Asset tracing 101
Friday 15 October, 2021
We are in the midst of an epidemic of fraud.
In one global survey, over 5000 respondents in up to 99 countries were interviewed and nearly 50 percent had been the victim of at least one fraud. On average companies were found to have experienced six frauds in 2020 at a loss of $42 billion*.
A massive £1.26 billion was lost to fraud in the UK in 2020, a rise from the previous year compounded by the mass disruption created by the pandemic**.
Given the scale of the risk, what can you do to protect assets from fraud and, should the worst happen, regain access to them?
Whether access has been lost due to fraud or confiscation, Here are some key points to remember.
Above all else, you need to act quickly. Here are the basic steps to take..
Civil proceedings
Here are 10 key pointers if you are going to start the process of asset recovery through civil proceedings
Here are 10 key pointers if you are going to start the process of asset recovery through civil proceedings
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- Instruct specialist lawyers and start an investigation. This may include hiring a private investigator but do make sure that they are registered in that jurisdiction or a member of a professional body to ensure they are complying with the relevant rules, regulations and legislation.
- Check if you can start civil proceedings in parallel with criminal proceedings. This depends on the jurisdiction as sometimes civil proceedings will be stayed until the outcome of criminal proceedings have been determined. In the US, for example, civil proceedings may be challenged if Fifth Amendment privileges against self-incrimination are asserted.
- Determine which court should be used as a forum for the claim. This is generally determined by the financial value of the claim, whether it is a natural person or legal entity, or the residence of the defendant.
- Discover if there is a time limit for bringing civil proceedings. In the UK, claims generally ought to be issued within six years from the date at which the cause of action accrued. Time limits can vary widely between countries. For example, the general time limit in Liechtenstein is thirty years, while in Qatar it is three years from when the individual discovered the action or fifteen years after it occurred.
- Will the court have jurisdiction in the matter? Check that country’s rules for jurisdiction for civil claims.
- What evidence can you bring? In the UK the general principle is that where evidence is relevant to the matter at hand, it is admissible no matter how it was obtained.
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- Take a look at what information is publicly available.
- Cooperate with enforcement agencies as their evidence may be used in civil proceedings on request.
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- Ask third parties to disclose relevant information.
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- Generally plaintiffs may apply to a court for an order requiring disclosure.
- Plaintiffs may have to prove that the information would be necessary for the case, or would not adversely affect the case of another party.
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- Perhaps interim relief will help in the short-term? Provided full and frank disclosure is made to the court there is the possibility of a wide range of interim remedies.
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- If there is an immediate risk that evidence is likely to disappear, a claimant may apply for a civil search order.
- Where a claimant seeks to recover specific property from the defendant or the traceable proceeds of that property, the court, subject to certain requirements, can grant an order for the detention, custody or preservation of that property.
- The court may also grant a search order against a non-party to the proceedings, where they are believed to have relevant evidence and there is good reason to grant the search order in order to preserve that evidence.
- Should a claimant suspect that a defendant may dissipate assets in order to frustrate a judgment, they may apply for a worldwide freezing order which prevents the defendant from dealing with any of their assets above a certain monetary level, anywhere in the world.
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- Stumbling blocks may include the defendant’s right to silence or non-compliance with court orders by any of the litigants or a third party. Non-compliance may lead to sanctions by the court. There may also be issues in obtaining information from another jurisdiction.
- The claim in a civil court could be based on unjustified enrichment, breach of contract, fraudulent misrepresentation among others.
Criminal proceedings
Has this turned into a criminal matter?
- There are interim measures that can take place when assets are suspected to be the proceeds of crime.
- When there is evidence that a crime has been committed an investigation will begin. However not all investigations lead to the freezing of assets.
- Criminal assets may be recovered through a private prosecution. If the private prosecution is successful, then the assets may be the target of confiscation proceedings.
- Keep in mind that this may be a very expensive process.
- Nevertheless, the number of private prosecutions brought by high-net-worth individuals and companies has grown exponentially in the last few years.
- A private prosecution is a viable alternative if it is impossible to bring a case to the civil courts – whether due to jurisdiction or limitation issues.
- Private prosecution is not a viable option in most jurisdictions, for example the United States. However, in the US asset forfeiture laws allow for coordination and cooperation between the authorities and private individuals/companies.
- There are interim measures that can take place when assets are suspected to be the proceeds of crime.
Once again: The most important point is to act as quickly and as accurately as possible. A thorough investigation may help, but focus on the facts and don’t get side-tracked by superfluous information.
i PwC’s Global Economic Crime and Fraud Survey for 2020,
ii UK Finance, Fraud – the Facts, 2021.
