JOURNAL OF FORENSIC ACCOUNTING RESEARCH American Accounting Association

Vol. 1, No. 1 DOI: 10.2308/jfar-51549

2016
pp. A42–A65

Domestic Asset Tracing: Identifying,

Locating and Freezing Stolen and Hidden
Assets
Carl J. Pacini
University of South Florida St. Petersburg
William S. Hopwood
Florida Atlantic University
Debra T. Sinclair
University of South Florida St. Petersburg

ABSTRACT: The rate of recovery of stolen and hidden assets from fraud and other
schemes is low. This paper explores two steps of the investigative sequence in pursuing
domestic (onshore) asset recovery when the objective is to recover specific assets (or
their equivalent value) lost to fraud or hidden for some other purpose: asset identification
and location (tracing) and asset freezing. Before pursuing asset tracing and freezing, an
attorney, a forensic accountant, and a client must consider various factors, including the
cost and likelihood of recovery, as well as whether there are third parties (e.g., banks,
lawyers, and accountants) from whom recovery may be sought. It is necessary to obtain
certain basic identifying information for any suspect or target, as well as their associates,
relatives, and friends. This information can be gleaned from electronic databases,
surveillance, covert operations, interviews, and other sources. This article also covers the
places where assets can be hidden, as well as the various asset freezing measures
available in the U.S., such as attachment, replevin, garnishment, lis pendens, and
injunctions. Numerous useful websites and databases are noted throughout the paper (a
list is available as a downloadable Word document, see Appendix A). The article
concludes with an analysis of the importance of protecting the attorney-client privilege for
a non-testifying forensic accountant.
Keywords: asset tracing; asset freezing; asset recovery; asset searches; fraud; fraud
recovery; hidden assets.

We thank three anonymous JFAR reviewers for their input on this paper.
Supplemental material can be accessed by clicking the link in Appendix A.
Editor’s note: Accepted by Charles D. Bailey.

Submitted: July 2015

Accepted: July 2016
Published Online: August 2016

A42
Pacini, Hopwood, and Sinclair A43

INTRODUCTION

T
he rate of recovery of stolen and hidden assets is quite low, based on available data.
According to the Association of Certified Fraud Examiners’ (ACFE 2016) Report to the
Nations on Occupational Fraud and Abuse, 58 percent of victim organizations had not
recovered any of their losses due to fraud, compared with 49 percent in 2012, and only 12 percent
had made a full recovery.1 Less than 3 percent of stolen assets have ever been recovered from the
corrupt actors who have stolen them (Davis 2011). Victims of the $7 billion fraud scheme
perpetrated by Allen Stanford, for example, have recovered only pennies on the dollar (Burstein
2013). Hence, there is much room to improve the recovery of assets that are hidden or lost to
fraud. Asset identification and location (tracing) and asset freezing are two important techniques
that can be employed to improve asset recovery. Asset tracing and freezing are also an important
part of various other forensic accounting services, such as business due diligence, litigation
support (e.g., collecting on a judgment or deciding whether to sue in the first place), estate/will
disputes, divorce, bankruptcy, and the acquisition and dissolution of partnerships.
A review of the forensic accounting literature reveals that fraud examiners, auditors,
regulators, law enforcement agents, and academics have analyzed hundreds, if not thousands, of
fraud schemes to understand how they work, what factors contributed to their occurrence, how
they could have been detected, and how they could have been prevented (B. Apostolou, N.
Apostolou, and Thibadoux 2015; Perols 2011; Uzun, Szewczyk, and Varma 2004; Simon 2012).
However, less research attention and effort have been devoted to asset tracing, freezing, and
other steps to assist fraud victims to recover their losses. C. Albrecht, Kranacher, and S. Albrecht
(2008, 16) have pointed out the need for additional research in this area that could explain the
steps for investigating asset misappropriation frauds.
This paper attempts to fill that need by focusing on the first two steps of the domestic asset
recovery process: identifying and locating hidden or stolen assets (or their proceeds) and freezing
those assets once located. The remaining steps of the asset recovery process, although important,
are not worthwhile unless the first two steps yield results.2
The remainder of this paper is organized as follows. The next section discusses the important
role of legal counsel and the decision of whether to proceed in the asset recovery process. The
third section describes the different parties to whom one must trace assets. The fourth section
breaks down the steps involved in conducting an asset trace: (1) collecting and analyzing data to
identify the potential parties involved, and (2) identifying places to search for hidden/stolen assets.
The fifth section details various U.S. asset freezing techniques and devices. The sixth section
discusses attorney-client privilege for non-testifying forensic accountants in asset recovery
situations. The paper concludes in the seventh section.

DECIDING WHETHER TO PROCEED

An asset recovery effort typically begins when a victim of fraud or another unethical scheme
asks an attorney to recover assets (or their monetary value). If the case is too small, then the

1
This refers to the recovery rate on all occupational frauds, including corruption, asset misappropriation, and
financial statement fraud. The ACFE’s (2016) Report states that ‘‘the data shows that such efforts can take
time and might never result in a full recovery.’’
2
The stolen asset recovery process involves five steps: identifying and locating hidden and stolen assets,
securing or freezing the assets once they are located, pursuing court processes, enforcing orders, and
returning assets (Brun, Gray, Scott, and Stephenson 2011).

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Pacini, Hopwood, and Sinclair A44

attorney may decline it because the likely costs exceed the potential benefits. If the attorney
considers the case worth pursuing, however, then he or she often hires forensic accountants (FAs)
for their expertise in identifying and locating assets in a wide range of circumstances, including
multi-jurisdictional (i.e., among different states) asset tracing and freezing.
An attorney handling multi-jurisdictional proceedings must manage and harmonize each of the
various proceedings to identify, locate, freeze, and recover hidden/stolen assets. In a pre-
judgment scenario, multi-jurisdictional efforts or actions to recover hidden or stolen assets are
usually launched in three waves: (1) pre-litigation investigative activities to identify and locate
hidden assets and to sometimes undertake discovery efforts to compel the disclosure of
confidential records (under gag orders); (2) asset freezing or preservation legal activities; and (3)
principal proceedings to obtain a final judgment capable of enforcement in each jurisdiction (state)
where assets have been frozen (Kenney 2009). The first two waves are the focus of this paper.
The attorney is a rich source of legal advice for FAs. The attorney should ensure that FAs do
not undertake investigative activities that violate federal, state, local, or international laws. The
attorney is best suited to collect and preserve evidence for ongoing or future legal proceedings.
The lawyer is also the key person to protect privileges, including those applicable to FAs.
Before pursuing asset tracing, a number of factors must be considered. First, the FA, working
with the attorney and client, should conduct a cost-benefit analysis. The value of the loss should be
compared to the estimated cost (including time spent by personnel and management) of tracing
and recovery.3 This analysis should include the impact of any available insurance coverage. For
example, the client company may have an insurance policy or fidelity bond that includes coverage
for losses from theft or embezzlement by employees.4
The victim must realize that the recovery investigation is an iterative process. A single
discovery may open up further lines of inquiry or lead to another discovery that may increase the
chances of recovery—and may also increase the cost. For example, if stolen assets have been
transferred to another, offshore location, then they may be more difficult to recover. If the cost of
recovery exceeds the value of the assets, then the client may forgo asset tracing and recovery.

PARTIES TO WHOM TO TRACE ASSETS

The fraud perpetrator is not necessarily the only party or entity to whom assets may be traced
and from whom to seek recovery. In many fraud/hidden asset situations, third parties may be liable
for stolen or hidden assets under various legal liability theories. One example of a potentially liable
third party is an attorney who aids and abets a Ponzi scheme on behalf of one client and contrary
to the interests of other clients. Another example is an auditor who issues an unqualified opinion on
a set of financial statements knowing that they are materially misleading and will cause investors to
lose substantial sums of money. Other examples include bankers or investment managers who fail
to understand a source of funds or to report suspicious transactions, violating know-your-customer
or anti-money-laundering laws.
From the inception of an asset tracing and freezing investigation, the FA, working together
with the client and the client’s attorney, should identify potentially liable third parties. Asset

3
This estimated cost is the net after-tax cost. Some taxpayers can deduct losses or reduce reported revenues
as appropriate.
4
Business property insurance may not protect against the theft of cash and securities; however, a separate
commercial crime policy typically will. Insurance may also be available to protect against electronic fraud
losses.

