Crypto Crime & Recovery
“Cryptocurrency draws in a lot of charlatans. It's something where people who are of less than stellar character see an opportunity to clip people who are trying to get rich. It will come to a bad ending." - Warren Buffet
In April 2021, Coinbase, a cryptocurrency exchange start-up, went public on the US stock exchange. The first major exchange to do so, it brought cryptocurrency into the mainstream, and the company was valued at $85.7 billion by the end of the first day of trading.
A Securities and Exchange Commission approved business, with over 1700 employees and 56 million users, it was a phenomenal success story. Fast forward to March 2022 and President Biden signed an executive order to examine greater regulation of cryptocurrencies; with the aim of helping financial regulators better understanding the associated risks and opportunities.
The President’s move direction demonstrates both the rapid speed with which this decentralised and predominantly unregulated financial renegade has developed since the introduction of Bitcoin in 2008, and the concerns over the relative anonymity and illegal activity that surrounds it.
The rise of cryptocurrency
For many, the world of cryptocurrency is a complex one, however; put simply, it is just a digital currency designed to work as a medium of exchange. Decentralised finance (DeFi), it is not controlled by a government, or an institution, like traditional fiat money, i.e., the US Dollar or the British Pound, and the investor in essence manages their own money.
Transactions are secured through the use of complex cryptography (mathematical techniques) which controls the creation of additional coins, as well as verifying the transfer of coin ownership. Blockchain technology underpins this and acts as a digital ledger; a computerised database, recording each transaction in real time across a peer-to-peer network.
Whilst most people have heard of Bitcoin or Ethereum, there are now over 10,000 different cryptocurrencies or altcoins, and an entire range of DeFi products and services, including lending, exchanges and synthetic derivatives.
Started by an unknown programmer called Satoshi Nakamoto in 2008, what can we put the inordinate rise of cryptocurrency down to? There are a range of factors:
- There is no bank or centralised authority in control. It is a peer and community-led process where individuals are in control. This has proven attractive for those with levels of mistrust in conventional ways of financial management, as well as countries such as Turkey, where economic crisis and inflation have been prevalent.
- It offers privacy, as governments and third parties cannot see transactions.
- Rapid transactions with low fees are carried out, recorded and validated in real-time.
- All an individual requires to start is a unique identifier. In the case of bitcoin, this is a Bitcoin address and a private key enabling them to spend the bitcoins associated with that address.
- It has offered a means of evading traditional scrutiny and financial channels, making it appealing to those seeking ways to hide assets, avoid tax, or launder money.
- Despite its often volatile nature, for investors and speculators alike, it can offer huge financial rewards.
Why is cryptocurrency a good asset to hide wealth?
The very reasons that have made cryptocurrency an attractive investment opportunity for many, are the same reasons why others view it as a perfect asset to hide their wealth, in situations such as divorce, or in more sinister activities such as money laundering.
The most obvious reason is anonymity. As these digital assets are stored online with no need to provide personal details and no Government, central authority, or third-party oversight, there is no paper trail.
The only thing that ties an individual to cryptocurrency, is their wallet and unique private key I.D, which allows them to buy and sell. This poses a significant challenge for tracing.
As mentioned in the introduction, regulatory controls and legislation are only beginning to now catch up to the advances made within cryptocurrencies, thus leaving many loopholes that people can exploit to hide their wealth.
Why do fraudsters use crypto scams to target people?
In March 2022, a brother and sister were arrested for scamming investors out of $124 million, between 2017 and 2021, in a crypto-mining scam named Ormeus Coin. In April 2021, the largest scam to date occurred, when the two founders of Africrypt disappeared with $3.8billion of bitcoin.
With revenue generated from scamming rising 82% in 2021 to $7.8billion worth of stolen cryptocurrency, it is unsurprising that fraudsters have turned to crypto scams as a way of making money. As the SEC Chair Gary Gensler describes it, cryptocurrencies are the “Wild west of finance”.
