What do you do when you cannot follow the money any further? Traditional forensic accountants are highly skilled in tracing ill-gotten funds through voluminous bank records and other financial records, but bad actors often convert this cash into other assets that are more difficult to trace. Focusing only on traditional forensic accounting methods often leads to emptied bank accounts and dead ends. However, incorporating intelligence and asset searching methods into forensic accounting service offerings during investigations, litigations and bankruptcy matters can further assist in recoveries and add significant value for both counsel and clients.

Money laundering is the concealment of ill-gotten proceeds to disguise their origin and shield them from recovery. Money laundering typically occurs in three stages: placement, layering and integration. In the placement stage, the launderer introduces the fraudulent proceeds into the financial system, for instance, through a deposit. Once the funds have entered the financial system, the launderer layers the funds through one or more transactions or movements that distance the funds from their initial source. This may consist of transferring funds through various bank accounts controlled by the launderer. The final stage of money laundering is integration, during which the ill-gotten proceeds are reintroduced into the legitimate economy — often through converting the funds into other assets such as real estate, luxury items or business ventures.[1]
 

Figure 1 – United Nations Office on Drugs and Crimes’ Schematic of Money Laundering Cycle[2]

While traditional forensic accounting methods are effective in tracing ill-gotten funds in the placement and layering stages, intelligence and asset search methods significantly further efforts to identify and recover assets converted during the integration stage.

Each case provides varying levels of available information that can be used in intelligence and asset searches. For example, litigations afford information and documents to be exchanged between parties in discovery. In internal investigations, investigators may access company business records and human resource documents such as personnel files. After consulting with counsel and ensuring use of the information is compliant with the law, investigators can scour these documents for valuable unique identifiers that can be used to perform wide-ranging intelligence and asset searches on individuals and entities.

Once unique identifiers are compiled, a skilled and experienced investigator can perform deep-dive research on individuals and entities using a proprietary mix of public records database searches and other open-source searches. When incorporated into existing litigation and investigation cases, this research can help “connect the dots,” identify new leads and provide valuable findings for counsel and the client.

During the initial stage of an investigation or litigation, intelligence searches can help identify hidden connections between parties, family and business relationships, and corporate affiliations. In recent cases, this has helped identify family members with undisclosed business relationships, the names of individuals behind suspect vendor company payments, and social media pages with pictures of assets likely purchased with illicit funds.

When reviewing bank records, skilled investigators will look out for potential asset purchases by performing ad-hoc research on the beneficiaries of funds. Below are some common asset purchases and the types of beneficiaries that may be identified in bank records:

• Real Estate – Title and Escrow Companies and Real Estate Law Firms
• Private Jets – Aircraft Trust Services and Broker Companies
• Motor Vehicles – Luxury Car Dealerships

Valuable information regarding asset purchases is often identified in wire transfer descriptions and check memos. For example, multiple private jet purchases were identified in a recent case where wire transfers to an aircraft trust service company had descriptions including the unique “N-Number” of the private jet. Using this “N-Number,” the investigation team was able to identify the jet models, registration and ownership information, recent flights, and the current location of the jets. In another recent case example, high-end watches were identified in wire transfer descriptions referencing specific luxury watch models and reference numbers.

One of the most common methods used by launderers when converting ill-gotten cash is purchasing residential and commercial real estate. In addition to reviewing available bank records for payments to title and escrow companies and real estate law firms, investigators can search for real estate in a variety of public records databases, local recorders of deeds and property appraiser websites, and social media posts. Depending on the jurisdiction, property records may be searched by owner name, address, parcel/block and lot number, or some combination of these identifiers.
 

Figure 2 – Property Appraiser Website Example – Palm Beach County, Florida[3]

By performing corporate affiliation searches, investigators can identify real estate purchased by bad actors through shell companies and trusts — common methods used to conceal these assets and keep them out of the reach of creditors, litigation counterparties and other interested parties. Certain jurisdictions are more transparent than others, and skilled investigators understand how to maximize the publicly available information within each of these jurisdictions and also leverage “boots-on-the-ground” sources if needed.

Common types of assets identified when performing deep-dive intelligence and asset searches include:

• Real Estate
• Motor Vehicles
• Aircraft
• Boats
• Jewelry
• Patents

Further, intelligence and asset research can also uncover evidence that a defendant or bad actor is dissipating assets and assist counsel in seeking emergency relief from a court, such as obtaining a temporary restraining order (TRO) or asset freeze. In a recent case, millions of dollars in payments from defendant bank accounts to various casinos were identified. It was determined that either the defendants were prolific gamblers or were employing a money laundering scheme at the casino in which funds were sent from accounts they controlled, converted to chips, and deposited to other accounts under their control — both of significant concern and strong evidence of a dissipation of assets. Other examples of dissipation of assets identified in recent cases include the use of online money transfer companies to send funds overseas. As fraudsters may like to flaunt their wealth, reviewing social media pages can be a great resource for understanding bad actors’ spending habits and uncovering asset purchases. Social media pages may also identify travel to foreign jurisdictions that are known money laundering havens.

In addition to furthering recoveries, asset research can help inform counsel and the client if a defendant/potential defendant has the ability pay a future judgment and if it makes sense from a cost-benefit perspective to pursue additional investigation and litigation.

In high-stakes litigations and investigations, you rarely have access to all the information you would like to have when making critical decisions. Employing a team of skilled forensic accountants that cannot only follow the money but seamlessly employ intelligence and asset search methods can help maximize the information available, uncover previously hidden assets, and lead to better outcomes for counsel and the client.