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Pacini, Hopwood, and Sinclair A45

recovery from liable third parties may present certain advantages to the attorney, client, and FA.
For example, many third parties are stationary, in close proximity, and averse to the negative
publicity associated with being linked to a fraudster (International Association for Asset Recovery
[IAAR] 2011). The FA and the attorney may compile a list of those third parties who advised,
maintained accounts for, had personal or professional affiliations with, served as a front for,
administered accounts for, had joint accounts with, kept books for, facilitated the activities of, or
had similar close services and relationships with the targets of the asset tracing case (IAAR 2011).
Many third parties—‘‘gatekeepers,’’ such as accountants, lawyers, or financial advisors—play a
role, either intentionally, negligently, or unwittingly, in facilitating fraud and hiding assets.
The services of gatekeepers are often essential for fraud and asset hiding schemes to
succeed. Gatekeepers sometimes facilitate the committing of a predicate offense, such as
disguising a person’s involvement in a commercial transaction, commingling property and
proceeds, or disguising property ownership/control by the ultimate beneficial owners (Baker and
Shorrock 2009). Gatekeepers’ services help sever the connection between the fraudster and the
safe enjoyment of the hidden assets. Another reason for a fraudster to hire a gatekeeper is the
attainment of a veneer of respectability (Baker and Shorrock 2009). In some cases, gatekeepers
may have a legal claim filed against them by a fraud victim if hidden assets cannot be recovered
and the gatekeeper had a duty of care to the victim.5 In other situations, a gatekeeper may provide
valuable information on the location of hidden assets in order to avoid a lawsuit.

CONDUCTING ASSET TRACING

Identifying and unwinding a fraud or other scheme can be particularly challenging due to the
complex arrangements and legal structures that can be established by fraudsters.6 Nonetheless, it
is important that the investigation yield evidence linking the fraudster to the illegal activity and the
hidden/stolen assets. Also, this evidence must then be collected and preserved correctly (i.e.,
achieve a secure chain of custody) to ensure that it is admissible into any civil or criminal
proceedings (Lasich 2009).

Know the Parties Involved

The FA should acquire as much intelligence as possible about potential targets by interviewing
victims and other knowledgeable parties identified by counsel and the client. Of course, the victim
should be the first party interviewed. Once any suspects have been identified, the FA should then

5
An example of recoveries from gatekeepers occurred in Securities and Exchange Commission v. Black, 163 F.
3d 188 (3rd Cir. 1998). John Gardner Black, the heir to a local candy manufacturing business in Tyrone,
Pennsylvania, began providing investment advisory services to school districts and municipalities in the late
1980s. A Securities and Exchange Commission (SEC) investigation in early 1997 uncovered massive trading
losses that had been hidden within the books of Black’s investment management companies by the material
inflation of asset values. New funds were used to fulfill obligations to existing clients. After the SEC
investigation and equity receivership were complete, investor victims still had not recovered close to $17
million out of $69 million in verified losses. Independent counsel filed federal and state class actions,
bankruptcy claims, and other related cases on behalf of the victims and got the remainder of the losses from
third parties. Claims against Black’s attorneys, Lehman Brothers, and Keystone Financial were settled for
millions of dollars (Gradwohl and Corbett 2010). Another more recent example is the Rothstein Ponzi scheme
in South Florida. Investors lost between $400 and $500 million. Victims recovered 100 cents on the dollar, with
$363 million in losses paid by TD Bank (Burstein 2013).
6
For a thorough review of asset cloaking techniques, see Simser (2008).

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Pacini, Hopwood, and Sinclair A46

identify and consider interviewing close sources, such as business associates, relatives,
neighbors, and competitors. Statements from close sources may corroborate or clarify information
obtained in initial interviews or reveal new information and avenues to pursue (Brun et al. 2011).
Since all the relevant parties may not be known or gleaned from interviews alone, information may
also be collected from public records and databases; for example, the target’s Social Security
number can produce new leads. The FA should also obtain any documentation pertinent to the
fraud or hidden asset scheme to facilitate the interviewing process.
During this process, the FA should be careful not to alert a fraud suspect or associate that
tracing activities are underway. Because parties related to the target may also be involved in the
scheme, it may be better to avoid interviewing these parties altogether and instead begin delving
into the assets and liabilities of relatives, business associates, ‘‘straw men’’ or nominees,
corporations, trusts, LLCs, LLPs, and foundations.

Obtaining and Using Basic Identifying Information and Places to Search

Once the targets and relevant non-targets have been identified, the FA should obtain as many
basic identifiers as possible for each party involved.7 Basic identifiers include the target’s full name,
birthdate, Social Security number, marital status, dates and places of marriages or divorces,
names of relatives, address history, email addresses, and phone numbers. Many records may be
accessed with identifier information; for example, with a date of birth and correctly spelled name,
one can often access driving records, criminal records, and even military records. This information
can often be obtained from free and fee-based websites, such as http://www.confi-chek.com;
http://www.casebreakers.com; http://www.publicdata.com; http://www.criminalcheck.com; http://
www.ussearch.com; http://mugshots.com; http://www.switchboard.com; and https://www.knowx.
comindex.jsp.8
When looking for information, the FA should check for records using not only the target’s
correctly spelled name, but also misspellings, variations, aliases, and maiden names. New legal
names may be created by divorces, remarriages, changes in child custody, and legal name
changes. When a target’s birth date is unknown, an approximate age may prove useful. The FA
should also search for relatives’ names on http://www.ancestry.com and https://www.intelius.com.
Obtaining the names of relatives is important, because legal title to hidden assets may be in the
names of the target’s children or other family members. Sometimes such searches can produce
leads that then require further investigation.
Social Media
Social media sites, such as Facebook, Twitter, and LinkedIn, should be examined for relevant
information.9 Visiting some sites may reveal the user’s identity to the fraudster, so the FA should take
appropriate caution. Since more than a third of adults on social media sites allow everyone to see their

7
The FA should develop hypotheses as to the nature and location of hidden/stolen assets in order to conduct
targeted research rather than a ‘‘blanket’’ search.
8
Many information sources exist that never make it to the internet. For example, 32 percent of courts in the U.S.
do not provide access to case files or to the record index (Hetherington 2015). Therefore, some data may have
to be hand-collected at the source.
9
One does not necessarily need an account to search social media. For example, http://www.tweettunnel.com;
https://twitter.com/topsy; and http://www.twazzup.com are search engines that allow an investigator to access
Twitter messages without an account. Similar sources are available for Instagram photos, including https://pro.
iconosquare.com; http://www.websta.me/search (Hetherington 2015).

