By Chris Taggart, OpenCorporates Founder

Last week, the Business Registry Insights group published a fascinating report on penalties issued by legal entity registers around the world. This is, admittedly, a bit wonkish, but at OpenCorporates we are proud to be wonkish about legal entity register data (in fact, a working definition of wonkish could be – unsexy details that matter relating to an unsexy but important subject).

Having said that, here are a few initial thoughts (comments welcome too).

Credit where credit’s due

First, credit should go to the Business Registry Insights group (a group of registers and register associations) and the registers that responded. Legal entity data is fundamental to the commercial world, as well as the fight against organised crime, fraud, money laundering and corruption, and surfacing information about the system that underpins it is vital to understanding and improving it.

The implications of silence

Second, the thing that struck me when looking at the survey was which registers and jurisdictions responded… and which did not. Response is always a challenge when doing such a survey, and the fact that over 90 registers responded is a testament to the team behind this.

However, it is noticeable that only 22 of the 52 US core jurisdictions responded (50 US states plus DC and Puerto Rico), and notable absences there include important registers such as Delaware, Wyoming and New York. Absent too are many of the traditional offshore jurisdictions – Caymans, BVI, Bermuda, Bahamas, Seychelles. Of course there may be many reasons for this – the US registers tend to be under-resourced and overworked, even when they generate tens of millions (or even billions in the case of Delaware). And the list of the top 50 jurisdictions on the Basel AML index (of which only Myanmar, Kenya and Panama responded), do have a significant number of very poor nations.

But even so, might one be forgiven for thinking that some of these jurisdictions don’t want comparisons with their peers? Does this extend too to the European registers that didn’t respond (Belgium, Austria, Hungary, among others), or the Canadian provincial registers, hardly any of which responded?

Registers are (often) all bark and no bite

Third, it’s perhaps shocking that so many registers have no powers at all to sanction incorrect filings, even when it’s fraudulent. These are the US and Canadian jurisdictions that responded, for example:

The limitations of sanctions

Fourth, this survey prompts another, more important question in a world where all commerce (and all large scale criminal activity too) is underpinned by legal entities. What is an appropriate and effective sanction, when companies are created for illicit or criminal purposes? Even a fine of $10,000 is nothing if you are laundering millions of dollars, or committing fraud. And even if the fine is issued, if the entity is a shell with the backers in another country, what’s your ability to enforce it?

The answer must surely be to make it harder for companies to be set up for criminal purposes, and harder to submit bad data in the first place (starting with verification of the identity of directors, as done by the Irish CRO, for example, and in the near future by UK Companies House). Otherwise it’s surely a case of bolting the stable door after the horse has bolted.

For more information

Contact us