There is very little transparency, or Know your Customer (KYC) protocols, associated, as individuals are not required to hand over personal details to make a transaction. The lack of third-party involvement also means that once you make a transaction, you cannot reverse, or stop it. Once gone it is gone, there is no insurance or fraud protection.
Whilst criminals continue to refine and adapt their modus operandi, the most common cryptocurrency scams centre around fraud and extortion:
- Romance Scams: As is the case with many scammers, online dating sites are a lucrative pool. Once the target believes they are in a committed relationship, they are asked to invest in cryptocurrency.
- Phishing Scams: Are used to get private information relating to crypto wallet private keys; those required to access funds held in wallets.
- Investment Scams: As with the brother and sister mentioned earlier, targets are duped into investing in the ‘next big thing’.
- DeFi Rug Pulls: A new scam type, but one increasing in popularity amongst DeFi projects and new tokens. This sees scammers build what appears to be a legitimate investment opportunity, however; once investors hand over their money, it disappears along with the scammer.
- Imposter Scams: Here the scammer pretends to be someone else, usually a social media influencer, or celebrity, to get investors to part with their money in exchange for what they promise will be a generous return.
Scammers are in essence relying on the fact that most investors do not have the heightened level of technical sophistication required to understand the true complexities of cryptocurrency and its pitfalls.
Can you track assets hidden in cryptocurrency?
Whilst cryptocurrency continues to provide a level of transaction speed and anonymity not seen with other forms of assets, innovations in investigative technology, software and law enforcement are catching up.
This is reflected in statistics which report lower criminal activity in comparison to the usage uptake. According to their Crypto-Crime Report 2022, blockchain analysts, Chainalysis, found that total transaction volume of cryptocurrencies grew to $15.8 trillion in 2021, up 567% from 2020’s totals, but the increase in illicit transaction volume was just 79%.
$14 billion is still a major problem though, and a significant issue for parties when it comes to tracking and recovering hidden assets.
Let’s look then at what an investigative team such as Matrix Intelligence, can use to help you track hidden cryptocurrency assets.
Blockchain analysis: Whilst no personal details are recorded in blockchain, every single transaction has a timestamp and date, and these cannot be altered once in the public domain. This means a level of transparency does exist. Analysts can use this information to work out in greater detail the flow of funds from one wallet to another.
Blockchain analysis has been used to great effect to help with cryptocurrency focused criminal investigations. One of the most well-known is the 2014 case of Chainalysis and Mt Gox, the latter the largest exchange at the time, where $450million worth of bitcoin went missing. In this case, whilst the location of the bitcoin became known, the chances of recovery were deemed slim.
Analysis such as this is reliant on criminals not employing ‘mixers’, or ‘tumblers’, which break up the flow of funds on the blockchain. For a fee, money is transferred to a mixing service, whereby it is mixed with that of others users before transferring the mixed currency to the desired address.
Legal Enforcement and Regulations: Law enforcement and regulations governing the use of cryptocurrencies, as seen with the recent announcement from the White House, are gaining greater traction. This follows the news in December 2021, that the IMF are seeking a co-ordinated and consistent approach to supervising cryptocurrencies. In the UK, all firms operating in this area must register with the Financial Conduct Authority.
Long unregulated, or partly regulated, service providers and platforms, are now having to gather greater detail from individual users.
In the EU for example, cryptocurrency exchanges are regulated and must meet due diligence requirements, as well as those relating to AML and KYC. They must report any suspicious activities and can be subject to subpoenas like any other financial institution. This aids an asset tracing investigation from a legal point of view, in gathering personal information.
Inevitably, illegal exchanges exist, and criminals can find other non-compliant ways to buy and sell currency, such as person to person trading, or by using Bitcoin ATMs. Europol has also stated that partly due to the pandemic, “virtually all crime now has a digital element”, with cryptocurrencies and encrypted networks often at the heart.