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social media profiles, such web pages can be a gold mine of data for the FA (Laitinen and Loynes
2012). These sites can also contain information confirming fraud or misrepresentations or impeaching
testimony regarding loss, injury, or location of assets through incriminating blogs, photos, or posts
(Laitinen and Loynes 2012). Examples include pictures of a new luxury house and postings made
during an exotic vacation in the Cayman Islands (Parks 2011). Moreover, frequent postings may allow
the FA to see whether an individual’s habits have changed, or if there are indications that the target
may be committing fraudulent acts or hiding assets. Any information gathered is fair game for the FA,
since there is no expectation of privacy when content is available for public viewing.10
When information is not publicly available, three options exist: (1) get the content from the
relevant party (which carries risks); (2) have the relevant party provide consent to get the
information directly from the site; or (3) attempt to get it from the social media site directly without
the relevant party’s consent via a subpoena or a demand letter. While the simplest option may be
to obtain information directly from the user, doing so gives the person the chance to ‘‘clean up’’
their online profile. The Federal Stored Communications Act11 prevents providers of communi-
cations services from knowingly divulging the contents of private communication to ‘‘any person or
entity’’ without the user’s consent. However, law enforcement entities may obtain information
directly from internet service providers with a warrant or subpoena. Additionally, in cases of
litigation, a court can order subjects themselves to produce information posted to their social media
sites. The FA should consult counsel to select the option with the least legal risk.
Various tools are available for gleaning information from social media sites. ‘‘Screen scraping’’
involves copying all or some of the data on a target website (Ward 2013). It is a tool typically used
to gather competitive intelligence, but it can also be employed to gather information for asset
tracing. Scraping tools include ScrapeWiki (https://scraperwiki.com), Mozenda (http://www.
mozenda.com), and Outwit Hub (http://www.outwit.com). Users of screen-scraping technology
can extract links, images, email addresses, and phone numbers from HTML without ever working
with the source code.
Another valuable tool for retrieving information from social media sites is the Wayback
Machine (WM) at https://archive.org/web/. Since 1996, the WM has been archiving cached pages
of websites onto a large cluster of Linux nodes. The WM, often referred to as an ‘‘archival index,’’
permits users to see older versions of web pages. So the FA can use the WM to go back in time
and see web pages that were deleted or modified years ago. For example, the WM can be helpful
in finding information that was scrubbed to throw FAs off track. Additionally, the WM can be used to
capture a web page the way it appears at the time of the investigation, giving the FA a permanent
record if the target later changes or deletes information. It is especially useful to FAs in intellectual
property fraud and professional malpractice cases.
In addition, Adobe Acrobat Pro allows one to copy an entire website to a PDF document.
Another interesting tool, Jeffrey’s Image Metadata Tool (http://regex.info/exif.cgi ) allows one to
upload photos and view the metadata that include when and where the photo was taken.
Using social media to find hidden assets or solve crime is one application of ‘‘Big Data.’’ Big
Data captures the notion that everything can be digitized and ‘‘datafied’’ because of more
inexpensive storage, faster processing, and better algorithms. Collecting large amounts of
unfiltered data means that any dataset can be used an almost limitless number of times, including
predictive analytics for finding fraud (Mayer-Schonberger and Cukier 2013). Predictive analytics

10
Moreno v. Hartford Sentinel, Inc., 172 Cal. App. 4th 1,125 (Cal. Ct. App. 2009).
11
18 U.S.C. §2701(a)(1) and (2)(2015).

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involves a diverse array of statistical techniques, including machine learning, data mining, and
predictive modeling. In fraud examination, predictive models exploit patterns found in transactional
data to discover anomalies (a symptom of potential fraud).
Occupation of Target
The present and prior occupation of the target and spouse may suggest potential locations
where assets may be hidden, or it may lead to the names of friends or associates who may be
involved in hiding assets. Additionally, knowing the target’s occupation gives the FA a reasonable
estimation of the target’s income.
Professional targets’ identifying information, including complaints filed and disciplinary actions
taken, may be found on state licensing or professional databases. For example, one can verify a
broker’s license at http://brokercheck.finra.org/ (FINRA [Financial Institution Regulatory Authority]
oversees people and firms that sell stocks, bonds, mutual funds, and other securities).
Address History
An address history can provide clues on where to look for assets or funds. The FA can use
online address (and phone) search services to discover current and former addresses. The FA
should seek not only personal addresses, but also employer addresses and addresses of
businesses in which the target has been an owner. The FA should seek the addresses of spouses,
children, other relatives, business associates, and close friends (Mendell 2011). Also, if the FA
possesses the target’s Social Security number, then he or she can employ detective agencies to
find past jobs and relatives. Once found, addresses can be used to call or visit persons now living
in the target’s previous neighborhood who may provide useful information.
If a current address is available, then the FA should drive by the target’s residence in the
evening hours to take note of the appearance of the residence, grounds, and neighborhood. Good
maintenance and an attractive neighborhood may indicate financial stability. The FA should take
note of any vehicles, jet skis, RVs, boats, travel trailers, motorcycles, and mobile homes and obtain
the license plate numbers, including those of friends and associates. The FA may consider
surveilling the residence when people leave for work or school. An observant FA can learn much
from dress and demeanor (Mendell 2011). Note the clothing worn by adults and children: Are they
wearing the latest fashions or hand-me-downs? Do there appear to be household employees
driving or accompanying family members? They could be potential sources of information. A note
of caution is necessary at this point: In some jurisdictions, state laws require FAs who undertake
certain investigative activities to be licensed private investigators. Serious consequences may
befall those who do not comply with such requirements.
Special Engagements
One technique FAs use in special engagements (‘‘special’’ refers to unusual investigations
that occur infrequently) is dumpster diving or trash runs. This involves looking through trash12 for
such items as discarded bank statements, names of business associates, correspondence, bills,
travel receipts, medical records, and credit card statements.13 When looking for items in the trash,

12
Trash left at the curbside or placed in a dumpster carries no expectation of privacy; therefore, searching
garbage left out for collection is not considered a ‘‘search’’ for purposes of the Fourth Amendment and a search
warrant is not necessary. California v. Greenwood, 486 U.S. 35 (1988). However, some states (e.g., New
Mexico) offer broader protections. In these states, the advice of counsel is paramount before the FA goes
through discarded trash.
13
Even though documents may be shredded, software is available that can frequently reassemble them.

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the FA should think ‘‘outside the box.’’ Evidence of visits to traditional tax or secrecy havens such
as Switzerland, Cayman Islands, British Virgin Islands, Isle of Man, and St. Kitts-Nevis may
indicate where cash is hidden.
Business Entities
The FA should obtain the name, address, date organized, legal nature, characteristics, tax
identification number, and registration of any entity with which targets are associated (e.g., as an
officer, director, or owner). Such entities could be used to transfer or hold funds or assets.
The sources for finding information on businesses are often different than the sources used to
find information on individuals. Certain basic questions should be answered when an FA does a
business asset search in the quest to recover concealed assets:
1. What type of legal entity is involved?
2. When and where was it formed?
3. Who are the principal owners, officers, directors, or members?
4. What are its principal product lines or services? (Is it a shell corporation?)
5. What are its annual revenues and how many employees does it have?
The answers to the questions above guide the FA’s search. Business information sources that
may be worth checking include the Yellow Pages, Better Business Bureau, and Chamber of
Commerce. An FA may also obtain business descriptions from sources such as Hoover’s, and
business credit reports from various sources, including Dun & Bradstreet, Experian, and
TransUnion. Small businesses and their owners may have been featured in local newspapers,
sometimes as sponsors of sports teams or charity events.
Another valuable resource for business asset searches is data from government agencies. A
one-stop site for a current collection of free searchable U.S. sources is https://www.
brbpublications.com. One can also visit the U.S. government depository library website at http://
www.gpo.gov/libraries (Hetherington 2015). Secretary of State databases and county office filings
or records may also be useful sources of information. Postal mailing permit information for
business post office box owners is subject to requests under the Freedom of Information Act
(Mendell 2011).
Admittedly, it is extremely difficult for an FA to acquire the books and records of a business
entity (except, perhaps, by sifting through trash), but the effort may produce leads to witnesses or
other valuable information. For example, a sales invoice may reveal the name, address, and
identifying information for a previously unknown purchaser or an important shipping address.
Business records should be examined for unusual notations that might be codes for money or
asset movements, or fronts or nominees. For example, a notation on the back of a check may
indicate that it was exchanged for a cashier’s check. The FA should also check for business
transactions that make no sense, have no apparent business purpose, or are not supported by the
financial records. In general, the observant FA should look for patterns of inconsistency, illogical
conduct, and unusual transactions and records.
Financial Institution Records
It is difficult, if not impossible, for an FA to obtain a target’s records from a financial institution.
However, there are some loopholes in financial institution privacy laws. First, the Gramm-Leach-
Bliley Act’s (GLBA) privacy rules indicate that financial institutions are supposed to give consumers
opportunities to opt out of having their private data shared. If consumers do not opt out, then some
of their financial information can be shared. Opt-out procedures come in disclosures that most

