We all know that compared to money hidden at domestic bank accounts, money hidden in offshore accounts is harder to detect and interdict. This explains why offshore bank accounts are perhaps the most widely used method to hide vast sums of money. Individuals ranging from high-net-worth divorcing spouses to narco-traffickers and terrorist financiers can use offshore bank accounts to hide money. Trusts, shell companies, partnerships & other business entities, sometimes also hide money at offshore bank accounts. One difficulty in trying to interdict hidden money at offshore bank accounts, is that you have to first gather competent evidence about these accounts in order for a court to help you.

To gather competent evidence, you will ordinarily need to hire offshore lawyers and bring offshore legal proceedings. Demonstrating this point, is the fact pattern¹ of a husband in a New York divorce who hid tens of millions of dollars from his wife by using two offshore banks respectively in Switzerland and Germany. The divorcing husband hid his millions offshore through the scheme I outline at my post “Money Laundering, Marital Assets & Divorce.” Meanwhile, the wife shouldered the burden during the divorce of proving to the court that her husband hid the millions offshore.

This meant the wife needed to file court cases in Switzerland and Germany through lawyers there. The wife had to file the court cases to compel the Swiss and German banks to supply her with copies of her husband’s: bank account opening documents; monthly bank account statements; & account signature cards. After collecting this evidence from the Swiss and German banks, the wife could use it at an equitable distribution hearing in the New York divorce.  By using this evidence at the hearing, the wife would be able to prove that her husband hid millions at the Swiss and German banks. The judge in the New York divorce could then consider the husband’s millions at the these two offshore banks and award the wife her fair share of the marital property.

The husband I describe above, hid money by using just two offshore bank accounts, the one in Switzerland and the other in Germany. However, most schemes to hide large sums of money offshore, involve a greater number of banks &/or bank accounts. An example of a scheme in which numerous bank accounts were used to hide money offshore is detailed at the “How FINTRAC Builds A Case” webpage. At its webpage, the Canadian financial intelligence unit FinTrac describes the way criminals laundered money through four banks and ten bank accounts. U.S.A. v. Rahman might be an example of another scheme with numerous bank accounts used to hide money offshore. Prosecutors in U.S.A. v. Rahman claim Mr. Azizur Rahman hid money from the IRS as part of a suspected tax fraud.  According to Mr. Rahman’s indictment available below, Mr. Rahman failed to disclose over 20 offshore bank accounts to the IRS.

¹This fact pattern has been changed & sanitized for privacy reasons.

Copyright 2021 Fred L. Abrams

The IRS thinks Florida businessman and Novatek CFO Mark Anthony Gyetvay, had hidden money offshore. The IRS believes Mr. Gyetvay secretly stashed as much as $93 million offshore in 2 Swiss bank accounts. On September 22, 2021 Mr. Gyetvay was indicted for suspected: tax fraud, failure to file FBAR’s, making false statements at the IRS’s Streamlined Filing Compliance Procedures,  etc.  The gravamen of the indictment was that Mr. Gyetvay had hidden money offshore by supposedly:

  • Transferring money through multiple jurisdictions;
  • Maintaining foreign bank accounts in Switzerland; etc.
  • Forming shell companies in Belize and the British Virgin Islands, which Mr. Gyetvay apparently used to open 2 Swiss bank accounts;
  • & directing the 2 Swiss banks to withhold monthly bank account statements and other mailings, so they would not be sent to Mr. Gyetvay in the U.S.

Additionally, Mr. Gyetvay could have hidden money at Swiss banks by enlisting the help of his then-wife who had a Russian address / Russian passport. Mr. Gyetvay may have used his then-wife to declare that she was the true beneficial owner of the Swiss bank accounts at account opening documents known in Switzerland as “Form A’s.” Meanwhile, Mr. Gyetvay and not his then-wife, was the alleged true beneficial owner of the Swiss bank accounts. Swiss banks required their bank customers to declare beneficial ownership via “Form A’s,” as discussed at the legal memo available here, which my Swiss counsel wrote many years ago.

