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The art of asset recovery

By Roddy AllanIllustration: Gary TaxaliTHE KEY TO TRACIG A! RETRIE"IG #I$A%%RO%RIATE! A$$ET$ I$ IGE&ITYA! E'%ERIECE O THE %ART O( A I"E$TIGATOR

The financial institution a)reed to a client*s re+uest for s,ecial treat-ent .ecause the client /as theson of a /ell01no/n /ealthy Canadian fa-ily2 (or t/o years he had .een tradin) throu)h theinstitution fro- his ho-e in the Cay-an Islands3 re)ularly sendin) che+ues .y courier to ,ay for histrades2 $o /hen he as1ed that the institution reco)ni4e his che+ues at full value as soon as itreceived the- instead of /aitin) for the- to clear3 the institution co-,lied2 5It ty,ically ta1es 67 to87 days for che+ues fro- the Cay-an Islands to clear29

ithin ;< -onths3 the ,lay.oy client had sent the institution ;3=>? che+ues for a total of &$@7-illion3 .ut he never had -ore than @;77 of his o/n -oney in his Cay-an account2 He /ould senda che+ue for &$@>7 -illion3 for exa-,le3 instruct the institution to leave &$@67 -illion in his

Canadian account to cover trades and /ire &$@?7 -illion to his Cay-an .an1 account /hich itdid2 (ortunately3 a dili)ent co-,liance officer uncovered the sche-e /hen the .an1 /as on thehoo1 for only &$0 @= -illion 5usually the .an1*s ex,osure /as &$@7 -illion92

The .an1 retained Irish0.ased international asset0recovery fir- Interclai- to hel, recover its-oney2 Interclai- en)a)ed a for-er CIA a)ent /ho /ent to the Cay-ans ,osin) as an investor2Over -any drin1s3 the investi)ator3 /ho /as /ired3 )ot the -an to .oast a.out his che+ue01itin)sche-e2 The evidence /as used to o.tain a #areva InDunction and Anton %iller Order 5see(ollo/in) orders3 on this ,a)e9 in e/ Yor1 and (lorida 5/here the client had assets9 and in theCay-ans2 Conse+uently3 the client fle/ to Canada and re,aid the institution2 Because theinstitution had the coura)e to s,end the resources3 /e /ere a.le to )et full recovery /ithin ;7days3 says #artin $2 Kenney3 a Canadian0.orn la/yer /ho founded Interclai- in ;>>2

Odds for recoveryhen fraudsters hide -isa,,ro,riated assets 5such as funds3 ,hysical )oods3 and securities93 it can

.e very difficult to locate and retrieve the- FF es,ecially in an electronic a)e /hen funds can .e-oved around the /orld in a -atter of seconds FF .ut not i-,ossi.le2 And it is rarely astrai)htfor/ard or inex,ensive ,rocess 5findin) @;773777 can .e Dust as costly as findin) @;7-illion92 Althou)h so-e cases are easily resolved3 an international asset tracin) and recoveryassi)n-ent is a-on) the -ost challen)in) for a forensic accountant2 In -any such en)a)e-ents3success re+uires the additional s1ills of le)al counsel2

"icti-s do not al/ays choose to ta1e action2 #any feel that the odds are a)ainst a successfulrecovery2 hy thro/ )ood -oney after .ad3 they ar)ue And there is -erit to that2 Accordin) to a77; %rice/aterhouseCoo,ers (raud $urvey3 only one in five victi-s recovered -ore than =7 oflost assets2 Ernst Youn)*s 777 (raud $urvey discovered that victi-s of a su.stantial fraud hadrecovered only > of funds /ithin a year2 But the ,ros,ects of recovery are not necessarily .lea12If fraud victi-s are a/are of the -any investi)ative o,tions and le)al re-edies that can assist the-3the ,otential for recovery can .e -uch hi)her2 In short3 a successful recovery effort re+uiresinvesti)ative and le)al cunnin) as /ell as an innovative strate)y and3 occasionally3 so-e luc12

Ti-e is a critical factor2 In al-ost any investi)ation /here losses are sustained3 +uic1 consideration

should .e )iven to recovery2 The ele-ent of sur,rise and ,ro-,t action in asset recovery should not.e underesti-ated2 The ,lethora of asset ,rotection -echanis-s and the ease /ith /hich funds can.e -oved can confound and add frustration to even the -ost dili)ent recovery effort2