Forensic Analysis: Digital forensics are increasingly being used to aid cryptocurrency-related investigations. As mentioned, a cryptocurrency wallet contains a unique address and all activity involving digital assets starts and ends with a wallet and address.
A forensic investigator can use these wallet files and associated addresses to map the flow of activity and piece together related transactions.
If the analyst also has access to the associated computers and mobile phones of the wallet holder, then they can examine the searches related to exchanges, or apps, and link these to the transactions made. The discovery of additional parties can be facilitated in such a search, as well as information relating to the dates/times and places of transfer.
Furthermore, bank statements, tax returns and other financial documents may show transactions related to crypto purchases and activity around crypto exchanges or trading apps.
As outlined, for all the steps being taken to regulate and address the fast-moving world of cryptocurrency, in relation to crime and asset tracing, there is much still to be done. It presents considerable challenges in an investigation and to address these takes time, experience and significant investment.
At Matrix Intelligence we will help you to understand the complexities of cryptocurrency when it comes to fraud and asset tracing and help you achieve the best outcome.
For more information on our asset tracing capabilities, contact us at: info@matrix-intelligence.com or online at www.matrix-intelligence.com
Successfully Challenged HMRC
We were approached by a client who was under enquiry from HMRC after his accountant informed him that he would have to settle an alleged £750k debt over undeclared income.
Outcome
We reviewed the principles and assumptions that had been made by the accountant and successfully challenged them. We offered a revised report, which HMRC accepted, and we managed to reduce the final settlement to £109,000, saving our client £641k.
Working with Matrix Intelligence
Matrix Intelligence are specialists in the conduct of forensic accounting investigations. If you would like to know more about how we can help you, please contact us for a no-obligation quote.
Successfully Challenged Proceeds Of Crime Valuation
We represented a client who was being pursued for the proceeds of crime to the value of circa £150k.
Whereas the client has plead guilty and did not deny their crime, they contested the figure.
Outcome
Through analysis of historical bank transactions, investments and property ownership we were able to conclusively demonstrate that the value of their assets was amassed long before the crime took place and we were successful in reducing the proceeds of crime figure to £13k, thus saving our client £137k.
Working with Matrix Intelligence
Matrix Intelligence are specialists in the conduct of forensic accounting investigations. If you would like to know more about how we can help you, please contact us for a no-obligation quote
Assisted Client To Avoid Criminal Prosecution
We were approached by an accountant whose client had been arrested by the police at London Heathrow Airport with a sizeable quantity of cash.
They were accused of money laundering and threatened with criminal prosecution, however; our intervention was able to refute the allegation.
Outcome
The reality was that the individual had been running a cash business, and whereas they were guilty of tax evasion, they were not money laundering. Acting on their behalf, we conducted negotiations with HMRC to enter into the contractual disclosure facility. The end result was the individual had to pay tax and a penalty, as opposed to facing a lengthy criminal enquiry and possible criminal prosecution.
Working with Matrix Intelligence
Matrix Intelligence are specialists in the conduct of forensic accounting investigations. If you would like to know more about how we can help you, please contact us for a no-obligation quote.
Assisted Client Prove Ownership of Land
We were approached by a client who was having difficulty proving land ownership and that they were the UBO of land which had been registered in the name of an offshore entity.
The dispute arose after the IFA that had been advising them was convicted of money laundering and it became apparent that they had been less than transparent in their dealings with our client.
Outcome
By revisiting the original purchase and subsequent transfers of money, we were able to prove land ownership and have the land transferred back into our client’s name.
In addition to preparing a court-ready report for our client, we also provided professional witness testimony in court, where Liz’s experience of as a former employee of HMRC was instrumental in the judge finding in our client’s favour.
Working with Matrix Intelligence
Matrix Intelligence are specialists in the conduct of forensic accounting investigations. If you would like to know more about how we can help you, please contact us for a no-obligation quote.
The Role Of Corporate Investigators
In March 2021, a Government white paper was published entitled “Restoring trust in audit and corporate governance”. This report was a direct response to issues of corporate mismanagement; specifically, failures in audit practices by the seven largest audit firms and major corporate collapses.