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consumers ignore.14 Other means by which these records become available are through the
target’s consent or by a third party providing them. If obtained, such records may permit the FA to
analyze flows of funds as a means to identify and locate hidden assets.
Lexis-Nexis Reports
A driver’s license number may open the door to vehicle registration records. Similar
information is available, for a fee, via the commercial version of Lexis-Nexis (http://www.lexisnexis.
com), which provides search-based reports for real property, motor vehicles, aircraft, and
watercraft compiled from publicly available sources, as well as proprietary records.15 Lexis-Nexis
provides reports from CLUE (Comprehensive Loss Underwriting Exchange), a claims information
database. The CLUE report generally contains up to seven years of personal auto and personal
property claims history. A CLUE auto report contains name, date of birth, policy number, and claim
information, such as date of loss, type of loss, amounts paid, and vehicle information. A CLUE
property report provides similar information.
Tax Returns
It is next to impossible for a private FA to obtain tax returns on a person or business except
from a spouse, ex-spouse, or jilted lover. Business partners or associates may be able to provide a
copy of a business tax return if they signed the returns. In some cases, tax returns are also
available to shareholders.16 Also, access may be possible in the case of bankruptcy estates,
debtors’ tax returns to the bankruptcy trustee, and beneficiaries of trusts. In many cases, insurance
policies require policyholders to give statements under oath and provide comprehensive financial
information, including accounts and statements.
Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs)
A currency transaction report (CTR) is a report that financial institutions must file with the
Financial Crimes Enforcement Network (FinCEN) for each deposit, withdrawal, exchange, or other
payment or transfer by, through, or to the financial institution that involves more than $10,000 in
currency. Multiple currency transactions must be considered a single transaction if the financial

14
One of the key rules under the GLBA, also known as the Financial Services Modernization Act, is The Financial
Privacy Rule, which governs the collection and disclosure of consumers’ personal financial information by
financial institutions. The Financial Privacy Rule requires financial institutions to provide each consumer with a
privacy notice at the time the consumer relationship is established and annually thereafter. The notice must
also identify the consumer’s right to opt out of the information being shared with unaffiliated parties under the
provisions of the Fair Credit Reporting Act (FCRA). Various types of information about consumers can be
shared, such as whether a consumer has a safe deposit box. There are services that search for safe deposit
boxes, such as http://www.assetlocatorservices.com/safe_deposit_search/index.html. The GLBA does contain
some fairly significant loopholes about providing consumers’ personal information, such as that provided to
outside firms to market the institution’s own products or services and certain products or services jointly with
another financial institution. Due to these loopholes, some firms advertise FCRA/GLBA-compliant searches for
stock, brokerage, and retirement accounts, such as http://beaconintlgroup.com/investigations-practice/asset-
investigations.
15
This information can also be found through publicly available sources. For example, state Departments of
Highway Safety and Motor Vehicles typically allow for vehicle searches by VIN number; boat ownership
databases are usually housed by a state’s boating regulation authority, as well as the Coast Guard (http://www.
st.nmfs.noaa.gov); and aircraft title searches can be done by owner name, N#, serial #, and other criteria on a
national FAA database (http://registry.faa.gov).
16
The applicable statute here is 26 U.S.C. Section 6103, which, under some circumstances, provides for
disclosure of tax returns to persons having a material interest in the filed tax return.

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institution knows that they are conducted on behalf of the same person and they result in cash
received or disbursed by the financial institution of more than $10,000. When a transaction
involving more than $10,000 in cash is processed, most financial institutions have a system that
automatically creates a CTR electronically. CTRs provide a storehouse of information about a
target, including full name, address, date of birth, Social Security number, driver’s license
information, bank account data, and other information.
Financial institutions are also mandated to file Suspicious Activity Reports (SARs) with
FinCEN when the financial institution knows or reasonably suspects that a transaction may violate
federal criminal law or may relate to money laundering. SARs and CTRs are potential treasure
troves of information for fraud victims, their attorneys, and FAs; the reports typically include the
names of the individuals or businesses conducting the transaction, a description of said
transaction, a statement that the bank suspects the transaction is illegal (in the case of an SAR),
and the reason for the bank’s suspicions (Lakatos and Hanchet 2007).
Financial institutions and federal administrative agencies strongly oppose efforts by private
citizens to obtain CTRs and SARs. Regulatory agencies such as the Office of the Comptroller of
the Currency (OCC) have promulgated regulations aimed at denying Freedom of Information Act
and other administrative requests seeking disclosure of CTRs and SARs (Lakatos and Hanchet
2007). A recent court decision, however, may have created a slight opportunity to obtain CTRs and
SARs under certain conditions. In Biz Capital Bus. & Indus. Dev. Corp. v. OCC,17 a federal
appellate court held that the Bank Secrecy Act (BSA) and other regulations do not provide a
blanket privilege against revealing information about an SAR or its contents to civil litigants. In this
ruling, the OCC was required to apply a balancing test when reviewing a request for the release of
SARs. State and federal courts have held that the BSA provides financial institutions a
confidentiality privilege against the disclosure of SARs in a civil lawsuit (Lakatos and Hanchet
2007).
The good news for FAs and lawyers is that, while CTRs and SARs may be difficult to obtain,
federal regulatory agencies and courts have taken the position that CTR and SAR supporting
documentation is not confidential and is subject to discovery as long as the content therein does
not show its relationship to the CTR or SAR.18 Supporting documentation usually includes
transactional and account documents, such as wire transfers, statements, checks, and deposit
slips.19
Court Records
The FA can use the Public Access to Court Electronic Records (PACER) database (https://
www.pacer.gov) to search federal appellate, district, and bankruptcy court records, as well as other
public records. PACER is a free database provided by the federal judiciary and is available to
anyone who registers for an account. Bankruptcy records may reveal proof of claim forms filed by
creditors, a creditor matrix, Schedule A—real property, Schedule B—personal property, Schedule
C—exempt property, Schedule G—executory contracts and unexpired leases, Schedule H—
codebtors, and Schedule I—current income of individual debtors. From these filings, the FA could
reap a bonanza of significant information about possible hidden assets.

17
467 F. 3d 871 (5th Cir. 2006).
18
12 C.F.R. §21.11(k)(OCC); 12 C.F.R. §358.3(h)(FDIC); Cotton v. Private Bank & Trust Co., 235 F. Supp. 2d
809 (N.D. Ill. 2002); Gregory v. Bank One, Ind., N.A., 200 F. Supp. 2d 1,000 (S.D. Ind. 2002).
19
Union Bank of Cal., N.A. v. Superior Court, 130 Cal. App. 4th 378 (Cal. Ct. App. 2005).

