Searching for an adversary’s hidden assets can be like tracking a shell-game-operator.  In USA v. Khalili for instance, Mr. Dan Farhad Khalili was accused of hiding assets & undeclared revenue from the IRS for 15 years at 5 offshore banks. The offshore banks were located in Switzerland & Israel. Although on 4/27/11 Mr. Khalili applied for the IRS’ Voluntary Disclosure Program, the IRS found him ineligible for it. Mr. Khalili ultimately pleaded guilty to failing to file U.S. Department of Treasury Reports of Foreign Bank & Financial Accounts. On 4/25/17 Mr. Khalili was sentenced to 1 year & 1 day of prison. When you search for assets hidden through sophisticated schemes similar to the one Mr. Khalili was accused of, it may help to keep 3 goals in mind. These goals are to detect the paper trails, look for compartmentalization & seek transparency.

I. Detect The Paper Trails

One way your adversary may hide the paper trail of an offshore bank account is to open an offshore post office box. Your adversary could then have the offshore bank send monthly bank account statements & other documents to the offshore post office box. By maintaining these banking documents offshore, your adversary reduces the risk that you; domestic tax authorities; or anyone else; will detect the secret offshore bank account.

II. Look For Compartmentalization

A former intelligence officer I knew kept 1 cellular phone for incoming calls & another for outgoing calls. By compartmentalizing incoming & outgoing calls, the former intelligence officer was trying to hamper any investigation of his telephone toll records. Your adversary may compartmentalize his/her financial activities in a scheme to hide assets from you. For more information read my post “Compartmentalization & An Asset Search.”

III. Seek Transparency

By eliminating paper trails & compartmentalizing, your adversary can make his/her financial activities nontransparent. Your adversary can also make financial activities nontransparent via: fraudulent asset transfers; bulk-cash smuggling; art assets & cultural heritage property; diamonds or other portable valuable commodities; etc. These common concealment methods are outlined at “Red Flags For An Asset Search.”

Image: Brian A Jackson/Shutterstock.com

Copyright 2017 Fred L. Abrams

In the criminal case against Robert Bandfield, the IRS & SEC searched for assets laundered offshore. These assets were the proceeds of stock pump & dump schemes.  The illicit proceeds of the pump & dump schemes were more than $250 million. The $250 million was believed to be hidden by money laundering carried out by Mr. Robert Bandfield & his co-conspirators.

According to a 2/6/17 press release, Mr. Bandfield was the “architect of [an] offshore fraud haven.” Mr. Bandfield seems to have owned 2 nominee incorporation services, which established & sold shell companies. The 2 nominee incorporation services formed offshore shell companies believed to have helped launder the $250 million.

Red flags Mr. Bandfield & his co-conspirators allegedly hid the $250 million included their suspected misuse of:

After Mr. Bandfield’s 9/5/14 indictment by a grand jury sitting in Brooklyn, N.Y., Mr. Bandfiled was arrested on 9/9/14 at the airport in Miami, Florida. The indictment charged Mr. Bandfield & others with conspiracy to commit securities fraud; conspiracy to defraud the U.S. via tax fraud; & money laundering conspiracy. On 2/6/17 Mr. Bandfield was sentenced to 72 months imprisonment.  The sentence was based on Mr. Bandfield’s guilty plea to the money laundering conspiracy charged by his second superseding indictment available here.

Image: Olga Sabarova/Shutterstock.com

Copyright 2017 Fred L. Abrams

A person residing out of the U.S. may hide assets in the U.S. because he/she is being sued for divorce outside of the U.S. or because of other lawsuits outside of the U.S. This person could hide assets by secretly: purchasing real estate in the U.S.; opening bank accounts in the U.S.; titling property in the names of shell companies formed in the U.S.; etc. How can you search for assets which are hidden in the U.S.? If the hidden assets are connected to a lawsuit outside the U.S., (& you are an interested person in this lawsuit), you might subpoena witnesses in the U.S.

