Habitual offenders in bankruptcy fraud

Ecorys, in collaboration with Alan Kabki, Ferry Ortiz Aldana, and Wim Bollen, conducted research into habitual offenders in bankruptcy fraud in the Netherlands. Bankruptcy fraud is a type of fraud in which entrepreneurs deliberately let their company go bankrupt by failing to pay debts and thereby penalising creditors. The research team investigated the nature and size of the group of habitual offenders and their modus operandi, and looked into which parties (e.g. trustees, the police, and the Fiscal Information and Investigation Service of the Netherlands – FIOD) are capable of tracking down bankruptcy fraud and subsequently tackling it. Based on the data collected, the team looked into possible ways of strengthening the Dutch approach to dealing with bankruptcy fraud in general, and to habitual offenders specifically.

Findings of the research show that although the group of habitual offenders is diverse and it is challenging to define a specific profile, all habitual offenders make good use of the opportunities that arise. They do so, for example, by consciously looking for companies that are in troubled financial situations; buy them; divert the income; and let the company go bankrupt. By doing so they ensure that they are able to remain out of sight from, inter alia, the police and the FIOD. Complex business structures are set up to remain unnoticed by the authorities, and offenders tend to operate in (fluid) networks which can also include money mules and (financial) service providers. These networks can also engage in more serious forms of crime, such as drug trafficking and smuggling.

Based on these findings, the research team advises to strengthen prevention efforts, including by conducting additional research into the various forms that bankruptcy fraud can take; and to improve information sharing between stakeholders with a view to working towards a more integrated approach towards combating bankruptcy fraud.

For more information, please read the full report (pdf, in Dutch).