There have been several recent profile cases where corporate organisations have been investigated due to alleged internal illegal activities; employee misconduct, or as a result of threats by competitors, such as the Wood Group and Amec case or Activision Blizzard. Currently, the professionalism of the big four accounting firms is under scrutiny and Credit Suisse is on trial over alleged failings relating to a money laundering case.
It is with this background that more light has been shed on the role and prominence of corporate investigators. These individuals are employed by bodies such as legal firms, banks and multinationals, to navigate the criminal complexities of the business world.
Effective corporate investigators can and have helped uncover numerous wrongdoings; think of Bernie Madoff, or Enron. They are however not limited to big business, no matter the size of an organisation, their vulnerability to internal and external threats can be very real, making their need for a corporate investigation essential.
What is a corporate investigator?
A corporate investigator undertakes an extensive examination of an organisation, business or corporation, when an unlawful act is deemed to have been, or is currently being committed, either by the business in question, its employees, or competitors.
When hired by a business, the investigator is often employed at a time when serious reputational or financial damage could be done to the institution if the act is left to continue.
Their role is to scrutinise both internal and external evidence, either as part of an investigation being carried out solely by the organisation, or as part of a third-party professional team.
They will recover evidence to determine whether any wrongdoings have taken place and help the client form the basis for internal or legal proceedings going forward.
Whilst legal, yet unregulated in the UK, there are many countries such as Indonesia; China or Saudi Arabia, which have banned or do not recognise the profession, whereas others such as Canada and the US recognise them, but under strict guidelines.
What do corporate investigators investigate?
The evolution in the sophistication of crime, as a result of online, cyber and technological advances, along with the complexity of the business environment in general, means that organisations today face a myriad of both internal and external threats.
With this in mind, a corporate investigator will be brought in to examine a vast array of incidences happening both within and external to an institution, that if left unchecked may have serious consequences:
- Data Violations: theft; loss of data or hacking.
- Intellectual property infringement: unauthorised use or sale of material classed as intellectual property.
- Corruption: bribes; issues around improper payments.
- Fraud and financial issues: embezzlement; money laundering; accounting anomalies.
- Staffing issues: harassment; bullying; misconduct; absenteeism; dishonesty.
- Due diligence: when entering into a partnership with another business or senior employee.
- Libel and defamation: false statements relating to reputation.
What investigative methods do corporate investigators utilise?
The complex and thorough nature of corporate investigation means that the methods used to uncover any illegal activities must be multi-disciplinary, with extensive knowledge required across research techniques including surveillance, interviewing and more.
The methods employed must be carried out in a structured form, quickly, legally and confidentially, to achieve the best outcome and minimise business risk.
A corporate investigator, such as those utilised by Matrix Intelligence, will ordinarily utilise two main methodologies; HUMINT and OSINT. Not all investigators have the skill or resources to employ both.
OSINT: Research and efficient document collection is a vital aspect of a corporate investigation and forms a significant part of OSINT.
This relates primarily to hard-copy documents, or electronic data (computer/digital forensics), and open-source and proprietary databases, such as financial and criminal records, property holdings and court documents. It is important that legislation relating to data protection is followed.
Accessing electronic data such as emails and other computer based or telecommunications activity can certainly only be carried out in the UK in line with the Regulation of Investigatory Powers Act 2000 and The Telecommunications (Lawful Business Practice) (Interception of Communications) Act 2000.
HUMINT: Conducting investigative interviews can shed considerable light on a case, especially at the start; providing valuable background information, detail and context as to what has taken place and why.
It will depend on the nature of the case as to how these interviews are carried out and recorded, and it requires a diligent and experienced individual. It is imperative that interviews are carried out and recorded in a way which makes them admissible in court.
Investigators can also use their own local network of contacts and resources to gather intelligence on an individual, again through discreet and confidential conversations.
