Criminal Recordkeeping

Abstract

Business managers must create and keep records for decision-making. Yet doing so presents an obvious problem for those who manage illegal businesses: their records would make for powerful evidence in the hands of prosecutors. That problem raises a question—why would one knowingly create and keep such records when their mere existence risks detection and sanction? The answer, in short, is that the interaction of illicit activity’s complexity and continuity compels recordkeeping. A business, including a criminal one, cannot be managed without adequate information about its operations, obligations, and condition. Just how complex and long-lived its affairs are will drive the scale and scope of its recordkeeping requirements.

Beyond these high-level intuitions, this Article contributes a novel theory of how the trueness or falsity of criminal business records, as well as the organizational settings in which they occur, shape their managerial uses and associated criminal-legal risks. This theory in turn yields principles for deterring illicit activity in organizations. When such activity is the kind enabled by recordkeeping, it can be prevented, or at least mitigated, by policies that inhibit the production of business records. It can also be countered by policies that encourage those records’ retention. Despite the contradiction implied by these two principles, together they promote ex ante deterrence and ex post detection and sanction. Although such interventions can be directed at any organizationally complex and long-lived illicit activity, their greatest promise is in informing compliance policies, practices, and programs in licit organizations (like large corporations) that already are obliged, or that seek, to proactively prevent law violations.

Keywords: corporate crime, organized crime, recordkeeping, corporate compliance

JEL Classification: K14, K22, K41, K42