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Pacini, Hopwood, and Sinclair A52

Given that the most common fraud scheme utilized in fraudulent bankruptcy filings involves
asset concealment (W. Albrecht, C. O. Albrecht, C. C. Albrecht, and Zimbelman 2016), the FA
may consider use of Rule 2004 of the Federal Rules of Bankruptcy Procedure (FRBP; see: https://
www.federalrulesofbankruptcyprocedure.org/part-ii/rule-2004), which states that ‘‘on motion of any
party in interest, the Court may order the examination of any entity.’’ The scope of a Rule 2004
exam is quite broad, because one does not need to be a creditor to be a party of interest and
anyone (not just the debtor) may be subject to examination. A party filing a Rule 2004 motion must
show ‘‘good cause.’’ But in appropriate cases, Rule 2004 can be a very powerful tool in locating
hidden assets.
Uniform Commercial Code (UCC) Filings
UCC filings are financing statements (UCC-1) that record and protect a secured party’s
interest in the collateral offered by a debtor in securing a loan. UCC filings typically include the
name and address of any lender, the lien date, a description of the property (sometimes with serial
numbers), and the names of persons signing the form. Therefore, these filings can help the FA to
determine the assets and liabilities of a target and perhaps when the assets were purchased
(Mendell 2011). These filings can be found in the offices of county clerks and Secretaries of State,
as well as in online databases such as Lexis-Nexis.
Tax Liens
State and local tax liens can be found at county clerks’ offices. Federal tax liens may be found
at both the county clerk and Secretary of State’s offices. Tax liens from other states may
sometimes be found in the Lexis-Nexis or Thomson Reuters CLEAR (https://signon.
thomsonreuters.com) databases. Because tax liens can hamper creditworthiness, individuals
usually try to have them removed as quickly as possible. A target whose property is subject to a tax
lien may have significant pressure to commit fraud or asset theft (Mendell 2011).
Other Sources of Information
Information concerning the target’s (or the target’s spouse’s) military record could yield other
background or occupational information, as can knowledge of any hobbies or interests. For
example, information on ham radio operators can be found in publicly available databases. The FA
can look for a target’s criminal record by searching the jurisdictions in which the target currently (or
formerly) lives and works. There are many good databases for performing criminal record
searches and background checks (as noted above).
If a target is not a U.S. citizen or legal resident, then it may be more difficult to find other
relevant information concerning that person, and other countries’ laws may restrict such
investigations. Citizenship in another country may necessitate an international data search or
the use of international databases. One database used to find data on international business
persons and firms is http://www.kompass.com. Another that aggregates the data on international
businesses and individuals associated with them is http://www.bvdinfo.com.
Real property records (grantor/grantee records) in any county where the target is suspected to
have real property should be searched using the target’s and target’s spouse’s names (including
maiden names and any former married names). The FA may also run the names of children,
siblings, and other relatives. One database that provides access to extensive real estate records in
the U.S., Australia, and New Zealand is http://www.corelogic.com.
Once the FA identifies as many parties (targets or suspects and those related to targets) to a
fraud or hidden assets scheme as feasible (time/cost pressures often require trade-offs), link
analysis should be used. Link analysis is a data analysis technique used to evaluate relationships

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or connections between nodes, such as organizations, people, and transactions. Myriads of bits of
data, such as names of individuals and business entities, addresses, phone numbers, and
birthdates, are integrated in a flowchart. A link analysis can be performed to ascertain title to
various assets or to identify cross-links between different entities and individuals (Korte and Muth
2009). Sentinel Visualizer is a software link analysis product used by law enforcement and fraud
investigators (http://www.sentinelvisualizer.com). GenoPro 2011 is a good example of a related
product that produces genograms, pictorial displays of personal relationships among parties
(http://www.genopro.com) (Crumbley, Heitger, and Smith 2015). Another widely used link analysis
and visualizer software is IBM’s i2 Analyst’s Notebook.

Use of Information Brokers/Asset Search Firms

An FA may hire the services of an asset search firm or information broker to search for much
of the information discussed previously. The advantage of hiring a broker is that it may be cheaper
than subscribing to a data service (e.g., Lexis-Nexis). Such firms may be found through a Google
search or in advertisements of security publications.
To ensure that the information is complete, the FA must provide a clear request to the
information broker that should include the target’s full name, date of birth, and address, if possible.
A Social Security number is not necessary, but is helpful. When an FA initially uses an asset
search firm, they should verify the work product via other information sources (Mendell 2011). The
FA and counsel must make sure that the asset search firm is obtaining data legally and should
obtain hold-harmless or indemnity agreements if the broker is using sources that are not available
to the general public and do not come from a commercial data provider.

Some Places to Hide Assets

People hide assets for many reasons (some legitimate), but often it is to keep them out of the
hands of creditors, fraud victims, or soon-to-be ex-spouses. Many asset hiders display ingenuity in
where they hide funds. This section discusses numerous methods to hide assets, based on the
experiences of FAs.
Universal Life Insurance
Universal life insurance requires an initial investment by the insured to establish a fund to pay
premiums. Most of the subsequent premium payments create cash surrender value. Access to
records for universal life policies may require a subpoena, unless supporting documentation (e.g.,
statements on account) can be obtained through trash runs or other means.
Dissolved Corporations
If a corporate entity name appears on the dead or dissolved list at the Secretary of State’s
office, then the assets acquired while the corporate entity was active may still survive and be listed
under a dissolved entity’s name. The legal status of a company is important, because it provides
circumstantial evidence that the business was not created as an operating company, but rather to
insulate the officers and directors from liability. In one case involving a person with a $3 million debt
deficiency, investigators revealed that the target, who claimed to be insolvent, had been buying
real estate at auctions with cash. When purchasing the real estate, the target used a company
name that was one of nine corporations in which the target had been an officer or director. The
company had been involuntarily dissolved by the Secretary of State years earlier for failure to file
an annual report.

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Limited Partnerships (LPs) and Family Limited Partnerships (FLPs)

LPs and FLPs are superb places to hide assets.20 In a typical scheme involving an LP, the
fraudster (the general partner) provides trusted associates, friends, or family members assets to
invest in an LP. These ‘‘investors’’ have no legal liability for the debts of the business, and they
cannot take an active role in running the business. In a standard FLP, married couples are
established as general partners. The married couple contributes all of their assets to the FLP, each
retaining a 1 percent general partnership interest and a 49 percent limited partnership interest.
General partners in an FLP have unlimited liability for the partnership’s activities. Hence, only 2
percent of the couple’s assets would be subject to unlimited liability. Creditors cannot directly reach
the FLP assets, but are restricted to obtaining a charging order, which gives the creditor the right to
receive any distributions made to the partner. The creditor cannot force the FLP to make
distributions to the partner (Association of Certified Fraud Examiners [ACFE] 2009).
Collectibles
Collectibles (e.g., paintings, sculptures, brass works, drawings, etchings, ceramics, coins,
baseball cards, stamps, and rare guns) are good places to hide stolen funds or assets. The
collectibles themselves may be hard to conceal: Collections may be large, collectors often like to
show off their collections, and collectors may buy and sell through various channels (e.g., eBay).
Sometimes a target may conceal collectibles by lending them to a museum. A fraud victim can
report stolen goods and check to see if property has been stolen on https://www.tracechecker.
com.
Cash Stored in Safes, Garbage Bags, and Lock Boxes at Home
Many individuals seek to remove cash from the banking system by storing or hiding it in
accessible places in their residence. Cash may be stored in many different kinds of wall or floor
safes. Some individuals store large sums of cash in garbage bags hidden in various locations
throughout a residence, such as an attic, basement, air ducts, recessed hiding areas, hollowed-out
staircases, or under floorboards. Cash can even be buried underground in waterproof containers.
Prepaid, Stored Value, and Credit Cards (Electronic and Otherwise)
A clever way to hide cash is to create a significant credit balance on a credit card or to
purchase a prepaid card. Prepaid cards may include gift cards, payroll cards, flexible spending
account cards, government benefit cards (such as food stamps), insurance claim cards, employee
reward cards, travel cards, remittance payment cards, and transportation cards. These are
excellent places to hide funds as they are portable, may be used almost anywhere in the United
States, and may store thousands of dollars (although some financial institutions have a policy of
refunding credit balances after a certain period of time). Several techniques can be used to detect
ill-gotten or illegitimate cash stored on prepaid cards or credit cards, including surveillance,
interviews, and anomaly detection (Wu and Banzhoff 2008).21 Also, the use of totally online
banking and credit card accounts is growing. Hence, there is no printed evidence or access/
knowledge without a password or forensic analysis of the subject’s laptop/tablet/smartphone.