Physical surveillance to document a person’s movements and business relationships, as well as technical surveillance, utilising photography and videography, are both effective means of capturing evidence. GPS tracking of vehicles is also permissible under law in the UK.
Are corporate investigators regulated?
The regulation of corporate and private investigators, and the industry as a whole, has been up for a debate within the UK Government for a considerable period. Lack of regulation has meant anyone can work in the industry regardless of experience, skill or convictions. This differs from say the U.S., where all investigators require a license.
Following the phone hacking scandal and the collapse of News International in 2011, which put the spotlight on the often unscrupulous world of private investigations, a Parliamentary Home Affairs Select Committee report on the industry was published in 2012.
This included 14 recommendations about the future of the UK investigation industry and regulations within, as well as the risks if left unchecked. These included a two-tier system of licensing and regulation for private investigators and companies, as well as increased penalties for the unlawful acquisition of private data.
As a result, the then Home Secretary, Theresa May, announced in July 2013 that operating as an unlicensed private investigator would become a criminal offence, however; despite this they are still unregulated and are under no legal requirement to carry a license.
When a corporate investigation crosses the legal line?
Once it has been agreed that a corporate investigation is warranted, it is vital that it is carried out within the confines of the law and that the client is aware of this, no matter which jurisdiction the work falls in. Any errors or failings to do so can lead to criminal prosecution or legal proceedings against the company and investigator in question.
It is only by employing an ethically sound agency such as Matrix Intelligence, with a robust investigative strategy, clear parameters, and legally obtained evidence, that a successful outcome and actionable result can be reached.
Having examined some of the legal means by which intelligence can be gained, it is also worth mentioning what is not permissible by law in a corporate investigation:
- Phone and computer hacking – as demonstrated in the News International scandal, this is illegal. The Computer Misuse Act of 1999 sets out that it is unlawful to access a computer to steal data or to bug a phone for similar reasons.
- Trespassing – you can follow someone in a public place, but you cannot go onto private property or enter a home.
- Accessing of certain bank or financial records – this is not possible without the permission of the account holder.
It is imperative that careful consideration is given to every aspect of an investigation to ensure that it stays within the confines of the law. If ignored, it can lead to serious reputational and legal repercussions, as we have seen with the Credit Suisse scandal.
UK corporate investigators remain an unregulated profession. In order to conduct an investigation which effectively contributes to legal action but does so within the realms of the law, choosing a professional and ethical agency that you can rely on to deliver is of the utmost importance.
We pride ourselves on being that agency, achieving credible, timely and legally sound results that help our clients maintain their reputation, business continuity, and security, no matter the threat.
For more information on our corporate investigative capabilities, contact us at: info@matrix-intelligence.com or online at www.matrix-intelligence.com
The Value & Challenges Of HUMINT
Sometimes HUMINT is the only viable option for an investigation.
We are regularly engaged by a FTSE100 company to conduct discreet pre-transactional due diligence for them in countries within which it is challenging to obtain reliable information; either due to a lack of comprehensive and accessible databases, or their absence altogether.
On this occasion, our client engaged us to conduct an internal investigation after concerns had been voiced by a third party about the conduct of their local in-country agent in Baghdad, Iraq.
Outcome
Allegations had been made that the agent had helped to secure contracts on behalf of the client through the use of bribes and furthermore, that they did not conduct their personal affairs in a manner that would be acceptable to the client’s corporate values.
Prior to accepting the assignment, we performed a source mapping estimate to determine whether we would be able to secure sufficient reliable and trustworthy sources to conduct the task. As it transpired, we were able to secure several highly credible sources, including a government minister, who knew the Subject and who would be willing to comment.
The cultural challenges of operating in Iraq are not often apparent, however; one truism, is that you must be wary of personal agendas/vendettas when seeking an individual’s opinion on someone else. As a result, we took care to consider each source’s tribal/familial loyalties and assign a weighting for their reliability. We also ensured that we cross-referenced key information wherever possible.
