“Searching For Assets Laundered Through Real Estate” shows how one divorcing husband washed & hid assets during his divorce. The following is a sanitized case study from the Egmont Group of Financial Intelligence Units. It is about “O” & “R” who may have similarly employed real estate in a scheme to hide assets. O & R might have been narcotraffickers washing their illicit proceeds by purchasing real estate in Europe:
Case Ref. 08011: courtesy of the Egmont Group of Financial Intelligence Units
Copyright 2015 Fred L. Abrams
Transparency International leads the fight against public corruption which includes bribery & theft by government officials. It basically says that corruption proceeds are transferred offshore & are one of the sources of illicit financial flows. How do financial investigators across the globe search for these illicit assets? One way they search is by looking for money laundering red flags. The following discusses red flags in the case of Vladimir Kuznetsov, a former Russian diplomat at the United Nations. These red flags were structuring bank deposits; forming an offshore corporation; & using an offshore bank account to hide assets/hinder an asset search:
Mr. Vladimir Kuznetsov ‘s October 19, 2007 criminal judgment mentions his $73,671 fine and prison sentence of 51 months for violating 18 U.S.C. § 1956 (h), conspiracy to commit money laundering. According to a press release, Mr. Kuznetsov had conspired with Mr. Alexander Yakovlev– a United Nations’ procurement officer who was taking bribes. The press release explains that Mr. Kuznetsov had laundered money while he was the highest ranking Russian diplomat at the United Nations. According to his superseding indictment, Mr. Kuznetsov had been a member of the Advisory Committee on Administrative and Budgetary Questions, which advises the United Nations’ General Assembly.
As part of Mr. Kuznetsov’s laundering scheme, he had received $32,000 from Antigua via two New York financial accounts. Most significant however, was his use of an offshore bank account at Antigua Overseas Bank Ltd. as the repository of hundreds of thousands of dollars in bribery proceeds. Mr. Kuznetsov had opened this account in the name of his offshore company Nikal Ltd., which he had formed in about 2000. Although Mr. Kuznetsov was not finally convicted of it, his indictment had also alleged that he had structured bank deposits in violation of 31 U.S.C. § 5324.
Structuring bank deposits, (a.k.a “smurfing”), indicates an attempt to avoid bank reporting requirements and can be a red flag of money laundering. Other red flags of money laundering in Mr. Kuznetsov’s case included his use of the offshore corporation Nikal Ltd. to open his Antigua Overseas Bank Ltd. account. The transfer of the $32,000 from Antigua to Mr. Kuznetsov in New York was also a red flag, especially because Antigua is a tax haven/high-risk location vulnerable to money laundering.
Copyright 2008-2015 Fred L. Abrams
By putting the right tools to work in your asset search, you may be able to detect & recover assets hidden from you. These tools can consist of:
- Private investigators—“Detecting Hidden Assets By Following A Money Trail” details one way an investigator/former intelligence officer named “Roger” would search for a money trail leading to a secret bank account. Hiring an investigator like “Roger” may make or break an asset search or recovery effort.
- Computer-based research—sometimes reveals assets hidden by an individual or corporation. This research is discussed at “A Low-Cost Asset Search.” It can include searches for physical business assets; IP licenses like patents & copyrights; & searches for additional things.
- Badges of fraud—may be used in court proceedings to recover assets fraudulently transferred to 3rd parties. The badges can help you demonstrate that assets were fraudulently transferred out of reach by your divorcing spouse; a judgment debtor; a bankruptcy debtor; or others. A fraudulent transfer is marked by the badges when assets are transferred in anticipation of a lawsuit or liability; when assets are transferred even though there is inadequate or no payment for them; etc. The badges are listed at Salomon v. Kaiser (In re Kaiser), 722 F.2d 1574 (2d Cir. 1983).
Copyright 2015 Fred L. Abrams
You may have to use different legal tools to shake loose assets an adversary hides from you. The tools available to you will depend on the particular situation. When assets are hidden from you, tools which may help your asset search or asset recovery effort include:
Image: Ron and Joe/Shutterstock.com
Copyright 2015 Fred L. Abrams
A divorcing spouse can hide marital assets by laundering them in a scheme to purchase real estate.
This 26th post in the “Divorce & Hidden Money” series describes one way assets may be laundered through the purchase of real estate. It supplies the hypothetical situation of “Mark,” a high net worth businessman in the U.S. who hid assets during his divorce.
To hide assets from both his divorcing wife & the IRS, Mark secretly formed a shell company which he used to open an offshore bank account. Mark hid his beneficial ownership of the shell company & bank account by hiring nominees (i.e. intermediaries). Mark employed the nominees as directors of his shell company & they acted as nominee bank signatories on Mark’s offshore bank account.