20
In some cases, conveyances to LPs can be set aside by a court. Some states, however, have strict statutes of
limitation. In some cases, the time limit begins to run on a ‘‘knew’’ or ‘‘should have known’’ basis.
21
Fraudsters tend to show different behavior from legitimate prepaid, stored value, and credit card holders.
Financial fraud presents an ideal application for anomaly detection algorithms. Wu and Banzhoff (2008)
proposed and tested an advanced algorithm on automated bank machine and point-of-sale data that achieved
a better detection rate than a standard algorithm.

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Sweetheart Lawsuits (or Friendly Liens)

Sometimes an entrepreneur who has incurred much debt will have a relative, friend, or trusted
associate sue or record a lien for a large sum of money under a pretext. Sham loan documents
(including a security agreement and promissory note or lien documents) are prepared and then the
individual goes into ‘‘default’’ (Mendell 2011). A judgment is obtained by the relative, friend, or
trusted associate and a significant percentage of any liquidated assets then goes to this ‘‘creditor’’
(Mendell 2011). Sweetheart lawsuits can help insulate defendants from other creditors for years.
An FA who suspects a sweetheart lawsuit should secure a full litigation history on the target and
check previous lawsuits in detail for a pattern of sham loans.
Assets Placed in a Nominee’s Name
Title to real estate may be held in the name of a nominee who may not have been involved in
purchasing it. A nominee can be a relative, friend, or trusted associate of a target who holds legal
title to an asset or funds while beneficial ownership resides in the target. The use of a nominee
illustrates the importance of an FA doing asset searches on a wife using her maiden name, other
relatives, friends, and business associates.
Nominees almost invariably have several common characteristics:
1. They are almost always real, as opposed to just being an alias;
2. They pay inadequate or no consideration;
3. The properties are placed in the nominees’ names in anticipation of a lawsuit or other
liability while the transferor remains in control;
4. There is a close relationship between the nominee and transferor;
5. The transferor continues to enjoy the benefits of the transferred property or funds; and
6. The transferor retains possession.22
The use of nominees to hide assets is very common in the U.S.23
Use of Front, Shell, Shelf Companies, and Trusts
Asset hiders may form or create various types of both onshore and offshore entities to hold
ownership (legal title) to stolen or hidden assets. They may then open and fund bank accounts in
the names of these entities. These various entities include onshore limited liability companies
(LLCs), trusts, and limited liability partnerships (LLPs), and offshore LLCs, international business
companies (IBCs), trusts, and foundations.
An LLC can be used to defeat, or at least delay, claims of creditors and other claimants. LLCs
are subject to abuse because they can be managed and owned anonymously. Transparency-of-
ownership requirements vary from state to state (Government Accountability Office [GAO] 2006).
Offshore entities are sometimes used to manage a U.S. LLC. Even if a judgment creditor is able to

22
Spotts v. U.S., 429 F. 3d 248 (6th Cir. 2005); Fourth Investment LP v. U.S., 720 F. 3d 1,058 (9th Cir. 2013);
U.S. v. Bell, 27 F. Supp. 2d 1,191 (E.D. Cal. 1998).
23
In August 2013, Timothy McGinn and David Smith, former owners of the Albany, New York broker-dealer
McGinn, Smith, and Co. were sentenced to 15 years and ten years in federal prison, respectively. The
defendants were convicted of conspiracy to commit mail fraud and wire fraud, securities fraud, and filing false
tax returns. The convictions stemmed from a Ponzi scheme that lasted over seven years and caused hundreds
of investors to lose well in excess of $80 million. On March 30, 2015, a federal judge signed an order providing
for the disgorgement of $87 million to be returned to investors. Much of the money was found in a stock
account and various bank accounts in a wife’s name and a family trust fund (Federal Bureau of Investigation
[FBI] 2013; SEC v. McGinn Smith & Co. et al. 2015).

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obtain a charging order against the debtor’s interest, the creditor will simply not be able to compel
the offshore manager to make a distribution without extended litigation abroad (Adkisson and Riser
2004).
LLCs may be established to act as ‘‘shell’’ corporations. A shell corporation has no substantial
assets or liabilities, just a charter to operate. They are easy to form and can be interlocked and
layered in many locations with other shells. If they are established in a place with no regard for
ownership transparency (e.g., Wyoming, Nevada, and Delaware), then it can be virtually
impossible to identify the owners.24 Criminals can use shell companies to commit crimes such as
money laundering, tax evasion, securities fraud, financial fraud, and corruption (Kalant 2009).25
Shell companies are typically used to move assets; the shell’s name conceals the identity of the
person with control over transactions. Shell bank accounts play an important role in money-
laundering schemes because they can be used to receive deposits and as transfer points to the
accounts of other shells, business entities, or individuals.
Ready-made, already-existing ‘‘shelf’’ corporations can easily be purchased in many different
countries. All the necessary prerequisites in the appropriate jurisdiction (e.g., British Virgin Islands,
Belize, or Panama) are in place at the time of purchase. Of course, these corporations have the
ability to open bank accounts and transfer monies. Shelf corporations (LLCs, IBCs) can even be
purchased on the internet (http://www.offshorecompany.com or http://companiesinc.com/aged) for
a few thousand dollars.
Another legal vehicle subject to abuse by fraudsters and asset hiders is a trust. The
establishment of a trust requires the trust creator (‘‘settlor’’ or ‘‘grantor’’) to transfer ownership of an
asset or assets (‘‘legal title’’) to a trust entity, which, in turn, is managed by a person or institutional
entity (‘‘trustee’’). The trustee owns and manages the assets according to the provisions or terms
set out in a trust agreement for the benefit of the beneficiaries. In most common law jurisdictions,
trusts are limited in duration, trust terms are fixed, and trustees cannot be removed without a legal
challenge. The attractiveness of abusing trusts is based on the fact that trusts possess more
privacy and autonomy than other entities or vehicles. Trusts have no registration requirements,
and there are no central registries where the names of the trustee, settlor, and beneficiary must be
listed.26

24
Jurisdictions that have failed to regulate corporate service providers while also leaving their company registries
as passive archives are a major point of vulnerability. The U.S. is foremost among these jurisdictions. U.S.
shell companies are used more often in laundering the proceeds of grand corruption than those of any other
country (Sharman 2013).
25
One example of the abuse of a shell corporation can be found in U.S. v. Larry Lake, 571 Appx. 303 (5th Cir.
2014). Larry Lake operated a car title loan business, VIP Finance, with six locations in the Dallas area. In
addition to VIP Finance, Lake also owned Cash Auto Sales, which handled ‘‘auto club’’ memberships for VIP
Finance, and a drugstore called Grapevine Drug Mart. On November 17, 2004, with several money judgments
against him, Lake filed a Chapter 13 bankruptcy petition. The day before he filed for bankruptcy, Lake
transferred $2,763,000 from an e-trade account in his name to an e-trade account held jointly with his wife. The
same day, he purchased a cashier’s check for $348,000 payable to Air I.Q., a shell company formed in his
wife’s name. Lake did not disclose these transactions during the bankruptcy case, which led to a charge of
bankruptcy fraud. On November 18, 2009, law enforcement officers found $5,965,057 in cash and business for
the Grapevine Drug Mart that post-dated when Lake lied to his accountant and said he had sold the business.
26
One possible exception is a land trust. In many states, a search of the public records will reveal the trustee’s
name and, possibly, a copy of the trust agreement. The beneficiaries’ names remain concealed. The
beneficiary can be a limited partnership or another trust. If the land trust trustee is a lawyer, then attorney-client
privilege erects an additional barrier for the FA. In other states, beneficiaries’ names must be listed in the public
records (Simser 2008).