Copyright 2021 Fred L. Abrams

I) PANAMÁ OFFSHORE LEGAL SERVICES

You won’t have an easy asset search if your adversary hires a Nominee Incorporation Service, (“NIS”), to hide assets from you. A NIS helps its customers establish corporations &/or other entities. In The Matter Of The Tax Liabilities Of John Does, prosecutors essentially alleged the Panamanian law firm known as Panama Offshore Legal Services, (“POLS”), was a NIS.  According to prosecutors, taxpayers had used offshore services offered by POLS to commit tax fraud.

II) THE JOHN DOE SUMMONSES

Therefore, In The Matter Of The Tax Liabilities Of John Does, prosecutors argued in court that the IRS needed John Doe summonses. The IRS could use the John Doe summonses to identify taxpayers who had hidden money via POLS, the prosecutors said. Prosecutors asked the Court to allow the IRS to serve the John Doe summonses on: Federal Express Corporation; FedEx Ground Package System, Inc.; DHL Express; United Parcel Service, Inc.; the Federal Reserve Bank of New York; The Clearing House Payments Company LLC; HSBC Bank USA, N.A.; Citibank, N.A.; Wells Fargo Bank, N.A.; and Bank of America, N.A.

To support their request for the John Doe summonses, prosecutors filed a May 4, 2021 declaration in court. The May 4th declaration was signed by an IRS Internal Revenue Agent who worked for The Offshore Compliance Initiatives Program. Page 17 ¶41 of the May 4th declaration said:

POLS is an entity that provides multi-jurisdictional offshore services in the form of comprehensive entity formation and legal and management services for clients wanting to use Panamanian entities to conceal their ownership of assets, to establish bank accounts in Panama, and to invest in Panamanian real estate.

III) SOME SERVICES POLS OFFERED

Additionally, the May 4th declaration seemed to indicate that taxpayers could have used the following services offered by POLS, to hide assets from the IRS:

IV) CONCLUSION

On July 15, 2021, the Court issued its order allowing the IRS to serve the John Doe summonses concerning POLS.  As all of the above-mentioned suggests, you won’t have an easy asset search if your adversary hides assets from you by hiring a NIS like POLS. However, learning the ways your adversary could use a NIS, might help you recognize your adversary’s methods for hiding assets. Once you recognize your adversary’s methods for hiding assets, you can consider the legal remedies available to you for recovering assets from your adversary.

Copyright 2021 Fred L. Abrams

 

There ain't that many smurfs in the world.

If you are trying to detect hidden money you should look for asset search red flags like “smurfing¹.” Smurfing is a form of structuring cash deposits into bank accounts. It is one of the ways to secretly place cash into a money laundering circuit. When a bank customer in the U.S. deposits or withdraws $10,000 or more in cash, the bank must file a Currency Transaction Report (“CTR”). The bank files CTRs with FinCen which is a financial intelligence unit. To prevent the bank from filing a CTR, a smurf would make several cash deposits under $10,000. By structuring the cash deposits this way, the smurf hopes to fly under the radar.

ALLEGED SMURFING IN USA v. BAHADORIFAR, ET. AL.

Count Five of the 7/13/21 superseding indictment in USA v. Bahadorifar, et. al., 21 Cr. 00430(RA), highlights an alleged smurfing scheme. The smurfing scheme was supposedly carried out by California resident and department store employee, Ms. Niloufar Bahadorifar. Page 34 ¶¶ 41-42 of the 7/13/21superseding indictment at Count Five says:

[B]etween at least approximately April 2019 and May 2021, BAHADORIFAR structured cash deposits totaling at least approximately $505,822 at a financial institution in individual deposits of less than $10,000 each.

Additionally, page 9 ¶ 12 of the 7/13/21 superseding indictment claims that since July 2020, Ms. Bahadorifar made about $472,000 in unexplained cash deposits into her bank account. This allegedly included 98 cash deposits totaling approximately  $444,000 that were each less than $10,000. Ms. Bahadorifar is also thought to have tried to secretly transfer money by using debit &/or credit cards.