After Mark opened the offshore bank account, Mark relied on illicit cash couriers, (a.k.a “money mules”), to smuggle the undeclared revenue/cash Mark had accumulated from his business in the U.S. After the illicit cash couriers smuggled Mark’s cash offshore, Mark deposited it into the offshore bank account he opened in the name of his shell company. Through his lawyer, Mark then used the cash in this bank account to purchase real estate located in an offshore tax haven. Mark’s lawyer titled Mark’s newly acquired real estate in the name of Mark’s shell company; and Mark successfully hid his beneficial ownership of the real estate from his wife & the IRS.
A search for assets hidden by a high net worth spouse like Mark, should try to determine whether real estate could have been used as a concealment tool. When real estate transactions are used to launder or otherwise hide assets, red flags involving lawyers are usually present. According to pp. 12-13 of a 2013 money laundering report by the Eastern and Southern African Anti-Money Laundering Group¹ these red flags can include the use of: large amounts of cash; intermediaries; money laundering havens; complex structures; business entities and trusts:
“a) Use of large amounts of cash to purchase property involving legal practitioners who do not report STRs [Suspicious Transaction Reports] giving the conclusion that they are either complacent in the money laundering or give a blind eye to circumstances relating to the payment where they could have asked more questions;
b) Distorting information on ownership by using intermediaries and false particulars during purchase of the property through a legal practitioner;
c) Legal practitioners facilitating quick money laundering havens through aborted property transactions where the initial deposited amount has to be paid back or transferred to another account from the legitimate client/trust account of the
d) Instances where legal practitioners have assisted with setting up complex structures to purchase real estate; and
e) Avoiding exposure of the beneficial owner by using the legal practitioner to purchase the property through a company or a trust.”
¹Typologies Report On Money Laundering Through The Real Estate Sector In The ESAAMLG Region Courtesy of: The Eastern and Southern African Anti-Money Laundering Group.
Image: Vycheslav Leskovskiy/Shutterstock.com
Copyright 2015 Fred L. Abrams
Spotting the red flags/the money laundering indicators is one way to search for hidden assets. The red flags may help you sniff out money or other assets concealed in matters ranging from a high net worth divorce to a securities fraud. Financial Intelligence Units part of the Egmont Group employ red flags to search for money hidden across the globe by terrorist financiers; narco-traffickers; kleptocrats & others. As more fully set forth here, red flags include:¹
- Large-scale cash transactions.
- Atypical or uneconomical fund transfer to or from foreign jurisdiction.
- Unusual business activity or transaction.
- Large and/or rapid movements of funds.
- Unrealistic wealth compared to client profile.
- Defensive stance to questioning.
The case study below, (sanitized for privacy reasons), is also from the Egmont Group.² It is about a homicide; public corruption; fraud; & the laundering of $9.5 million dollars in “Economy F.” The money was washed through a corporate bank account; lawyers’ trust accounts; & bank accounts belonging to money mules. The Financial Intelligence Unit (“FIU”) involved in the case analyzed Suspicious Transaction Reports (“STRs”); issued orders freezing monies; etc.
ECONOMY F: A CASE STUDY
The Economy F police received a criminal complaint from a government department involving fraud and theft. The facts related to the predicate offenses indicated that staff working in the government department colluded with an external crime syndicate to assist in obtaining copies of legitimate vendor payments, which were subsequently duplicated and processed to the benefit of various accounts indirectly linked to the syndicate. The initial loss exposure amounted to approximately US$573,000. Police requested Economy F’s FIU’s assistance in blocking the accounts that received the proceeds of crime, with an additional request to identify other possible players.
The FIU interacted with the relevant accountable institutions and subsequently issued several postponement orders, resulting in US$317,000 of the initial proceeds being secured. This enabled the prosecuting authority to obtain a preservation order to secure the proceeds. These interventions were brought immediately after the police provided proof of the nexus between the criminal offense and the funds that were still available in the identified bank accounts. Upon analysis of the STRs and bank records received of the accounts, the FIU identified various other payments originating from different government departments, which were unknown to the police at that stage, amounting to US$9.5 million.
An asset search may reveal that your spouse is hiding assets from you during your divorce. You might then be able to sue your spouse & possibly others for fraudulently concealing assets. As this 25th post in the “Divorce & Hidden Money” series shows, you may be able to sue on the ground that assets were fraudulently conveyed away from you:
Before leaving New York, the divorcing husband in Skiff-Murray v. Murray¹ fraudulently conveyed his business and former marital residence to his newly created Nevada corporation. Violating a restraining order, the husband next conveyed the residence from his Nevada corporation to his aunt and uncle. The aunt and uncle then mortgaged the residence to a third party.