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A fraudulent transfer to a trust may be set aside by most U.S. courts. Many courts in the U.S.
will not protect assets placed in a trust solely for the benefit of the trust settlor. A trust established
in an offshore jurisdiction is governed by the laws of that nation, which may conflict with U.S. laws.
This conflict provides major advantages over a domestic trust for a settlor who wishes to maintain
tight control over trust assets.
Intellectual Property
Intellectual property, such as patents, trademarks, service marks, copyrights, and trade
secrets, may be more valuable than physical or monetary assets. Stolen funds or hidden assets
may be tied up in intellectual property. The U.S. Patent and Trademark Office (http://www.uspto.
gov) is the ultimate source for locating these assets. The U.S. Copyright office is the best source
for copyright ownership, publication, transfers, and derivative works (http://www.copyright.gov/
records) (Hetherington 2015). European patents can be checked at https://worldwide.espacenet.
com.
Domestic Nonprofits and Foundations
Domestically, some fraudsters may attempt to hide assets in a nonprofit or foundation.
Several free and paid resources are geared toward providing information on these entities. The FA
may wish to check http://www.guidestar.org; http://foundationcenter.org; and https://www.
nozasearch.com for information on larger nonprofits; smaller nonprofits are not typically listed. If
a nonprofit is tax-exempt, then it must make its exemption application available for public
inspection. A tax-exempt organization must also make available for public inspection and copying
its annual report, including Form 990s; its returns must be available for a three-year period starting
with the due date of the return (including any schedules, attachments, or supporting documents).
Some nonprofits, such as clubs, associations, trade organizations, and others, are nonprofit, but
not tax-exempt organizations. Fraudsters may attempt to conceal assets in either type of
nonprofits.
Overseas or Offshore Accounts or Entities
Although this article is focused on domestic asset tracing, some brief discussion of offshore
asset tracing is appropriate here. Many FAs run into a dead end when trying to obtain information
about assets held offshore. One can obtain information from U.S. Department of Commerce
experts from https://www.commerce.gov. Another valuable resource is http://www.
worldoffshorebanks.com. Investigative organizations, such as the National Association of Legal
Investigators (http://www.nalionline.org) and the World Association of Detectives (http://www.wad.
net), are sources of specialists on offshore jurisdictions (Mendell 2011).
Other Techniques
Bank statements will usually reveal large purchases of money orders, cashier’s checks,
traveler’s checks, or wire transfers; however, if the target makes these purchases elsewhere, then
surveillance may be necessary (following the advice of counsel). Safe deposit boxes and storage
units are almost impossible to access without a court order or the owner’s consent. Surveillance
may reveal patterns of visits to bank safety deposit boxes or storage units that correlate with a
return from foreign travel, attending a collectibles event, or other suspicious activities.
Stolen funds may be parked in various investment vehicles through a stock brokerage
account. Surveillance may be required to at least reveal which brokerage firm is being used. In rare
cases, an FA may be fortunate enough to find such statements in the trash. Another popular

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technique is prepayment of an owner-occupied or second home mortgage. A copy of the mortgage

payment history, if obtainable, would reveal if the target has made a large cash paydown.
Fraudsters, divorcing spouses, business disputants, and others may use ongoing businesses to
conceal assets. Strategies used by business owners to conceal cash include skimming cash from the
business, paying salaries to ghost employees and then voiding checks or direct deposits after the
divorce, or paying salaries to relatives or close friends for services that never have been rendered and
receiving the money back later. Custodial accounts may be created under a child’s Social Security
number to cloak liquid assets. Assets can be transferred into various types of retirement plans, pension
plans, and profit-sharing plans, which are generally exempt from creditors’ claims. Another good place
to hide funds is with the Internal Revenue Service (IRS): One can overpay one’s estimated taxes and
then not take a refund, instead applying the amount to the next year’s estimated taxes.

ASSET FREEZING
In many situations, protective or provisional measures must be taken at an early stage to
prevent the target or suspect from moving or dissipating assets. When possible, such measures
should secure or freeze assets until the termination of any legal proceedings. Such measures are
referred to as ‘‘seizure,’’ ‘‘restraint,’’ ‘‘freezing,’’ or ‘‘blocking,’’ depending on the jurisdiction. For
ease of discussion, this article uses the term ‘‘freezing.’’
Any plan to seek a freezing order should include the property taken in a fraud or other
scheme, assets or earnings obtained from such fraudulently taken or hidden assets (i.e.,
proceeds), and the target’s assets that may not be directly traceable to the fraud. Moreover, prior
to seeking freezing orders, the FA, client/victim, and the client’s attorney must consider whether
the jurisdictions involved have laws favorable to asset recovery, as well as the form and
characteristics of the misappropriated assets.
Before pursuing provisional measures or efforts at asset freezing, the client, the client’s attorney,
and the FA should perform a cost-benefit analysis for assets that will require management.
Consideration should be given to the degree and type of management that would be required for
ultimate confiscation. Preservation of assets that will be managed requires taking physical possession
and making plans for safe seizure, storage, and transfer to storage facilities. Over time, the
management costs of certain assets may exceed their value. An example is racehorses or horses kept
for breeding, where the proceeds may be highly uncertain and maintenance costs are high. Similarly,
large mansions or estates, especially in unusual locations, may be illiquid, taking years to sell.
In addition to asset management, the precise timing of asset freezing is also important. If asset
freezing is pursued too early, then a target may be tipped off and cease activities, making it more
difficult to gather information and identify assets. If it is done too late, then assets may disappear or
move. The client’s counsel must coordinate the efforts of practitioners seeking asset recovery and
those investigating offenses (i.e., law enforcement), unless the same personnel perform both. A
target or suspect may be tipped off when certain investigative techniques are employed, such as
searching residences or businesses, interviewing witnesses or suspects, issuing letters rogatory27 (to

27
A letter rogatory is a formal request by the courts of one country to the courts of another country requesting
assistance. The assistance may involve documents, testimony, asset freezing, etc. The letter rogatory must be
drafted following an exemplar provided by the U.S. Office of International Affairs (OIA; see: https://www.
justice.gov/criminal-oia). A letter rogatory must be signed by a judge and then translated into the appropriate
language. The signed letter rogatory and translation are sent to the OIA for transmission through diplomatic
channels to the appropriate foreign court, which decides whether to act on the letter rogatory.

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an offshore jurisdiction), issuing an MLA request28 (to an offshore jurisdiction), or conducting

surveillance. Hence, it is vital that assets be secured before some of these techniques are used (Brun
et al. 2011). On the other hand, such investigative techniques may be vital for identifying assets to be
frozen. So counsel and the FA must strategize carefully and take actions designed to best meet the
client’s objectives and risk tolerance (e.g., whether to safely recover 50 percent, safely recover 30
percent and have a good chance to recover another 30 percent, or take risks with the potential to
recover 100 percent, but the possibility of getting zero).

Provisional Measures (U.S. Asset Freezing Techniques)

A provisional measure is a legal device or process that prevents the dissipation of assets
beyond the jurisdiction of a court. In many nations, one of the most widely used and powerful
freezing orders is known as a Mareva injunction or order. A Mareva order freezes all of a party’s
assets on a pretrial basis in an ex parte hearing (i.e., the defendant receives no notice of the
hearing). The claimant or victim also asks for a simultaneous court order that seals the
proceedings to prevent leaks (i.e., a ‘‘gag’’ order) (IAAR 2011).
While Mareva injunctions per se are not available for use within U.S. courts, they are not
without other powerful devices in practice (Wilson 2005). U.S. federal and state courts rely on
prejudgment writs of attachment, replevin, garnishment, lis pendens, and injunctions (collectively
sometimes called ‘‘freezing orders’’).
Prejudgment Writ of Attachment
Prejudgment writ of attachment state statutes permit a plaintiff (e.g., creditor or fraud victim)
to attach both tangible and intangible property or funds before any rights have been legally
established against the defendant (Wasserman 1992). A prejudgment writ of attachment is
sought ex parte on the basis of a verified complaint or affidavit. Many attachment statutes
provide that the grounds for a prejudgment writ are that the defendant is absconding, secreting
property, fraudulently disposing of property, or is removing him- or herself or his or her property
from the jurisdiction. A plaintiff must usually post a bond to cover the costs and damages a
defendant incurs if it is later determined that the prejudgment writ should not have been issued
(Davis 2011).
If a prejudgment writ is approved, then law enforcement can levy any property located in the
relevant jurisdiction. Law enforcement must be certain that no third party has an interest in the
property; otherwise, it can be sued for wrongful attachment and conversion (Wasserman 1992).
The defendant is entitled to a hearing immediately after any levy to challenge the writ. Prejudgment
attachment is an in rem procedure (against the property, not the defendant), meaning it is not
available for property outside the court’s jurisdiction. A prejudgment writ of attachment is
applicable on a state basis; hence, if assets are located in several states, then the claimant must
pursue this remedy in several courts, making it expensive and time-consuming (Harshman, Islan,
Nelson, and Ordower 2002).29

28
A mutual legal assistance (MLA) request is a written request to a foreign government used to gather
information, obtain provisional measures, and pursue enforcement of domestic court orders in foreign
jurisdictions. MLA requests are not available to private parties.
29
Again, the advice of experienced legal counsel is critical in deciding whether to pursue a prejudgment writ of
attachment, especially in multiple U.S. jurisdictions (given some variations in state statutes).