THE SUSPECTED IRANIAN TERRORIST NETWORK

Meanwhile, an Iranian terrorist network, (“the Network”), may be the true beneficial owner of Ms. Bahadorifar’s alleged $472,000 in unexplained cash deposits. The Network is comprised of Iranian intelligence officers and/or their intelligence assets. It is reportedly tasked with kidnapping exiled Iranian dissidents for rendition to Iran. Once the kidnapped victims are back in Iran, they face imprisonment &/or execution. According to the 7/13/21 superseding indictment, the Network planned to kidnap Iranian journalist Masih Alinejad, who lives in exile in Brooklyn, NY.  The Network apparently set its sights on Ms. Alinejad because she is vocal about the Government of Iran’s human rights abuses.

MISUSE OF PRIVATE INVESTIGATORS

During the alleged scheme to kidnap Ms. Alinejad for rendition to Iran, the Network allegedly hired licensed private investigators to place Ms. Alinejad under surveillance in Brooklyn, N.Y. The Network through its intelligence officers &/or intelligence assets hired the private investigators under the pretext of recovering money Ms. Alinejad supposedly stolen &/or supposedly owed to a foreign creditor. The Network is thought to have even hired a Manhattan-based private investigator to place a vehicle with a hidden camera in front of Ms. Alinejad’s Brooklyn home. This could provide the Network with live video monitoring of the home.

THE DECISION TO INITIATE OR DECLINE PROSECUTION 

Even though the Network hired private investigators to surveil Ms. Alinejad, prosecutors declined prosecution of the private investigators.The prosecutors might have believed the Network duped the private investigators into surveilling Ms. Alinejad. Prosecutors similarly declined prosecution of Ms. Bahadorifar for a conspiracy to kidnap Ms. Alinejad.  Prosecutors declined this prosecution although Page 9 ¶ 12 of the 7/13/21 superseding indictment alleges Ms. Bahadorifar “caused a payment to a private investigator for surveillance of [Ms. Alinejad]…”

Continue Reading Asset Search Red Flags, Smurfing, Private Investigators & A Kidnap Plot

Everybody knows there can be hidden community property in ultra-high-net-worth divorces.  Meanwhile, the ultra-high-net-worth divorce between Mr. Bill Gates and his wife Melinda does not now appear to involve hidden community property.  Their divorce does however, give us a glimpse of the kinds of community property the Court often divides in ultra-high-net worth divorces. Mr. and Mrs. Gates recently filed an agreement in Court which reportedly identifies and divides their community property. Additionally, Mr. Gates is thought to have already transferred $2.4 billion to Mrs. Gates. Part of this transfer to Mrs. Gates included 14.1 million shares of Canadian National Railway Co. and 2.94 million shares in AutoNation Inc. Among other things, the couple’s community property includes 422 square miles of land across more than a dozen states, cars & art.

3 Ways Community Property Can Be Hidden

Although Mr. & Mrs. Gates appear to be amicably dividing their community property, here are some ways a spouse can hide community property during an ultra-high-net worth divorce:

  • Arts / Antiquities: Ultra-high-net worth couples often possess valuable art / antiquities. However, a divorcing spouse may secretly purchase valuable art / antiquities. During the divorce this spouse may then fail to disclose the art / antiquities.
  • Yachts & / or Airplanes: Some businesses offer their clients the service of titling a yacht & / or aircraft in the name of a Delaware or other shell company. A divorcing spouse may hide community property by employing and abusing these services.  Furthermore, a divorcing spouse may easily place a yacht & / or airplane out of reach by parking it offshore across international borders.
  • Bulk Cash Smuggling: Contrary to what one would think, enormous amounts of cash can be hidden.  This cash may then be washed at a money laundering circuit.  At AMC’s Breaking Bad tv episode “Say My Name,” fictional lawyer Daniel Wachsberger used at least nine safety deposit boxes to smuggle cash for his clients. A real world case of suspected bulk cash smuggling involved Zhenli Ye Gon (“Ye Gon”). Ye Gon was extradited from the United States to Mexico for an alleged drug conspiracy. During March 2007, the hundreds of millions in cash shown here were found in Ye Gon’s Mexican home in a concealed room next to his bedroom:

Copyright 2021 Fred L. Abrams

Mr. Alhassan Iddris Lari’s indictment says he had hidden cash in a Bronx bank account between 2014 & 2020.  Mr. Lari apparently maintained this bank account in the name of a shipping company which was just a shell company.  A press release from the IRS about Mr. Lari claims the hidden cash totaled $1.5 million. The press release alleges the cash was criminal proceeds from online romance scams &/or other e-mail scams.