According to the Court in Skiff-Murray, the divorcing husband had “…made it impossible for plaintiff [the wife] to enforce her judgments for child support arrears or obtain the maintenance, distribution of marital property and counsel fees awarded in the judgment of divorce.” After the divorce was over, the now ex-wife filed a lawsuit against the aunt; uncle & others. The lawsuit alleged the residence had been fraudulently transferred. It asked the Court to set the transfer aside under N.Y. Debt. Cred. Law. §§ 270 – 281, which is the codified version of the Uniform Fraudulent Conveyance Act. Continue Reading
I. PROGRAM DESCRIPTION
At the New York County Lawyers’ Association on October 13, 2015 from 5:30 PM to 9:00 PM, I will be the program chair of “Whistleblowers, Secret Swiss Bank Accounts & Recovering Hidden Assets.” Attendee registration is available at the website available here or by calling the New York County Lawyers’ Association at (212) 267-6646. During the October 13th program, I highlight the use of whistleblower tips to recover hidden assets. I show how to search for assets which can be hidden by high net worth divorcing spouses; corporations; Ponzi schemers; tax fraudsters; etc. I talk about tools you can use to recover assets hidden in Switzerland and other places across the globe. The October 13th program also focuses on the Internal Revenue Service & Securities Exchange Commission whistleblower programs which can provide qualifying tipsters with the largest payouts compared to any other reward programs in the world.
Washington, D.C. attorney Jack Blum is well-known internationally for his representation of whistleblowers. Mr. Blum will talk about Mr. Hervé Falciani, the whistleblower the media dubbed “the [Edward] Snowden of Swiss banking.” Mr. Falciani allegedly stole Swiss bank account information from HSBC in Geneva and as a whistleblower turned the information over to French authorities. This alleged HSBC bank account information eventually fell into the hands of the International Consortium Of Investigative Journalists, which published part of it at their webpages known as the Swiss Leaks project. This past February 8th, Mr. Blum appeared on the CBS/60 Minutes television show to discuss the foregoing. He will similarly discuss these matters at the October 13th program and analyze: the IRS whistleblower program; problems whistleblowers face in the real world; and the difficulty lawyers may encounter in dealing with whistleblowers either as clients or tipsters.
Charles Bott QC, Head of Carmelite Chambers in the United Kingdom, is a recognized authority on financial crime and its regulation. He has appeared in more than 80 serious fraud trials including some of the leading cases of recent years and advised many other clients under investigation. Mr. Bott specializes in cases of serious fraud, money laundering and revenue evasion; and in the United Kingdom, he is regularly instructed in serious criminal cases and regulatory cases of all kinds. At the October 13th program, Mr. Bott will talk about the LIBOR manipulation litigation in the United Kingdom, which he is involved in. He will mention recent developments and revelations in the ongoing litigation; and will discuss the role of inside informants and cooperating witnesses in it.
Labaton & Sucharow partner Jordan A. Thomas will also speak at the October 13th program. Mr. Thomas will discuss the Securities Exchange Commission’s whistleblower program, as he is one of the world’s leading experts on it. He will review the advantages and disadvantages of the different whistleblower programs; and the ethical concerns gatekeepers like attorneys, accountants, officers and directors have, in reporting illegal behavior in both the civil and criminal contexts. As more fully set forth below, Mr. Thomas: is a former assistant director in the Commission’s Enforcement Division; had a leadership role in developing the Commission’s whistleblower program; and was assigned to many of the Commission’s highest-profile matters such as those involving Enron, Fannie Mae, UBS & Citigroup. Continue Reading
If you are a divorcing spouse, judgment creditor or anyone else who believes they may need to do a bank search to locate hidden assets parked offshore, read this post to see how individuals sometimes hide their assets. It covers the legal remedies that may be available to you in your asset search for offshore bank accounts. This post was first published in 2013 and was called “Hidden Assets Offshore & A Bank Search To Find Them.”
Beneficial owners around the world are able to secretly transfer assets across international borders into offshore bank accounts. The beneficial owners sometimes do this by money laundering through multiple jurisdictions; bulk-cash smuggling; back-to-back loans; shell companies; nominee incorporation services & gatekeepers like lawyers. Legal remedies are however, usually available for finding hidden assets transferred offshore. These remedies may even include seeking a court order directing a Swiss or other offshore bank to perform a bank search and disclose bank customer information.
The link chart below describes how one divorcing husband concealed both undeclared revenue and marital assets via multiple jurisdictions.¹ The husband laundered millions from the U.S., through a Swiss bank and a German one. Prior to the equitable distribution hearing in his divorce, the husband alleged he had a liability of $29 million owed to a prime bank in Germany because of an arm’s length business loan. As this link chart reveals, the supposed arm’s length loan was back-to-back , (i.e. a fully collateralized loan in which the borrower and the lender are one and the same):
(Click On The Link Chart To Enlarge)