Why do organized crime groups often use front companies? (Choose two).

Question

Options

• ABecause they are not registered, front companies are not subject to income and other sales
• BBecause using multiple front companies can make it easier to control an entire sector of the
• CBecause they are generally subject to lighter due diligence requirements by banks and other
• DBecause front companies generally charge higher prices than legitimate companies, so profit
• EBecause they can use the company's bank accounts to comingle deposits with those of legal

• A
  11% (3)
• B
  82% (23)
• C
  4% (1)
• D
  4% (1)

Explanation

Organized crime groups often use front companies to disguise the origin and destination of their illicit funds, and to integrate them into the legitimate economy. Front companies are businesses that appear to be engaged in lawful activities, but are actually controlled by criminals for money laundering purposes. One reason why organized crime groups use front companies is to gain control over an entire sector of the economy, such as construction, transportation, or gambling. By using multiple front companies, they can create a network of interrelated businesses that can manipulate prices, evade taxes, and influence public contracts. This can give them a competitive advantage over legitimate businesses, and allow them to launder large amounts of money through seemingly legitimate transactions. Another reason why organized crime groups use front companies is to comingle their illicit funds with those of legal businesses. By using the bank accounts of front companies, they can deposit cash from criminal activities along with the revenues from legitimate operations, making it harder to trace the source of the funds. They can also transfer funds between different front companies, or use them to pay for goods and services, creating layers of transactions that obscure the money

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