Arizona Corporation Commission cracks down on business fraud
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The Arizona Corporation Commission is looking to crack down on business fraud following an Axios Phoenix investigation.
Why it matters: State law makes it easy for scammers to set up fake companies and submit false business records — and difficult for victims to notice identity theft, we found last year.
- Bad actors can use the fraudulent LLCs to set up business bank accounts and siphon funds from their victims.
Driving the news: The Corporation Commission, which oversees LLC registration in Arizona, announced several changes last month aiming to beef up security, including:
- Requiring people who submit business records to show two forms of ID to ensure they are who they purport to be;
- Allowing LLC owners to specify who is allowed to submit documents on their behalf;
- Implementing a new system to allow business owners to quickly close inactive LLCs (these can be ripe for fraud because the owner is no longer consistently monitoring them).
Threat level: State law outlines policies for opening and closing LLCs, limiting how far the Corporation Commission can go to enhance security measures. This has been a point of frustration for commission employees for years, corporations division director Tanya Gibson told us.
- Yes, but: She said she believes these changes are "tiptoeing" the line and provide meaningful roadblocks for scammers.
The intrigue: Corporations division assistant director Joey Ordoñez said the commission is trying to strike the balance between accessibility and security.
- "We certainly don't want to be obstructive or create any kind of burden or red tape that doesn't need to be there," Ordoñez said. "We want to make things as simple, as streamlined and as efficient as possible… while trying to add in some features that may help deter bad actors."
What's next: The commissioners will vote to officially adopt the new security policies at their March 12 meeting.
- Gibson and Ordoñez said their team is also working on legislative proposals that would expand the commission's power to address scams. They likely won't be introduced until next session.
- The commission is also updating its online corporation filing system, which will include IP address tracking to boost security further, Ordoñez said.