What best defines a front company?

• A. A business that provides legitimate revenue
• B. A business established to help illicit funds and activities appear legitimate
• C. A non-profit
• D. A sole proprietorship with clean records

Answer: (B)

A front company is a business created to hide the true, illicit origin of funds and activities by presenting a credible, legitimate facade. It operates as if it were a normal business—with invoices, customers, and suppliers—to persuade banks and authorities that the money is clean and the transactions are legitimate. The purpose is to launder proceeds and disguise criminal activity, making it easier to move money through the financial system and avoid scrutiny. These entities often have little real underlying activity, odd transaction patterns, or relationships that raise red flags, all aimed at blending into the legitimate economy.

Options that describe legitimate, charitable, or ordinary small-business activity don’t fit this concept. A business that merely provides legitimate revenue is a normal enterprise, not a cover for crime. A non-profit has a charitable or social purpose and, while it can be misused, isn’t defined by the intent to mask illicit funds. A sole proprietorship with clean records is simply a straightforward small business, not a mechanism to disguise illegal activity.