In the final of four posts on asset recovery in fraud claims, Arun Chauhan and Elizabeth Rhodes consider the challenges posed by international asset tracing for cases anchored and litigated in England against a defendant that appears to hold assets overseas.
Whilst this post is written in the context of international issues, the points below regarding commonality and connections are equally relevant to asset tracing in England and Wales.
A common scenario
When advising in relation to cases where it is alleged that loss has been caused by fraudulent or dishonest conduct, one of the things we are often asked to consider (and that was the subject of our first blog post) is whether a defendant is worth pursuing. If we are not looking for assets, we are often tasked to explore whether we can produce evidence that a defendant is connected with assets that have been diverted, thereby causing our client loss.
Life would be boring if the answer was simple. Frankly, we are typically presented by a client or colleague with a scenario along the following lines:
- We are told that it is believed the defendant in question is allegedly connected to ill-gotten gains or assets that are located overseas.
- When we ask why that connection is believed to be the case, it cannot quite be explained why such a belief is held.
Perhaps somebody in the story had mentioned a link, or the answer may be that it is obvious. How else would they get their money?
The harbouring of assets overseas presents numerous complications when looking at the issue of tracing. A defendant might not hold any assets in their own name. In fact, this is quite common. They may have assets held for them beneficially in trusts, or by third party confidants, family members or companies with nominee directors or shareholders. If any of the above proves to be the reality, the key to finding the assets is to look for the common denominator.
Disclosure orders and public records
In our first and second blog posts, we looked at information obtained by way of public records and disclosure orders, but from a domestic angle. The methodology for the start of your international asset trace will not be too dissimilar, save that you will need to be au fait with the challenges of any specific jurisdiction in which you are tasked with making such enquiries. Often, we find that we are dealing with off-shore issues where obtaining details about comparatively basic information from the equivalent of a Companies House would require a court order. The BVI is a good example of this, where only very limited information is available without court intervention.
The starting point has to be an understanding of the relevant jurisdictions and the challenges they each pose, including an understanding of how certain jurisdictions may see connectivity (for example Russia and Cyprus). You can then assess what can be obtained through local public records and via court-directed disclosure. If you engage in a court process, you will have to weigh up the risk of potentially tipping off the defendant that you are making such searches. So, if this is pre-emptive research in aid of seeking injunctive relief before a claim is launched, caution is advised. Otherwise, precipitate action may alert a defendant resulting in assets being dissipated before your client can proceed.
Indeed, it may be that searching public records themselves runs the risk of leaving a trail. If you are unsure, engage an expert with local knowledge or investigation agents with international experience. They will consider these risks before you take an overzealous approach to your asset tracing exercise.
It’s not what they own, but who they know
The best way to identify links between a defendant and assets is to understand what they do on a day-to-day basis, where they go and who they know.
Picture this. You are a wealthy but perhaps dishonest individual. You know that there is always a risk that a party may pursue you for loss you have caused. The best counter is to make your opponent question if it is even worth fighting you, as you do not hold any assets in your own name (of course, you will also fight the case on legal and factual points). Those assets may well be held (as set out above) in trusts, companies or by other individuals. Here, the issue is that they are still your assets. You will be pretty certain to only place those assets in the apparent ownership and control of others if you trust them.
So who are these “other parties”? Their ownership of assets calls for an explanation. If they are young, for example, or are employed in jobs that pay an average wage, some may question how it is possible for such parties to apparently hold such wealth.
How do you find these other parties? This task is not so much about asset tracing but about focussing on human elements or characters in the story. A common or recurring name can, on occasion, link to assets, trusts or companies. In addition, covert and lawful surveillance over a period of time may reveal where the defendant visits and the people they often meet. This should help in piecing together the information.
Examples of seeking this commonality are found by reverse engineering a route to information or looking at the wider picture.
With respect to reverse engineering information, it may be that the same trusted formation agent is used for all companies you suspect are linked to the defendant. It may be the same bank, lawyer or accountant. We have seen documents lodged at the Land Registry or at Companies House or the equivalent in other jurisdictions where the professional adviser is identified. They may have been used elsewhere in the story; therefore, an inference can be drawn that there is a link to your defendant.
On the human side, social media accounts of the defendant’s relatives may reveal the commonality. The defendant might be careful, but his 16 year old child may reveal which individuals were together during the weekend at their home. This could include the defendant and a party who expressly owns assets you suspect belong to that defendant. From this type of information, you can start to draw an inference and submit to the court that an asset’s ownership needs to be explained.
Emotional attachment is another area to consider. For example, where you can identify a defendant’s hobby, such as horseracing or participation in a sports club, connections in respect of ownership of those assets may be more obvious. There is a need for the defendant to be seen as associated because of the emotional buy-in.
Conclusion
The reason we enjoy asset tracing is that it takes us away, to an extent, from what we have been taught about the CPR and legislation, to an area of work that requires practical and lateral thinking to unravel information. It is the closest we will get to being Magnum PI; at least that is something.
