In Norwegian business there are operators who systematically exploit the rules to run companies that end in bankruptcy. These so-called serial bankruptcy operators start new companies and often run them under their own name, but at times use family members or others as front men, especially if they have been handed a bankruptcy disqualification. Unfortunately, bankruptcy disqualification is not always imposed, which in turn means that a check against that register is not a fully reliable safeguard.
Assets can be hidden or transferred to related parties in order to minimise the operator's own liability. The result is that suppliers, employees and the state are left with the bill. Serial bankruptcy operators are rarely hidden; when they use front men, it is usually so they can keep running a company despite being subject to a bankruptcy disqualification. In those cases, family members or close connections are typically used to appear on paper as owners or general managers, while the original operator still holds control behind the scenes.
Exploiting trust and a lack of visibility
To suppliers, banks and business partners who do not have access to complete information about a person's background, they can look like legitimate operators. It is precisely this information gap that serial bankruptcy operators exploit to make their gains.
The reason serial bankruptcy operators get away with it is that it is not easy to find out what they have been involved in before without the right tools. If someone has been involved in several companies and those companies have gone bankrupt, that is not readily visible. The company and bankruptcy history of individuals is not easy to get an overview of without the right tools.
Preventing and detecting serial bankruptcy operators
An important part of the work to stop serial bankruptcy operators is identifying patterns early. By analysing roles, ownership, finances and history across companies, risk factors and warning signals can be uncovered before they have serious consequences. In this context, technology and advanced analysis tools can help find irregularities in time.
At Enin we work specifically on identifying patterns like these. Our tools are designed to help banks, authorities and investigative journalists uncover fraud and serial bankruptcy schemes before the damage is done, rather than waiting until it is too late.
Photo by Svein Sund on Unsplash