You would try to collect evidence about the hidden assets by issuing subpoenas to witnesses who know about the assets. These witnesses can be: banks;  gatekeepers like lawyers & accountants; businesses which establish shell companies (i.e. nominee incorporation services); relatives of the person hiding assets; etc. You may apply for subpoenas pursuant to 28 U.S.C. §1782 in the U.S. District Court which possesses personal jurisdiction over the witnesses; and as set forth at Fed.R.Civ.P. 45. At your application filed in the U.S. District Court, you would also show you need to subpoena the witnesses because of your lawsuit outside the U.S.

In the Ex-Parte Application of June Wu, Ms. Wu a Taiwanese national, sought permission from the U.S. District Court in Delaware to issue subpoenas under 28 U.S.C. §1782. Ms. Wu apparently deposited $3 million into a bank account in Taiwan for a prospective investment in the Delaware company Tagboard, Inc.  Ms. Wu’s $3 million was then allegedly embezzled out of Taiwan & supposedly transferred to Tagboard, Inc’s bank account in the U.S. At its 9/13/17 Order, the U.S. District Court authorized Ms. Wu’s attorney to serve subpoenas about the $3 million.  The Order permits Ms. Wu’s attorney to elicit evidence by using subpoenas including this one:

(Click On The Image To View The Complete Subpoena)

Image of Map: Thitirat J13/Shutterstock.com

A person hiding assets from you could park their money in an offshore bank account & hire an intermediary to be the account’s bank signatory. One website offers this “Bank Nominee Signatories Service” for a cost of about $1000 per year.  This person could additionally title their real estate in the name of shell companies. A person can also hide assets by converting cash into portable valuable commodities like diamonds and smuggle the diamonds offshore.

This kind of scheme is outlined by “Detecting Hidden Assets By Following A Money Trail.”  “Searching For Assets Hidden By Lawyers” examines another way to hide assets.  It explains a person might hide their cash by laundering it through a lawyer. In these kinds of schemes the person hides his/her true beneficial ownership of assets. You may be able to detect  true beneficial ownership & search for assets 3 ways:

I. Collecting human intelligence/informants’ tips is sometimes the only practical way to detect a sophisticated scheme to hide assets.  If there is an informant with knowledge of the hidden assets, the informant might be willing to tip you about the assets.  This informant may be a disgruntled: employee; family member; paramour; etc.

II. Private investigators may help you identify informants & gather leads about hidden assets through surveillance or other surreptitious means. Some investigators however, search for assets illegally or provide spurious information. Ex-Toronto private investigator Elaine White & ex-police detective Cullen Johnson for example, ran an “asset locator” business. They supplied their clients with bogus bank account information.

III. Legal tools can be critically important in searching for assets.  “How Does A Divorcing Spouse Recover Assets Concealed In A Swiss Bank Account?” gives a glimpse of the kinds of tools generally available in many countries across the globe. Among other things, the tools can include serving letters rogatory upon foreign bank witnesses & tipping prosecutors or other governmental authorities.

Image: Farizum Amrod Saad/Shutterstock.com

 Copyright 2017 Fred L. Abrams

Beneficial Ownership Post
Spouses can hide assets through layering & fraudulent transfers, this 35th Post in the “Divorce & Hidden Money” series says.

According to The Financial Action Task Force anti-money laundering group:

Beneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement. Glossary of the FATF Recommendations, Web. July 10, 2017.

A divorcing spouse may conceal his/her beneficial ownership of community property by titling: bank accounts; real estateart; etc. in the name of an intermediary (i.e. a nominee). The divorcing spouse secretly controls these assets while the nominee appears to own them. The nominee acts as a protective layer which hides the divorcing spouse’s beneficial ownership of assets.

Protective layers can be comprised of: nominees; offshore bank accounts; multiple jurisdictions; shell companies; trusts; & gatekeepers. The layering is the first clue a divorcing spouse could be concealing beneficially owned assets. The second clue a divorcing spouse is concealing assets would be the divorcing spouse’s fraudulent transfers. To detect fraudulent transfers look for the badges of fraud, as more fully set forth at “An Asset Search When Money Is Hidden Offshore.”

