A beneficial owner’s transfer of funds through banks in multiple jurisdictions, can be a red flag that assets have been secreted. Purchasing large amounts of portable valuable commodities, hoarding cash, forming a shell company, etc, can also be red flags as mentioned by “Asset Search Indicia for Divorce, Debt Collection & Bankruptcy”. The weight given to these red flags should meanwhile, depend on the facts and circumstances in a particular case.
It is also true that the ability to recognize red flags can be critical to a broad range of litigants searching for assets hidden via fraud or other illicit activity. Such a litigant could for example, use red flags at a deposition to develop a line of questions about assets, liabilities and net worth.
As the list below also indicates, Financial Intelligence Units, U.S. Trustees, the IRS and U.S. banks, all rely on red flags to help uncover / interdict hidden assets:
1. Financial Intelligence Units across the globe use red flags to detect assets hidden via money laundering, as more fully set forth by my above-mentioned post “Asset Search Indicia For Divorce, Debt Collection & Bankruptcy “.
2. U.S. Trustees look for red flags to detect a debtor’s bankruptcy fraud / the concealment of bankruptcy estate assets. These specific red flags are described in the U.S. Trustee Manual at 5-10.7.2 Red Flags/Common Characteristics in Cases of Concealment and False Statements.
3. The IRS uses red flags to search for undeclared revenue and hidden assets. The IRS Manual describes the same at 126.96.36.199 (01-01-2003), Indicators of Fraud.
4. U.S. Banks are required to look for red flags as part of their Bank Secrecy Act anti-money laundering programs, as mentioned by the Federal Financial Institutions Examination Council’s BSA / AML Examination Manual.
(Edited October 12, 2011)
Copyright 2008-2011 Fred L. Abrams