Which of the following is a red flag for a front company?

• A. Cash deposits align with revenue
• B. Clear business type
• C. Cash deposit volume not commensurate with other revenue/services/location/expenses
• D. Verified online research shows credible business model

Answer: (C)

When evaluating a front company, the key warning sign is that cash activity doesn’t line up with what the business claims to do. If the volume of cash deposits is not commensurate with the reported revenue, services, location, or expenses, it suggests funds may be coming from or being funneled through illicit activity rather than reflecting a legitimate, sustainable business. This misalignment is a strong indicator that the company could be used to mask illegal proceeds or launder money, since legitimate businesses typically show deposits that are proportionate to their described operations and financial footprint.

The other scenarios describe normal or low-risk situations: cash deposits that align with revenue fit expected cash flows; a clear, identifiable business type makes due diligence straightforward; and credible online research supporting a feasible business model reduces suspicion. None of these raise the same red flag as deposits that don’t match the business’s stated activity.