Corporate registration fraud on the rise

Chen Huizhi
Relaxed rules have led to more instances of registrations with false identities.
Chen Huizhi

Relaxed rules have led to more instances of registrations with false identities, according to a deputy to Shanghai People’s Congress.

Such criminal activities should be curbed by streamlining administrative measures, as law enforcement and punishments aren't forceful enough to deter them, said the deputy, Chen Huanyan, manager of the department of legal affairs at Shanghai Fengxian Gas Co.

In Fengxian District alone, as the number of new companies registered has continued to increase since 2014, government officials have received an increasing number of complaints from residents whose names appear on shareholder lists or as legal representatives of companies unfamiliar to them.

In 2014, there were only eight such complaints, while last year there were 262, leading to more cases filed against the government.

Currently, people who register a company in China need only to present their identity documents and application materials with their signatures, but don’t have to show up in person during the registration process.

This makes it difficult for authorities to identify registrants, compounded by the fact that information related to people who have reported losing their identity cards to the police is not shared with business registration authorities.

Taking advantage of relaxed company registration rules, some criminals register shell companies to run various scams. It's difficult for law enforcement to hold those perpetrating the scams accountable, as they are hard to locate and company registration agents are exempt from legal responsibilities in presenting problematic materials.

In Fengxian, authorities have taken measures against the problem and are achieving positive results.

The district’s market watchdog now cooperates with banks to check the identities of registered shareholders of companies. Since March 2018, more than 24,000 shareholders have been subjected to the measure, 576 of whom were found to be problematic. During that time, the rate of problematic cases has decreased from 11 to 2 percent.

Chen has also proposed that people who register companies be required to provide pictures of themselves holding their identity documents and letters of authorization for registration, and that facial recognition be applied in the future.

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