The slight error (and I'm being petty here) is that you're not the registered owner, but the registered keeper.
It's generally accepted that the person who is the registered keeper is not necessarily the owner, but the person who uses the vehicle the most - hence the reason all the fines, etc come to you - if you were not in charge, then realistically you should know who was using the vehicle at the time and you have a duty to infirm the relevant authorities of this.
You would not be held responsible if your vehicle was stolen and used in a criminal activity. Yes, the police may come to you first as you were obviously the registered keeper, but so long as there was evidence to suggest that the car was stolen, no further action would be taken.
As to how did we let the law get like this, how the hell do you expect people to be responsible for their actions if you can't trace the responsibility of ownership?
If no-one registered the cars in their names, then you'd never trace people who hit-and-run pedestrians, who flee accidents, paedo's who kidnap (or attempt) to kidnap kids and someone see's their reg, etc.
If you don;t know who's using your car, maybe you shouldn;t be allowed to drive.