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Any investi)ation should re-ain confidential as lon) as ,ossi.le2 Only those /ho need to 1no/should .e infor-ed2 If the tar)et .eco-es a/are an investi)ation is .ein) conducted3 assets -ay .e-oved out of the Durisdiction to i-,ede the victi-*s recovery efforts for -onths or years2

In -ost cases3 recovery efforts are conducted on a ,reDud)-ent .asis2 Ho/ever3 if the creditor has a

Dud)-ent in hand3 this can .e a -aDor factor in deter-inin) an a,,ro,riate strate)y to identify andsecure assets2 (ree4in) availa.le assets .efore the fraudster 1no/s /hat is ha,,enin) is a ,riority2

ot only are the assets ,reserved3 .ut the fraudster*s a.ility to -ount a len)thy defence is th/arted2%ost Dud)-ent3 de.tors 1no/ they are under revie/2 hile they can .e exa-ined as to the existenceand location of their assets3 sufficient ti-e -ay have ,assed for the- to or)ani4e their affairs to)ive the i-,ression they are i-,ecunious2

(ollo/in) ordersThere are several le)al -echanis-s that can hel, in asset recovery /or12A,,lication for and use of these orders re+uire the ex,ertise of ex,erienced le)al counsel3 as-isste,s in the a,,lications for or use of such orders can result in ,enalties a)ainst the ,laintiff2

#areva InDunction restrains a defendant fro- dis,osin) of assets .efore there has .een ano,,ortunity to adDudicate the ,laintiff*s clai-2

Anton %iller Order ,rovides the ,laintiff /ith su,ervised access to other/ise ,rivate ,re-ises toins,ect or re-ove ite-s3 ty,ically docu-ents and other evidence over /hich the ,laintiff asserts a

,ro,rietary clai-2

or/ich %har-acia Ban1ers Trust Orders3 na-ed after t/o fa-ous cases3 can )ive ,laintiffs theri)ht to secretly o.tain infor-ation3 such as a fraudster*s .an1in) records3 that nor-ally /ould not

.e availa.le to investi)ators2

Kno/ your adversaryInitially3 a 1ey tas1 is to ,rofile the sus,ected fraudster2 A si)nificant a-ount of valua.leinfor-ation -ay .e )enerated fro- the investi)ation of the fraud itself2 A-on) the +uestions toconsider:

here is the fraudster li1ely to .eIf -issin)3 does the fraudster have ,ersonal or .usiness connections in other do-estic or forei)nlocationsHo/ so,histicated is the fraudster

Is there evidence to su))est that the stolen funds are -ore li1ely to .e here or overseas!oes the ,erson*s ,articular lifestyle 5a )a-.lin) ha.it3 for exa-,le9 offer any clues as to /here heor she -i)ht dis,erse or hide assetsAre there individuals /ho /or1ed /ithJ 1no/ the fraudster /ho could ,rovide infor-ation on aconfidential .asisAre there any easy asset hits that can .e recovered to fund a .roader3 -ore a-.itiousinvesti)ationIf assets are offshore and a Dud)-ent can .e o.tained in one Durisdiction3 can it .e enforced easily/here the assets are locatedHo/ /ill a cri-inal ,roceedin) influence the fraudster and the outco-eIt is critical to understand the ,ersonality and character of the fraudster2 Often3 successful recovery

/or1 involves a,,lyin) ,ressure to /hich the fraudster is susce,ti.le2 (or exa-,le3 the li-itedinvolve-ent in the fraud of other -e-.ers of the fraudster*s fa-ily can .e ex,loited if they are suedas ,art of the initial recovery effort2

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At the sa-e ti-e3 the nature of the alle)ed fraud -ust .e deter-ined3 as le)al ,roceedin)s torecover assets /ill re+uire co-,ellin) evidence of the underlyin) fraud and losses suffered .y thevicti-2

Conceal-ent -ethods

Any forensic accountant on the trail of the ill0)otten )ains should .e fa-iliar /ith techni+uesfraudsters use to conceal assets2 $o-e of the -ore strai)htfor/ard ones include:

launderin) -oney throu)h local and international .an1stransfers to cor,orations3 fa-ily -e-.ers or other individuals under their control or influencetransfers to discretionary trusts /here the .eneficiaries include the fraudster*s children or otherfa-ily -e-.ers and the trustee is influenced .y the fraudster

