A Treasure Hunt: The Methods of Asset-Tracing

Lawyer Monthly hears from Phoebe Waters, Associate at Schillings, on the techniques involved in professional asset-tracing and the role it plays in cracking down on white-collar crime.

“Things gained through unjust fraud are never secure” – Sophocles

Okay, this is from a Tragedian who espoused academia like I do Ibizan house music, but it resonates absolutely with my role as an investigator – and specifically, an asset tracing specialist.

Why do I agree with an ancient Greek playwright, famed for fatalism? Because in my experience, assets gained as a result of fraud are insecure – particularly when you’ve got an investigative team on speed dial (think Ghostbusters, but better dressed).

In January 2020, former Deputy Scotland Yard Commissioner Sir Craig Mackey stated that fraud accounts for one in three of all crimes committed in Britain. And the Association of Certified Fraud Examiner’s (‘CFE’) 2020 Report to the Nations survey claims that from the 2,504 fraud cases studied, there was a resulting loss of above $3.6 billion.

Where fraud is committed, pre-litigation strategy should be informed by a professional investigative asset trace. This will save the client their most precious asset – time.

An asset trace is the process by which investigators ‘follow the money’; locating items of value owned by an individual or company, commonly real estate, cash, and shareholdings. Assets are everything owned by a business or an individual, the value of which can be defined by their financial worth, value to the client, and/or the value of the disruption they can cause.

Treasure

The Persian poet Rumi claimed: “Where there is ruin, there is hope for treasure”. An asset trace is like a treasure hunt.

But if X marks the spot, then we need to figure out A – W first, right? Let’s use the example of a high-net worth British businessman (‘the subject’). Instructed on an asset trace, we are asked to hunt down a) the subject, b) the stolen company money, and c) the subject’s assets.

Where fraud is committed, pre-litigation strategy should be informed by a professional investigative asset trace.

Starting an asset trace, it is helpful to set a wide aperture before narrowing to the detail. We want to understand the subject’s asset profile, the ownership structures, and the jurisdictions in which they sit. We also want to establish the fraudster’s lifestyle: statues of business interests, propensity to sip coconut cocktails during island retreats etc.

In order to do this, we hoover all details of the subject (with the “exam question” in mind) including career history, company ownership, family members, contact details and aliases. Our open-source-intelligence research covers corporate and property searches; media/social media; trading/financial/government disclosure sites, litigation trackers and more. Asset tracers (the good ones) have a particular set of skills, but access to specialist international databases enables us to dig even deeper.

Hunting

Why the phrase: ‘follow the money’? Because when the subject has committed a fraud, we need to visualise a trajectory in two directions: fraud towards an asset, and backwards from an asset to the fraud. If we suspect an apartment is subject-owned, we need to work back from this property; establishing when it was purchased, where it fits in a timeline of events, and how the subject financed it. Breadcrumbs are there to follow.

Asset structures abroad can be more challenging to unravel. Countries differ in what their official registries provide and the legal and procedural requirements of forming a company or purchasing property.

Nevertheless, investigators are adept at hunting in ‘unfamiliar’ lands. We know the difference between land records in France – Spain – Russia and are abundantly aware of the corporate transparency disparity between US States. But even we cannot provide optimal intelligence alone – we obtain on-the-ground, discreet and valuable insight from experts who are well-placed in jurisdiction and sector.

Countries differ in what their official registries provide and the legal and procedural requirements of forming a company or purchasing property.

Additional Complexity

The treasure hunt can become complex if, in a more dramatic attempt to conceal the stolen money and assets funded by the fraud, the subject 1) leads us ‘offshore’ and 2) uses obscure ownership vehicles.

It is a truth universally acknowledged that business owners and high-net worth individuals utilise ‘tax havens’ to save cash. But just as important to them is the low threshold of detail that controllers of a company have to provide to the registries and that the registries legally have to provide to the public.

It is crucial though that we keep up to speed with the constantly evolving offshore world. For example, the British Virgin Islands, Curacao, Cyprus are all jurisdictions for which shareholder information is shrouded in mystery but the BVI government has recently resolved to make beneficial ownership publicly accessible. This is huge news.

There are other tricks a subject may employ. The use of nominee directors and shareholders. Provision of names of close associates or family members to register ownership of the assets because he thinks they are less easy to track (hence why the initial broad scope on the subject is paramount). The use of unnecessary intermediary companies to throw pursuers off the scent. Over innumerable investigations, we have picked up on a range of patterns that fraudsters follow; making us pretty good at ‘piercing the corporate veil’ to catch the bad guys.

Fraud is clever, but it’s seldom flawless. Louis J Freeh stated that “the fraudster’s greatest liability is the certainty that the fraud is too clever to be detected”. We specialise in assessing how the subject is attempting to shield assets to resist enforcement; fraudsters ‘secret squirrel’ fantasies are often short lived.

It is essential for lawyers to understand our capabilities because we can help assess, pre-litigation, the cost/benefit of proceeding against this character. If litigation is already underway, investigators can still provide priceless intelligence to ensure the client achieves a commercially favourable outcome. Investigation results, comprising proof of assets and valuations, plus information that could pressurise the subject, may be enough to force settlement.

To conclude then, an asset trace is simply a treasure hunt, a game in which players search for hidden items of value by following a trail of sequential clues.

Investigators, as acutely curious creatures, always remain ready to hunt.