Mr. Lari is thought to have wire transferred the $1.5 million out of the Bronx to criminals located in the Republic of Ghana. The press release suggests as part of Mr. Lari’s scheme to hide cash, Mr. Lari ran an unlicensed money transmitting business in the Bronx.  Based upon all of the foregoing Mr. Lari is believed to have hidden the $1.5 million by employing the following asset concealment tools:

On February 3, 2021 Mr. Lari pleaded guilty to conspiracy to commit money laundering and operating an illegal money transmitting business.  Mr. Lari faces a maximum of 10 years in prison for the money laundering conspiracy and up to 5 years in prison for operating an illegal money transmitting business. According to Mr. Lari’s docket report, the Court will next sentence Mr. Lari in Manhattan on June 16, 2021.

Copyright 2021 Fred L. Abrams

As your adversary may hide money in multiple bank accounts, you may need to perform bank searches. For example, my December 21, 2020 post mentioned a scheme in which 150 checks worth $2 million were seemingly hidden at 12 bank accounts. At your bank searches you would seek your adversary’s customer information from banks. Therefore, you would try to collect: account opening documents; signatory cards; monthly account statements; debit/credit card information; & loan instruments. My 3 tips for performing bank searches are:

A) Identify The Bank’s Document Retention Policies

Banks have different document retention polices. Two cite just 2 examples, banks in the U.S. maintain bank account records for 7 years while banks in Switzerland keep their records for 10 years. Although a bank may retain records beyond its retention period, it is important for you to know what this retention period is. You might even decide to forego your bank search if it is based on a stale lead and the bank’s document retention period has long passed.

B) Use The Legal Tools

If you were curious about your neighbor’s bank account balance you could not simply phone your local bank and expect the bank to supply it to you. This is because your neighbor’s bank customer information is not public information. Therefore, you should use the legal tools that may be available to you. The tools can include subpoenaing domestic banks and serving letters rogatory on offshore banks.  You might also be able to use authorization forms for the release of bank account information (i.e. compelled consent forms).

C) Avoid Backdoor Channels

In most cases, it is a crime to collect bank account information by phoning a bank and impersonating a bank customer. This phone call is based on false pretenses and is known as a pretext call.  Another backdoor channel is bribing a bank teller for bank account information. If you hire private investigators or data brokers to illegally access bank account information, then you could be criminally liable. On July 25, 2008 private investigator Victoria J. Tade pleaded guilty to hiring data broker BNT which made illegal pretext calls to banks, the IRS, medical offices; etc. One piece of evidence prosecutors used against Ms. Tade was a transcript of a phone call between Ms. Tade and BNT.  This phone call had been monitored by federal law enforcement agents. As the transcript reveals, Ms. Tade had discussed making pretext calls. Click on the image below to read the full transcript.

Copyright 2021 Fred L. Abrams

Tax fraudsters usually hide undeclared revenue &/or assets by using common concealment methods. By studying the methods you can improve your ability to identify hidden assets. This in turn increases your odds that your asset searches will be successful. The tax fraud case against NYC restaurateur Mr. Adell Kellel, highlights the concealment method of transferring money into or through multiple bank accounts.  At Mr. Kellel’s January 24, 2020 plea hearing, Mr. Kellel pleaded guilty to tax fraud under 26 U.S.C. § 7201. On November 30, 2020 Mr. Kellel was sentenced to serve 2 years in prison.