Our investigation gathered a body of evidence to confirm beyond doubt that the agent had indeed been conducting himself in a manner that did not align with our client’s corporate values. Consequently, the client severed all ties with the agent.
The information we provided was invaluable to our client as it enabled them to remove a serious threat to both their reputation and in-country operations.
Working with Matrix Intelligence
HUMINT is an excellent means of gathering information and it can be used in isolation, or to compliment the findings of OSINT. Whereas many firms can deliver the latter, few have the requisite experience to conduct a sensitive or complex HUMINT investigation.
Matrix Intelligence are specialists in the provision of HUMINT. We have taken years to develop and nurture an expansive and comprehensive network of trusted sources.
Please contact us with any queries regarding our covert and investigative surveillance service.
The Value & Challenges Of HUMINT
When it comes to international asset tracing it may give rise to the term ‘a needle in a haystack.’ The challenge of cross-border investigations, HUMINT, limited resources, multiple jurisdictions and the comprehensive lengths a Subject may go to protect their interests, is not always an enviable one.
It is because of this that professional and experienced investigators require a combination of extensive investigative tools, giving each careful consideration, to build a clear picture of a Subject. In so doing a reliable and actionable result is reached, in a way that minimises Client time and cost.
In this insight, we examine one such tool. HUMINT or human source intelligence, the challenges that it presents, its effectiveness and, how we at Matrix Intelligence employ it successfully to complement our investigative strategies.
What is HUMINT?
NATO describes HUMINT as “a category of intelligence derived from information collected and provided by human sources.”
As opposed to data collection, which can be automated, this is information and intelligence which is gathered by highly skilled and experienced individuals, rather than technical means. It is an excellent collection tool and it is very commonly utilised by government and private intelligence agencies around the world.
In the field of asset tracing and litigation, where the prime motivation is to hide physical evidence, often sophisticatedly, HUMINT is a powerful tool in gathering information from individuals close to the target Subject.
HUMINT V OSINT
Whilst open-source intelligence (OSINT) is valuable in terms of collating publicly available information, as well as that which is notably harder to retrieve, through sources such as credit checks; bankruptcy checks; land registry and, deep web searches, you can reach a dead end.
In addition, determining who owns what from recorded data is often a timely and costly exercise. If the relevant information has not been written down or accurately recorded in emails; company structures, financial records, it can be difficult to trace assets and correctly determine true ownership. This is particularly problematic in jurisdictions which have few, or unreliable, online records.
In comparison, HUMINT is able through skilled and discreet methods, to extract information from well-placed individuals who possess detailed knowledge and therefore can provide a thorough picture of the subject.
Most investigators will therefore begin with OSINT as the precursor to any investigation, before moving on to HUMINT to achieve greater clarity when it comes to the Subject.
How is HUMINT carried out?
This is high-value intelligence built on discreet direct and indirect inquiries, as such, it requires to be undertaken by experts, skilled in the field. Not all agencies can deliver it.
At Matrix Intelligence, we have amassed considerable expertise in the provision of HUMINT and have developed a global network comprising tried and tested contacts from a variety of disciplines. Such networks take years to establish before they can be deemed effective.
As HUMINT uses people as the main medium to gather information, a tremendous amount can be obtained relatively quickly. However, it requires carefully developed skill and patience to establish which individuals to be approached, namely those believed to have detailed knowledge. Furthermore, a well-thought-out narrative must be presented to said individual to create an environment in which they feel safe to speak.
A conversation/engagement is then initiated to gather as much pertinent information as possible related to the Subject without making the person aware of the intent behind it. These inquiries can take place around targets familiar to the Subject including near to home address; office or where colleagues and staff socialise.
At Matrix Intelligence, we regularly conduct HUMINT investigations. Recent examples include:
- A complex internal investigation for a FTSE100 company in Iraq.
- An investigation on behalf of a corporate client that believed one of its major competitors was employing underhand tactics to damage their reputation.
- An investigation of a company director who was on annual leave but was building his own portfolio of clients.