,ay-ents into insurance ,olicies-ort)a)e ,aydo/ns on assets held .y other fa-ily -e-.ers

,urchase of cashiers or travelers* che+ues to rede,osit in other localessafety de,osit .oxes2

In -ore so,histicated cases3 assets -ay .e concealed in tax havens and Durisdictions /ith secrecyla/s and relatively so,histicated .an1in) syste-s2 These often include very s-all .ut ra,idlydevelo,in) countries or ,rinci,alities auru anyone $o-e have le)al -echanis-s ordeficiencies that are to the fraudster*s advanta)e2 !evices such as /al1in) trusts 5/hich can .ei--ediately -oved to other Duridictions in res,onse to investi)ative in+uiries9 can .e a -aDori-,edi-ent to recovery2

!iscoverin) /here funds or assets -ay have .een secreted re+uires use of the investi)ative-entality2 %ut yourself in the shoes of the fraudster: .ased on /hat is 1no/n3 /here could you hidethe assets The follo/in) -ay .e indicators of assets in offshore locations:

transfers or recei,ts of funds toJfro- offshore accountsconsultations /ith offshore counsel or tax advisersconversion of funds into nontracea.le for-s that are easily exchan)ed 5for instance3 )e-s9unusual ,atterns of travel .y the fraudster to 1no/n tax havens

,urchase of unusual securities or lar)e volu-es of travelers* che+ues2It is co-fortin) to 1no/ that Canada and the &$ are a-on) the -ost creditor0friendly Durisdictions2Asset0related infor-ation is -ore readi.ly retrieva.le and availa.le in orth A-erica than in any

,lace in the /orld2 As .oth Canada and the &$ are technolo)ically advanced societies and o,encultures3 an un,aralleled a-ount of infor-ation on individuals and .usinesses is availa.le fro-)overn-ent records and electronic data.ases2

A vast a-ount of infor-ation is online3 if you 1no/ /here to loo1 and ho/ to inter,ret the data2Availa.le infor-ation 5de,endin) on the Durisdiction9 includes Dud)-ents3 liens and .an1ru,tcyfilin)s ,ro,erty records .usiness re)istrations 5cross0referenced in various /ays9 oil and )as

,artnershi,s -otor vehicle and driver licence re)istrations re)ulatory ,roceedin)s and filin)sthorou)h.red horse o/nershi, lists of all for-er addresses ,ro,erty tax rolls infor-ation relatin)to divorce ,roceedin)s and details of .oat or ,lane o/nershi,2

Ho/ever3 asset searchin) of this 1ind usually reveals only the ti, of the ice.er) and -oreso,histicated -ethods -ust .e used to )ive the victi- confidence that all ,ossi.le assets held .y orunder the control of the fraudster have .een identified2

As /ell as searchin) ,u.lic records and data.ases3 -ethods can .e e-,loyed to develo,intelli)ence for focusin) the recovery effort2 Intervie/s /ith friendly and unfriendly ,arties can .e

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very useful2 A for-er s,ouse3 for exa-,le3 -ay ,rovide valua.le infor-ation a.out the sus,ect*s,ersonal and .usiness dealin)s2

One ulti-ate strate)y can so-eti-es .rea1 the case: a direct discussion /ith the sus,ect3 if he orshe is availa.le2The o.Dective is to o.tain valua.le clues as to the use and location of the-isa,,ro,riated funds2 Also3 the results fro- investi)ations conducted ,rior to the -eetin) can

,rovide si)nificant levera)e3 if used ,ro,erly2

In today*s /orld3 the reality is that an ex,erienced fraudster has -any -ethods to conceal-isa,,ro,riated assets and 1ee, one ste, ahead of his or her victi-s2 In -any cases3 even arelatively strai)htfor/ard asset conceal-ent strate)y can ,revent or3 at the very least3 si)nificantlydelay recovery efforts2

At the sa-e ti-e3 ho/ever3 the tracin) and locatin) of defalcated assets has .eco-e an increasin)lyso,histicated .usiness2 !evelo,-ents in technolo)y and co--unications have )iven victi-s andtheir investi)ators considera.ly -ore infor-ation to /or1 /ith than used to .e the case3 even ;7years a)o2

hile there can .e no )uarantees that victi-s /ill re)ain their assets3 there have .een so-es,ectacular successes in notorious asset recovery cases2 The 1ey to success lies in the in)enuity andex,erience of the investi)ator and the deter-ination and ,ersistence of the creditor2