Image: kentoh/Shutterstock.com

Copyright 2017 Fred L. Abrams

Money Laundering Typology Post

One way to learn how to search for hidden assets is to read “A Laundry List For An Asset Search.” Another way is to study money laundering typologies. Money laundering typologies are used by law enforcement and regulators to develop countermeasures against emerging criminal trends. “100 Cases from the Egmont Group” contains a wide variety of money laundering typologies.¹ Although “100 Cases from the Egmont Group” arises from data collected during the 1990s, it is still relevant today. “100 Cases from the Egmont Group” describes these methods for concealing assets:

  • Concealment within existing business structures
  • Misuse of legitimate businesses
  • Use of false identities, documents or straw men
  • Exploiting international jurisdictional issues
  • Use of anonymous asset types

Below is the money laundering typology “Example B: Limited edition jewellery.”² It is about an agent who participated in an auction for a diamond necklace. The agent tried to conceal monies from suspected frauds by using multiple jurisdictions; offshore bank accounts & a portable valuable commodity—a diamond necklace.

Example B Limited editon jewellery

¹”100 Cases From The Egmont Group” courtesy of The Egmont Group of Financial Intelligence Units.

²“Example B: Limited edition jewellery” courtesy of The Guernsey Financial Services Commission.

First Image: studiostoks/Shutterstock.com

Copyright 2017 Fred L. Abrams

Back to Back Loan Image

Money Laundering, Marital Assets & Divorce was my first Asset Search Blog post highlighting back-to-back loans (i.e. a fully collateralized loan in which the borrower and the lender are one and the same). That post mentioned a divorcing husband who hid millions from his wife and the IRS, by claiming he was indebted because of an arm’s length business loan. The husband’s claim about owing money to an arm’s length lender was false, as the loan was back-to-back. In other words, the husband hid millions by secretly arranging to be both the borrower and lender of the loan; and by pretending to be in debt.

Federal prosecutors similarly discussed back–to-back loans in their tax fraud case against Los Angeles, California businessman Masud Sarshar. According to prosecutors, Mr. Sarshar hid tens of millions of dollars from the IRS by using two back-to-back loans and offshore bank accounts in Israel and Hong Kong. Mr. Sarshar supposedly maintained the offshore bank accounts in the names of intermediaries (i.e. nominees). Prosecutors also said an Israeli banker delivered offshore bank account statements to Mr. Sarshar by smuggling them into the U.S. on a USB drive hidden in a necklace.

To avoid being flagged as an American by the offshore banks, Mr. Sarshar is believed to have used Israeli and Iranian passports to open his offshore accounts. When Mr. Sarshar mentioned his offshore accounts during conversations with his Israeli bankers, Mr. Sarshar also reportedly spoke in code. On 3/13/17 Mr. Sarshar was sentenced to 24 months in prison for conspiring to defraud the U.S. and for seeking to impair/impede administration of internal revenue laws. Mr. Sarshar’s 8/1/16 plea agreement can be read here.

Image: Ionut Catalin Parvu/Shutterstock.com

Copyright 2017 Fred L. Abrams

3 HInts About Asset Searches

A divorcing spouse; judgment creditor; bankruptcy creditor; or a beneficiary under a trust or will; may face an adversary hiding assets through nominees (i.e. intermediaries). See cf., Fourth Inv. LP v. United States, 720 F.3d 1058, 1070 (9th Cir. 2013) (six-part test for nominee ownership applied to tax lien case). An adversary can hide real estate, automobiles, jewelry; and offshore bank accounts by titling them in the names of nominees. Nominees are easily accessed through nominee incorporation services like the one at the “Anonymous Panama Corporation” webpage.

The “Anonymous Panama Corporation” webpage can be used to form a Panamanian shell company with “nominee directors.” The initial fee for this service is $1200. The webpage suggests that one can “save taxes or protect…assets” by forming a Panamanian shell company:

[Y]our personal information will not be available in any government records, but [sic] still maintain complete control over your corporation. The Nominee Directors will not have control over your corporation and can be replaced at any time.

