The Causes of Compliance in International Relations: Evidence from a Field Experiment on Financial Transparency

Our study examines compliance with international standards that require full identity disclosure when incorporating a business. Without such disclosure, individuals are able to form anonymous “shell” corporations that can hide corruption, organized crime, and the financing of terrorism. We assess the causes of compliance with international financial transparency standards through random assignment of incorporation services – firms that specialize in setting up companies – to a variety of treatment and control conditions. We create two samples of incorporation services providers, one consisting solely of U.S. providers and one of service providers from over 140 nations. Using aliases and posing as consultants seeking incorporation, we vary the information given in emails to incorporation services regarding commitment to international transparency standards, along with associated mechanisms of enforcement. We also vary the requester’s rationale for raising international law: concern for legal consequences, as in rationalism, vs. an interest in behaving appropriately, a la constructivism. We finally invoke suspicions of terrorist activity or corrupt intentions. This allows us to assess the causal effects of information about international law on incorporation services’ decision to require or not documents that fully disclose the identity of applicants.