A treasure hunt: methods of tracing assets
Lawyer Monthly hears from Phoebe Waters, Partner at Schillings, about the techniques involved in professional asset tracing and the role it plays in cracking down on white collar crime.
“Things acquired through unfair fraud are never secure” – Sophocles
Okay, this is from a tragedian who married academia like I do Ibiza house music, but it absolutely resonates with my role as an investigator – and more specifically, an asset search specialist. .
Why do I agree with an ancient Greek playwright, famous for his fatalism? Because in my experience, the assets acquired as a result of the fraud are insecurity – especially when you have a speed dial investigative team (think Ghostbusters, but better dressed).
In January 2020, former Scotland Yard deputy commissioner Sir Craig Mackey said fraud represented one in three crimes committed in Britain. And the Association of Certified Fraud Examiner’s (“ CFE ”) 2020 Report to Nations According to the survey, of the 2,504 cases of fraud investigated, there was a loss of over $ 3.6 billion.
When fraud is committed, the pre-litigation strategy must be informed by professional tracing of investigative assets. This will save the client their most valuable asset – time.
An asset trail is the process by which investigators “follow the money”; locate items of value owned by an individual or business, typically real estate, cash and equity. The assets are all owned by a business or individual, the value of which can be defined by their financial value, their value to the customer and / or the value of the disruption they can cause.
The Persian poet Rumi said: “Where there is ruin, there is hope for treasure ”. A trace of assets is like a treasure hunt.
But if X marks the spot, then we have to understand A – W first, right? Take the example of a wealthy British businessman (‘the object’). Educated on an asset trail, we are instructed to track down a) the subject, b) the stolen company money, and c) the subject’s assets.
When fraud is committed, the pre-litigation strategy must be informed by professional tracing of investigative assets.
When starting an asset trace, it helps to define a large opening before restricting yourself to the details. We want to understand the subject’s asset profile, ownership structures and the jurisdictions in which they sit. We also want to establish the fraudster’s way of life: statues of business interests, propensity to sip coconut cocktails on island retreats, etc.
To do this, we suck up all the details of the topic (with the “exam question” in mind), including career history, company ownership, family members, contact details and aliases. Our open source intelligence research covers company and property searches; media / social media; business / financial / government disclosure sites, litigation tracking and more. Asset tracers (the good guys) have a particular skill set, but access to specialized international databases allows us to go even further.
Why this sentence: “follow the money”? Because when the subject has committed fraud, it is necessary to visualize a trajectory in two directions: fraud towards an asset, and backwards from an asset towards fraud. If we suspect that an apartment belongs to the subject, we must work back from that property; establish when it was purchased, where it fits in a timeline of events, and how the subject funded it. The bread crumbs are here to follow.
Asset structures abroad can be more difficult to disentangle. Countries differ in what their official records provide and the legal and procedural requirements for starting a company or buying property.
Nonetheless, investigators are adept at hunting in “unknown” lands. We know the difference between land registers in France – Spain – Russia and are fully aware of the disparity in business transparency between US states. But even we can’t deliver optimal intelligence on their own – we get on the ground, discreet and valuable information from well-placed experts in the jurisdiction and industry.
Countries differ in what their official records provide and the legal and procedural requirements for starting a company or buying property.
The scavenger hunt can become complex if, in a more dramatic attempt to cover up stolen money and assets funded by fraud, Subject 1) drives us “offshore” and 2) uses obscure property vehicles.
It is a universally recognized truth that business owners and high net worth individuals use “tax havens” to save money. But equally important to them is the low level of detail that a company’s auditors must provide to registers and which registers must legally provide to the public.
However, it is crucial that we stay on top of the ever-changing offshore world. For example, the British Virgin Islands, Curaçao and Cyprus are all jurisdictions where shareholder information is shrouded in mystery. But the government of the British Virgin Islands recently decided to make beneficial ownership accessible to the public. This is huge news.
There are other tips a subject can use. The use of appointed directors and shareholders. Providing names of close associates or family members to record ownership of assets because he thinks they are less easy to follow (hence why the initial broad scope on the topic is paramount). The use of unnecessary middleman companies to drive the pursuers away from the scent. In countless investigations, we have spotted a range of patterns followed by fraudsters; making us good enough to “pierce the corporate veil” to catch the bad guys.
Fraud is smart, but it is rarely faultless. Louis J Freeh stated that “The biggest responsibility of the fraudster is the certainty that the fraud is too smart to be detected”. We specialize in assessing how the subject attempts to protect assets to resist law enforcement; The fantasies of the scammer’s secret squirrel are often short-lived.
It is essential that lawyers understand our capabilities, as we can help assess, before litigation, the cost / benefit of proceeding against this character. If a dispute is already ongoing, investigators can still provide invaluable information to ensure that the client obtains a commercially favorable outcome. The results of the investigation, including evidence of assets and valuations, as well as information that may put pressure on the matter, may be enough to force a settlement.
To conclude then, an asset trace is simply a treasure hunt, a game in which players search for valuable hidden objects by following a trail of sequential clues.
The investigators, extremely curious creatures, are always ready to hunt.