Challenges ?
Whilst the potential for gathering relevant information in an asset tracing case is huge, HUMINT does have its challenges.
The largest problem is that sources can lie, or embellish their account of an event to endear themselves to the person gathering the information. With HUMINT you are relying on the source to tell the truth, but with human nature being what it is, this is not always the case.
To counter this, it is essential that the reliability and trustworthiness of potential sources are assessed in advance and that where there is doubt over the veracity of a statement, corroboration from other sources (human or public records) is sought. Where doubt remains, this must be reported to the Client, so that they are not mislead.
Relying on people also means you may be dealing with geographical challenges in terms of their location and their dispersal. This can contribute to the expense and time involved in any particular investigation.
Surveillance and site visits (the other human factor)
In addition to gathering human intelligence through direct or indirect inquiries, surveillance and the conduct of discreet site visits are additional tools which can assist with corroborating information gained from HUMINT.
Surveillance is a specialist skill, close observation requiring high levels of expertise and knowledge, most frequently used by Police or Intelligence Agencies. It might take the form of static observation from a fixed position; say an office block across from the suspected asset, or mobile observation, involving a moving vehicle. Both of which can produce video or photographic evidence which can be used in litigation.
Discreet site visits to what is believed to be an asset, or where assets may be hidden, are valuable to confirm ownership and as general fact-finding as part of the investigative strategy.
At Matrix Intelligence we have a network of trusted sources, including expertly trained former police and government-trained operatives, who are skilled at conducting covert operations, within legal parameters, to efficiently and quickly deliver results for our Clients.
Asset tracing by its very nature requires expertise and professionalism throughout, as it presents considerable challenges.
A well thought-out investigative strategy, supported by on the ground experience, using a combination of benchmark intelligence-gathering methods such as HUMINT results in the most effective solution for clients.
At Matrix Intelligence, we are skilled in the sensitive collection of HUMINT to deliver high quality results to support complex investigations.
For more information on our asset tracing capabilities, contact us at: info@matrix-intelligence.com or online at www.matrix-intelligence.com
Asset Tracing In France
Asset tracing in France is a professional, complex and highly sought after skill. Ambiguity within foreign jurisdictions, technology, and globalisation have facilitated the movement of assets worldwide, and heightened the need to discover them swiftly.
This ease of movement presents a challenge for clients looking to locate and recover assets overseas. If assets are moved to a different country, there is much to do in terms of navigating the foreign legal and legislative landscape, accessing records and confidential documents.
In this insight, we examine asset tracing in France, the challenges that it presents, and how we at Matrix Intelligence use our extensive expertise and global reach to achieve results for our clients.
The French legal landscape
France does not follow a common law system, but rather a civil one. It is important to outline this to better understand what is legally possible when it comes to asset tracing and subsequent recovery.
A civil law jurisdiction relies on written statutes and legal codes which are constantly updated, these set out legal procedures and what can and cannot be brought in front of a court. This differs from the common law system in the UK, for example, which relies on precedence and custom, evolving over time.
Within a civil system, there is no duty for disclosure or discovery mechanism before the courts, unlike in common law which requires full pre-litigation transparency. This means that the opposing parties decide which documents to submit into evidence.
Whilst a judge can intervene, it means that the burden of proving allegations of hidden assets, for example, property or real estate purchased in France, lies with the victim.
This can be very difficult when such assets are often in the names of third parties or offshore companies and alsmot completely reliant on personal disclosure. Take for example the case of the former Czech Prime Minister Andrej Babis, who purchased a $22m French estate under the name of an offshore company, thus concealing his ownership.
Governance in France
As with the legal landscape, it is important to understand the French form of governance to appreciate the impact it has on asset tracing, its co-ordination, and the conduct of an investigation in country.
France has a decentralised and complex system of governance across its 18 regions (13 in metropolitan France and 5 elsewhere), designed in theory to give a greater balance of power across the nation:
- Divided into 96 mainland administrative departments and 5 overseas.