This type of corporation is a good choice if your objective is to save taxes or protect your assets. The actual owner of this corporation is not registered in public records.

Shell companies are not the only things that can be utilized as nominees. Lawyers; accountants; bankers; financial advisors; paramours; family members and trusts can be nominees. In the criminal prosecution called USA v. James S. Faller II, Case #: 13−cr−00029, the Court discussed how a nominee trust could be part of a scheme to hide assets from the IRS. Pages 13-14 of the Court’s 4/30/15 Memorandum Opinion and Order highlighted Mr. Faller’s alleged misuse of nominees.

Mr. Faller from Russell Springs, Kentucky, relied on “nominee names” to evade taxes, an IRS Special Agent’s affidavit claimed at ¶68. Prosecutors argued Mr. Faller evaded taxes by titling his home and bank account in the name of a trust believed to be Mr. Faller’s nominee. Mr. Faller was convicted of tax fraud and on 1/29/16 Mr. Faller was sentenced to 36 months’ imprisonment. Although Mr. Faller appealed his conviction, the U.S. Court of Appeals upheld the conviction at a 1/10/17 Opinion.

Image: Robert Kneschke/Shutterstock.com

Copyright 2017 Fred L. Abrams

12 8 16 Post
This 34th post in the “Divorce & Hidden Money” series highlights ways assets may be hidden in a money laundering circuit.

The November 30th New York Times Magazine article “How To Hide $400 Million” described the divorce between Sarah Pursglove & Finnish internet tycoon Robert Oesterlund. A document from Mr. Oesterlund’s lender allegedly indicated Mr. Oesterlund’s net worth was $400 million, “How To Hide $400 Million” said. This article also said Mr. Oesterlund claimed during the divorce that the ‘net family property’ was only worth a few million dollars.

Ms. Pursglove however, did not believe this and tried to search for assets reportedly hidden by Mr. Oesterlund. Based on “How To Hide $400 Million,” Mr. Oesterlund was an ultra-high-net-worth spouse who allegedly hid assets through:

  1. gatekeepers (such as lawyers & bankers);
  2. multiple jurisdictions;
  3. offshore bank accounts;
  4. shell companies;
  5. & trusts.

These can all be used as laundering links which wash assets in a money laundering circuit. A money laundering circuit is shown at a chart on a webpage from FINTRAC, a Canadian financial intelligence unit. An ultra-high-net-worth spouse may place assets into a laundering circuit through: structuring bank deposits; money mules/bulk-cash smuggling; diamonds or other portable valuable commodities; false invoicing schemes (i.e. trade-based laundering); wire transfers; etc. How do you perform an asset search when these methods are used to hide assets? Click here for seven tips.

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Copyright 2016 Fred L. Abrams

10 26 16 Post

If you are litigating against an adversary who is hiding assets from you, subpoenaing your adversary’s credit card statements might help you track the hidden assets. As my post “Secreting Assets Without A Border Trace” suggests, expenses listed at a credit card statement may lead you to your adversary’s assets. “Secreting Assets Without A Border Trace” is about tracking a Ponzi schemer’s illicit assets. The Ponzi schemer in that post could have: converted cash into diamonds; parked the diamonds in a Swiss security box (i.e. safe deposit box); and opened a secret bank account in Luxembourg.

The subpoena available below has language you can include at a subpoena for credit card records. The subpoena was issued to American Express by the Chapter 7 trustee in Michael Mastro’s bankruptcy case.  Along with credit card statements, the subpoena requested “[c]opies of all checks, money orders, electronic transfer records, and other documents showing the source and manner of each [credit card] payment…” Some of my other posts discussing subpoenas are “An Asset Search of A Lawyer Employed To Conceal Cash” & “Eliciting Evidence From Foreign Bank Witnesses.

American Express Subpoena

Image of torn paper & word subpoena: arfa adam/Shutterstock.com

Copyright 2016 Fred L. Abrams