Dominika Jaskiewicz

Asset Tracing & Insolvency

In this insight, we look at the importance of professional asset tracing in cases of individual and company insolvency and the multidisciplinary skills and experience we at Matrix Intelligence bring.

The challenges of Asset Tracing in Insolvency cases

We live in a globalised economy, where businesses and individuals can operate across multiple jurisdictions, and move assets with considerable speed. Establishing a picture of a person’s wealth is particularly important in cases of fraud and insolvency, where the original asset is misappropriated, exchanged, or substituted for another asset.

When it comes to insolvency and tracking down the assets of a debtor, it is a contentious and complex field, one seldom straightforward. Significant challenges include:

• Time/Location: The person in question has usually had a ‘head-start’ on placing his/her assets out of obvious sight prior to formal insolvency. They may be anywhere from foreign jurisdictions with weaker laws and enforcement, to unidentifiable associates/family members, trusts and offshore banks.
• Funding: There are usually limited resources in what can be a costly, lengthy, and often international search.
• Differing legal jurisdictions: If the assets are overseas, there can be many issues related to the different legal systems, accessibility of records and data protection.

Corporate intelligence has a huge role to play in the navigation of this web of legal, geographical, and human lines of cross-border investigation.

At Matrix, we have the resources, investigative knowledge, and expertise, to map the counterparties involved and understand their relationship to the debtor.

Asset Tracing Investigations

A major difficulty with an asset tracing investigation, is that there is no way of knowing in advance what the outcome will be and how it will relate to the initial cost; with insolvency practitioners (IPs) required to justify all spend.

Utilising professionals who are able to obtain the right intelligence, will clarify from the outset whether a complex pursuit is viable in terms of likely recovery and/or enforcement.

At Matrix our approach is transparent and accountable. We will advise if the outcome is likely to be positive or not, i.e. if we assess that the target has no material or obvious assets.

We conduct our preliminary asset tracing investigation at no cost to the client, allowing us to honestly manage their expectations and shape the initial case strategy.

We split our investigations into two distinct phases, both outlined and clearly costed, in our client proposal:

Phase 1 – Open Source Intelligence (OSINT): this is the identification, access and analysis of relevant public records, wherever in the world they may be, and in whatever language. It is based on a specific intelligence requirement and framework, due to the sheer volume.

This can range from information available on major search engines, to that of the deep web i.e. documents not indexed, including databases and files. These days, most countries have digitised important records, such as shipping data or corporate filings, but the level of accuracy differs depending on jurisdiction.

Once we complete OSINT and identify potential leads to assets, we often need to progress to HUMINT to delve deeper.

Phase 2 – Human Intelligence (HUMINT): entails the gathering of information and intelligence, through our established network of tried and tested human source experts, from numerous backgrounds, including the military, police, journalists and local investigators.

This can be an important route for gathering valuable information from people such as former employees; clients or advisors to the debtor.

By using this balanced methodology, we offer clients a realistic outcome which is actionable and highly-effective. Our findings are then presented in a concise, factual and court-ready manner.

The future of Asset Tracing and Insolvency

We are at the precipice of a rise in UK insolvency due to a downturn in the global economy; in large, attributable to the repercussions of Covid-19. Government measures enabled debtors a stay of execution in facing their creditors, however; time is running out and many will now inevitably be targeted with insolvency legislation.

When coupled with the more creative ways that individuals are able to hide their assets, particularly with developments in new technologies, the requirement to engage professional investigators is greater than ever.

Whilst costs underlie most decisions made by IPs, engaging specialist intelligence companies such as Matrix, to gather the correct intelligence and build a strong, cost-effective case is key to successful recovery.

Professional investigators are as important to a successful outcome as forensic accountants, or lawyers. Failure to employ one could result in a lost Court case and little or no returns to creditors.

For more information on our asset tracing capabilities, contact us at: info@matrix-intelligence.com or online at www.matrix-intelligence.com.

by Dominika Jaskiewicz

How Do People Hide Their Assets?

There are various tactics which individuals can employ for hidden assets in an attempt to put them beyond the reach of the courts, or creditors. Typically, this will involve spreading their wealth across a variety of asset classes and the use of offshore jurisdictions.

An asset is defined as “an item of property owned by a person or company, regarded as having value and available to meet debts, commitments or legacies.”

