Tackling repeat offenders of bankruptcy fraud encounters obstacles

The group of people who commit multiple bankruptcy frauds is very diverse. The methods used by fraudsters also differ. This is shown by our research into multiple perpetrators of bankruptcy fraud commissioned by the Scientific Research and Documentation Centre (WODC). This diversity makes it difficult to gain insight into the size of the group of people who commit bankruptcy fraud multiple times. Moreover, it is difficult to identify the effectiveness of existing measures. To get a better grip on the group of repeat offenders, the researchers recommend focusing more on effective prevention.

According to the Central Bureau of Statistics, over 2,700 companies and institutions went bankrupt in 2019. It is unclear how many of these bankruptcies involved bankruptcy fraud: a form of fraud in which entrepreneurs deliberately bankrupt their businesses by not paying debts to harm creditors. Individuals who repeatedly commit bankruptcy fraud can be characterised as repeat offenders.

Commissioned by the WODC, Ecorys, in collaboration with Alan Kabki, Ferry Ortiz Aldana and Wim Bollen, investigated who these repeat offenders are, how many they are and how they operate. It also looked at which parties (such as trustees, police and the FIOD) are able to detect and then tackle bankruptcy fraud. Based on the information gathered, it examined how the Dutch approach to bankruptcy fraud in general and the approach to repeat offenders in particular could be further strengthened.

Multiple offenders of bankruptcy fraud
The researchers found that the stereotype repeat offender of bankruptcy fraud does not exist. The same goes for the group of multiple offenders: the group is very diverse. However, it can be concluded that multiple offenders make clever use of the opportunities that arise. For instance, they deliberately seek out companies in dire straits, buy them out, siphon off the profits and let the company go bankrupt. In doing so, they make sure they do not stand out, thus managing to stay out of sight of the police and the FIOD, among others.

Working methods
To stay out of sight of the investigating authorities, fraudsters also set up complex business structures. The working methods used by fraudsters are very diverse and are adapted as necessary. In addition, the investigators found that fraudsters often do not act alone. Fraudsters operate in networks that may also include cat catchers and (financial) service providers. These networks are increasingly fluid in nature: whereas networks used to consist of a fixed group of people, this is less the case nowadays. Also, networks involved in bankruptcy fraud sometimes engage in heavier forms of crime (such as drug trafficking and smuggling).

Tackling repeat offenders
To get a better grip on the group of repeat offenders of bankruptcy fraud, the researchers recommended focusing more on effective prevention in order to prevent bankruptcy fraud and spare the investigative authorities. Effective prevention can be achieved, among other things, by conducting more research into the various manifestations of bankruptcy fraud and fraudsters. The researchers also recommended focusing on more effective information sharing between parties, so that already existing knowledge and information can be better exchanged and used. This would allow the parties involved to work towards a more integrated approach to bankruptcy fraud.

Read the research report (in Dutch) for more information, or contact Linette de Swart or Gabriëlle op ‘t Hoog.