Mr. Kellel’s January 24, 2020 information accused Mr. Kellel of hiding over $2 million in business revenue from the IRS. Page 4 ¶ 12 of the January 24th information alleged Mr. Kellel hid the $2 million by depositing more than 150 checks into 12 bank accounts. Mr Kellel’s suspected tax fraud scheme is also described at pp. 14-18 of Mr. Kellel’s January 24, 2020 plea hearing. Mr. Kellel reportedly caused a combined tax loss of at least $771,195 to the IRS and the New York State Department of Taxation and Finance for years 2011-2015. For a list of federal crimes related to tax fraud investigations read the second paragraph at my post “An Asset Search By Pursuing Interviews & Tips.”

Copyright 2020 Fred L. Abrams

In 2014 the offshore financial services firm Strachans S.A. voluntrarily disclosed to U.S. authorities that Strachans had helped some U.S. taxpayers hide assets and income from the IRS.  Therefore, prosecutors in U.S.A v. Strachans S.A. IN Liquidation accused Strachans of conspiring to defraud the United States as contemplated by 18 U.S.C. § 371.  Based on the prosecutors’ August 19, 2020 criminal information, the conspiracy with the U.S. taxpayers occurred from about 1987 to about November 2014.  This tax fraud conspiracy also seemed to involve about 90 U.S. taxpayers. In August 2020 Strachans signed a plea deal and on October 5, 2020 the Court sentenced Strachans to pay a $500,000 fine.

The plea deal’s Statement of Facts is available below.  It reveals with Strachans’ help, U.S. taxpayers could hide their true beneficial ownership of assets.  Strachans hid beneficial ownership / hid assets by employing common concealment methods. I have discussed the common concealment methods at the Asset Search Blog since I first published it in 2007. The common methods Strachans is thought to have utilized to hide assets included:

  1. Foreign bank accounts in places like the Bailiwick of Jersey; United Kingdom and Switzerland
  2. Nominees / strawpersons
  3. Offshore Trusts
  4. Shell Companies
  5. Back-to-Back or Other Sham Loans
  6. Offshore Post Office Boxes
  7. Bulk-Cash Smuggling
  8. Offshore Credit Cards

USA vs Strachans SA Statement of FactsFirst Image: Pixelbliss / Shutterstock.com

Copyright 2020 Fred L. Abrams

 

A) MS. YOUNG SUES MR. YOUNG

Nicole Young’s lawsuit alleges her husband music mogul Andre Young, (“Dr. Dre”), made fraudulent transfers to hide assets.  Ms. Young’s lawsuit claims during the couple’s divorce, Mr. Young secretly transferred his 5 “DR. DRE” trademarks & 1 for “THE CHRONIC“.  Ms. Young recently filed her lawsuit in the Superior Court of the State of California, in Los Angeles County. According to the lawsuit, the trademarks are community property under California Family Code § 760.  Therefore, Ms. Young has an ownership interest in the trademarks, the lawsuit claims.

B) MR. YOUNG ASSIGNS THE TRADEMARKS

On April 27, 2020 Mr. Young assigned all his rights to his 6 trademarks to ARY Trademarks, LLC (“ARY”). Mr. Young is thought to have formed ARY two weeks before his April 27th assignment. Mr. Young is a manager or member of ARY and ARY is believed to be a shell company. Mr. Young reportedly transferred his 6 trademarks to ARY with the help of lawyers. Page 2 ¶ 1 at Ms. Young’s lawsuit describes Mr. Young’s transfer of the trademarks as a “scheme”:

Andre’s transparent and reprehensible scheme to transfer these assets away, without Nicole’s knowledge or consent, so he could retain more for himself in a divorce from his wife of 24 years, and the mother of his three children, is an epic failure and revels the true nature of his character, or lack thereof.

C) BADGES OF FRAUD & RED FLAGS

The judge deciding whether Mr. Young fraudulently transferred the 6 trademarks will likely consider Cal. Civ. Code § 3439.04. It is the statute which covers fraudulent transfers in California. Section 3439.04 (b) lists what is commonly referred to as the “badges of fraud.”  Courts generally consider these kinds of “badges” when deciding whether a party had actual intent to make a fraudulent transfer. Red flags that Mr. Young might have tried to place his 6 trademarks beyond Ms. Young’s reach are:

Copyright 2020 Fred L. Abrams