Criminals or fraudsters will have hidden assets in an attempt to prevent paying taxes, avoid civil forfeiture, or apprehension. At a basic level they will employ friends or family to assist them, or if they are more creative, they will use worldwide offshore accounts which are disguised by shell companies.

It is not just criminals who go to such lengths and Spouses who are undergoing or preparing for divorce proceedings often have hidden assets by: placing cash in a safe place, underreporting income or tax returns, deferring salary or receipt of a work-related bonus, transferring stock, or setting up a custodial account.

The various asset classes which people utilise to hide wealth include:

• Cash at bank - Most people are attracted to the accessibility of cash and use accounts in high street accounts or offshore banks to hide at least part of their money. The account will be opened utilising fake credentials or a third party, which makes it incredibly hard to trace.
• Moveable assets - This include items such as cars, high-end paintings, expensive wine, jewellery, yachts or airplanes. Much like cash, this form of asset is highly desirable, as it is typically easy to move and conceal (either physical, or its ownership) and pleasure can also be derived from it.
• Real Estate - This encompasses: residential, commercial, industrial and land. People can invest in a classic residential property, commercial property, such as an offices or restaurants, industrial warehouses, or purchase a plot of land and hide their ownership by doing so through a third party, or subsequently transferring ownership to family members.
• Equities - Equity is purchased in a company and individual ownership is concealed by utilising a company registered in an offshore jurisdiction to make the transaction or by subsequently transferring the holding to family or friends.
• Cryptocurrencies – The newest and perhaps most significant new asset class in recent years is cryptocurrency; a virtual currency which can either held as an asset in its own right, or utilised to make online transactions. The best-known example of a cryptocurrency is bitcoin and this is well known to be utilised by criminals in order to hide money. As bitcoins are virtual assets, this enables an individual to easily conceal their ownership in a virtual wallet, which is incredibly hard to track; in part facilitated by the lack of worldwide legislation to regulate the industry.

Offshore Jurisdictions

Offshore jurisdictions can be used for perfectly legally for activities such as tax avoidance, however; they are more synonymous with illegal activities such as tax evasion (non-residents evading tax in their actual country of residence) and money laundering (returning criminal/illegal money back into circulation). The prime reason they are attractive to criminals, is their inappropriately high level of client confidentiality; enabling criminals to operate within them with relative impunity.

Individuals and companies alike exploit offshore jurisdictions and as a general rule, the wealthier they are, the more embedded they are; with some having hundreds of offshore subsidiaries. In 2017, it was estimated that individuals had hidden $8.7 trillion. Whereas much of this money may be clean, a sizeable amount could be considered dirty and is doubtless being laundered by criminals who are exploiting the secrecy of offshore jurisdictions for illegal activities such as money laundering. In sophisticated cases, they do so by utilising complex mechanisms, spanning several countries, with a chain of intermediaries and a network of shell companies, offshore structures and nominee arrangements to mask their activities and hide the identity of ultimate beneficial owners (the person/s who invest in, control, or otherwise benefit from an asset, such as a bank account, real estate property, company, or trust).

What can be done to find hidden assets?

Asset Tracing is the process whereby investigators conduct specialist financial enquiries to determine a subject's wealth, their assets and where and how they are held. It is a highly complex series of protocols that requires expert professional support in any jurisdiction.

The process is often far from simple and can be highly complex and time-consuming and it is especially difficult for those working in the context of failed states, widespread corruption, or with limited resources. Other challenges include navigating data protection laws, treaties and jurisdiction specific legislation.

Matrix Intelligence understands the difference between intelligence and evidence required for use in a Court of Law. We have extensive knowledge of the legal system, enforcement regimes and cultural practices within the jurisdictions that we most commonly operate.

Before we accept any case, we first require sufficient details to enable us to conduct a preliminary investigation (at no cost to our client). Only then are we able to propose a coherent and phased strategy to meet both the client’s requirement and budget. We value integrity and if we believe that a case has little likelihood of a positive outcome (time and cost-efficient), we will advise accordingly.

Having conducted extensive multi-jurisdictional and cross border complex investigations, we are experts at assisting with commercial and high-end litigation.

We deliver reliable and actionable intelligence for lawyers, financial firms, corporate clients, third party funders and HNW individuals – worldwide. We operate internationally and have exceptional capabilities in Eastern Europe and all offshore banking jurisdictions. For more information, contact us at: info@matrix-intelligence.com or online at www.matrix-intelligence.com

by Dominika Jaskiewicz