- Created in 1790, each department (department) is allocated a capital, usually the largest city in the area but not always. It is the largest unit of local government and is governed by an elected general council with President, responsible for local services, law and budget.
- Most departments in continental France are two and a half times the size of an English county with over 500,000 residents. Paris for example currently has 2 deparments (reduced from 8) and sits in the Île-de-France region.
- These departments which are allocated a two-digit official geographical code, are then sub-divided into arrondissements (districts) of which there are 342.
- They are then divided into cantons or communes (municipalities), governed by municipal councils. There are approx 34,836.
- Paris, Marseille and Lyon are further divided into municipal arrondissements, 20, 16 and 9 respectively.
- St Tropez, a known haven of wealth and power and historically a location for hidden assets such as property, is in the department of Var and the region of Provence-Alpes Cote de Azur, of which there are 153 municipalities.
Challenges of Asset Tracing in France
The main challenge is that which relates to evidence disclosure and discovery around civil law and cross-border investigations. As discussed there is no obligation for transparency in France .
Furthermore, the French Blocking Statute, prohibits specific evidence that French companies or nationals may hold, from being disclosed in foreign legal proceedings. These include certain categories of documents (economic, technical, financial, commercial and industrial) and often it is only once a French court order has been obtained that access is granted.
France has also always taken a strong position in terms of data protection and privacy laws, enacting one of the first in 1978, the Data Protection and Liberties Act. That same year, it created the Commission nationale de l'informatique et des libertes (CNIL), the French data protection agency.
A further challenge comes from the decentralised system, as asset tracing would most likely require investigate enquiries in multiple departments, as there is no connectivity between each, which this can have a huge impact both on the time and cost of the work involved.
All of which combined presents complex challenges in cross-border discovery and asset tracing investigations in France. It is imperative therefore to take the utmost care to ensure that any evidence captured for use in a foreign asset tracing case, goes through the correct consultation, legal and administrative channels.
It should be noted that there are treaties, including Mutual Legal Assistance Treaties (MLAT) and the Hague Evidence Convention which do make certain foreign disclosures, including personal data, documents and other pertinent information, possible in criminal and civil cases.
All investigations, whether fraud or insolvency related, require a specialist asset tracing agency which understands how to conduct a focussed investigation, navigate complexities and maximise use of the client's budget to achieve results.
At Matrix Intelligence, we are able to utilise our extensive network of investigative professionals and their expertise within the French jurisdiction to help achieve this.
Asset Tracing tools in France
In recent years, there has been greater emphasis and priority placed globally on corruption, asset tracing and recovery, thanks in part to organisations such as the Global Forum for Asset Recovery and the Stolen Asset Recovery Initiative.
This has resulted in France strengthening the efficiency of its domestic capacity, as well as its international co-operation and collaboration in the field.
The two primary and important asset recovery bodies in the country from an international mutual legal assistance point of view are:
- Plateforme d’identification des avoirs criminels (PIAC) – a law enforcement unit dedicated to criminal asset identification.
- L'Agence de gestion et de recouvrement des avoirs saisis et confisqués (AGRASC) - an agency for the management and recovery of seized and confiscated assets.
Using our expertise and sources we are able to access other information platforms, such as:
- Registre du Commerce ET des Societes (RCS) – information related to registered businesses including shareholder details and financial information.
- FICOBA – a centralised bank register, which allows for swift access to financial information.
- Service de Publicité Foncière (land registry) - holds documentary evidence outlining the ownership of land for real estate properties.
Apart from in-country sources, we use additional deep web resources and comprehensive international tracing proprietary databases to navigate through data in order to identify the subject's footprint.
The ability to trace and recover assets globally is based on the quality of information, knowledge and expertise within the particular jurisdiction. At Matrix intelligence we have considerable experience of asset tracing in France, throughout the European Union and beyond.
For more information on our asset tracing capabilities, contact us at: info@matrix-intelligence.com or online at www.matrix-intelligence.com