Uncovering the size of the illegal corporate service provider industry in the Netherlands: a network approach
Department of Methodology & Statistics, Utrecht University, Utrecht, The Netherlands
2 SEO Amsterdam Economics, Amsterdam, The Netherlands
Accepted: 16 March 2022
Published online: 11 April 2022
Economic crimes such as money laundering, terrorism financing, tax evasion or corruption almost invariably involve the use of a corporate entity. Such entities are regularly incorporated and managed by corporate services providers (CSPs). Given this potential for enabling economic crime, the CSP industry in the Netherlands is heavily regulated and CSPs require a license to operate. Operating without a licence is illegal. In this paper, we estimate the size of the illegal CSP sector in the Netherlands. For this, we develop a classification method to detect potentially illegal CSPs based on their similarity with licensed CSPs. Similarity is computed based on their position within the network of directors, companies and addresses, and the characteristics of such entities. We manually annotate a sample of the potential illegal CSPs and estimate that illegal CSPs constitute 31–51% of the total number of CSPs and manage 19–27% of all companies managed by CSPs. Our analysis provides a tool to regulators to improve detection and prevention of economic crime, and can be extended to the estimation of other illegal activities.
Key words: Economic crime / Network analysis / Corporate service providers / Netherlands
© The Author(s) 2022
Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.