Acquiring a company on the verge of bankruptcy anonymously

Acquiring a company on the verge of bankruptcy anonymously is a new trend in fraud

The acquisition of a company on the verge of bankruptcy is a professional form of business exploitation. It means that companies that have tax debt or are otherwise in trouble are sold with a view to winding down their operations. Fraudsters may use such companies to keep sales income off the books and as tools for committing various kinds of fraud.

During the pandemic, the authorities have identified a new form of acquisition: anonymous acquisitions. This means a situation where the operations, bank accounts, liabilities and debts of a (limited liability) company are transferred to a new operator who does not, however, record the change of responsible persons as agreed in the Trade Register, and the individuals in responsible positions in the company do not change. The entrepreneur seems to act in good faith by transferring the company to a new operator who, however, uses the company to commit fraud. These situations often involve the exhaustion of the entrepreneur who ran the business.

These givers of “end-of-life care” are consummate professionals. They are particularly interested in companies that have established operations and a good reputation, as they are easy to use as a means of committing fraud due to their impeccable business history. Because the fraudsters remain anonymous, the risk of getting caught is smaller than in normal acquisitions where the front men are registered as responsible persons. Similarly, this practice aims to make it more difficult to identify the actual fraudsters and for the authorities to track illegal funds. In addition, it will be more difficult for the authorities to detect the act and intervene in real time.

Roles related to anonymous acquisitions:

• An entrepreneur in a responsible position
• An operator who takes over the company
• An assistant who helps in committing the fraud (e.g. by withdrawing, transporting, or distributing funds)
• The company’s accountant (who detects unusual activities)
• The company’s creditors
• The authorities (e.g. the Financial Intelligence Unit, the Police of Finland, the enforcement authorities)

Motives of different operators:

• The entrepreneur wants, in good faith, to save their business, which has run into financial difficulties
• The operator that takes over the company seeks financial gains through criminal activities

Direct and indirect impact of the activities:

• The reputation risk and the risk of financial liability for the entrepreneur
• The loss of a job and wages for employees
• Financial losses for creditors
• Financial losses for victims
• The authorities’ resources tied to investigations

Read more about Fraud using companies