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Replevin
A prejudgment writ of replevin (state statutory remedy) is a process involving an ex parte
hearing in which a court orders seizure (by law enforcement) of allegedly illegally obtained or
wrongfully detained personal (not real) property to be held in the custody of the court until a judicial
decision is made on who is entitled to lawful possession. Replevin is a possessory legal action to
obtain specific tangible personal property. Replevin involves the return of an actual item or items,
not monetary compensation. In a prejudgment situation, the claimant must file a verified complaint
or a complaint supported by an affidavit and post a bond to compensate the defendant for any
wrongful taking. Prejudgment replevin is appropriate to prevent a defendant from hiding,
transferring, or destroying personal property. Prejudgment replevin is an in rem procedure,
meaning it is not available for property outside the court’s jurisdiction; hence, if multiple states are
involved, then the claimant must pursue this remedy in several courts, making it a burdensome and
expensive process (Harshman et al. 2002).
Garnishment
A prejudgment writ of garnishment is a process by which a court orders the seizure or
attachment of the property of a defendant in the possession or control of a third party (e.g., a
financial institution). The third party is the garnishee. A classic example of prejudgment
garnishment is the seizure of money held in a commercial bank or stock brokerage firm. In a
prejudgment garnishment, a hearing is held ex parte, but the defendant must be given a prompt
hearing after the garnishment. In nearly all states, the plaintiff must file a verified petition or affidavit
alleging specific facts, including the nature of the cause of action, the amount involved, and that the
debt sued on is just, due, and unpaid (Davis 2011).30 The plaintiff must also post a bond to cover
costs and damages incurred by the garnishee in the event the garnishment is deemed wrongful
(Davis 2011).
Garnishment of wages is different from other forms of attachment prior to judgment. Wages
are a specialized type of property, and garnishment requires notice to the defendant to satisfy
procedural due process (rather than substantive due process) requirements.31 The details on how
to accomplish a prejudgment garnishment differ from state to state. The FA and client must rely on
the experience and advice of a seasoned lawyer, especially in a multi-state scenario.
Lis Pendens
Another state statutory prejudgment device is a lis pendens. A lis pendens is a written notice
that a lawsuit concerning title to certain real estate (or an interest in that real estate) has been filed.
A lis pendens is not a lien and may be filed by a third party without court action. To support a lis
pendens, a claimant is not required to show a substantial likelihood of success on the merits, only
that there is a fair nexus or connection between the apparent legal or equitable ownership of the
property and the dispute outlined in the lawsuit.32 The filing of a notice of lis pendens is usually a

30
In Raines v. Impact Net Worth Solutions, 2009 U.S. Dist. LEXIS 62,610 (D. Utah July 21, 2009), David Reber
invested over $66,000 in what had been represented to him as an individual fractional ownership interest in a
hotel and condominium project being developed in the Dominican Republic. Reber filed for a prejudgment writ
of garnishment when he learned that none of his monies went toward the development of the hotel/
condominium project, nor did he receive a deed showing his fractional interest in the project. (The defendants
were essentially operating a real estate Ponzi scheme.) A federal district court granted the writ of garnishment
with the garnishee being Wells Fargo Bank.
31
Sniadach v. Family Finance Corp., 395 U.S. 337 (1969).
32
Bergman v. Slater, 922 So. 2d 1,110 (Fla. 4th DCA 2006).

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bar to the enforcement against the property of all interests and liens unrecorded at the time of
filing, with few exceptions (Wielebinski et al. 2009). Some states require that a bond be posted to
file a lis pendens. Even if a state does not require posting a bond, a party can be held liable for
damages and fees in certain cases. State laws vary somewhat on the details of filing of a notice of
lis pendens. The sage advice of counsel matters even in the case of a lis pendens, because such a
notice only affects real property in the county in which it is recorded.
Temporary Restraining Orders and Injunctions
Another type of freezing order (at the state level) is an injunction. This is a court order
prohibiting some type of conduct or activity, or commanding the performance of some act to undo a
wrong or injury. The three types of injunctions are temporary restraining orders (TROs),
preliminary injunctions, and permanent injunctions.
A TRO is an ex parte remedy issued in exceptional circumstances to prevent destruction or
dissipation of the subject matter or irreparable injury. A TRO is in effect for a short time. Courts can
also issue preliminary injunctions to take effect immediately and stay in effect until a judicial
decision is made on a preliminary or permanent injunction. A party seeking a temporary or
preliminary injunction must often post a bond with the issuing court. The burden required to
demonstrate need for a permanent injunction (issued after a trial on the merits) does not vary from
that mandated for a preliminary injunction (Wielebinski et al. 2009).33 The advice of counsel is
paramount, because state laws vary in application with regard to injunctions.
Each state has established its own statutory scheme for providing authority for its state courts
to issue prejudgment freezing orders. The ability of federal district courts to utilize the freezing
remedies available to state courts in the districts in which they sit falls under the Federal Rules of
Civil Procedure (FRCP; see: https://www.federalrulesofcivilprocedure.org/frcp) 64 and 65. FRCP
64 makes explicit that state law applies in federal court cases in determining appropriate
provisional remedies (excluding TROs and injunctions) and the procedures that apply in a given
state. FRCP 65 applies to the issuance of TROs, preliminary, and permanent injunctions. A TRO
lasts only until the court holds a hearing on whether the court will grant a preliminary injunction. A
court’s decision on a TRO may not be appealed (FRCP 65). An order granting a temporary
injunction (after a hearing) is immediately appealable. It is less certain whether an order granting or
denying a prejudgment freezing order under FRCP 64 is immediately appealable.34 Relief under
FRCP 64 is limited to property within the state in which the federal court sits.35 An FRCP 65 TRO
or injunction can have effect beyond just one state.36 Given the legal intricacies of using various
prejudgment freezing orders and the state and federal court systems, the importance of the FA
working together with an experienced and knowledgeable attorney cannot be overemphasized.

ATTORNEY-CLIENT PRIVILEGE EXTENDED TO FORENSIC

ACCOUNTANTS
The question naturally arises as to whether information and communication that occurred
during an asset tracing investigation would be discoverable by opposing counsel in the event that a

33
eBay v. MercExchange, 547 U.S. 388 (2006).
34
Charlesbank Equity Fund II v. Blinds to Go, Inc., 370 F. 3d 151 (1st Cir. 2004).
35
Paul H. Aschkar & Co. v. Curtis, 327 F. 2d 306 (9th Cir. 1963); Murdock v. Allina (In re Curtina Int’l), 15 B.R.
993 (Bankr. S.D.N.Y. 1981).
36
U.S. v. First Nat’l City Bank, 379 U.S. 378 (1965).

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Pacini, Hopwood, and Sinclair A62

case goes into litigation. The answer, in short, is that as long as the FA is hired by the lawyer, the
attorney may cloak a non-testifying expert or consultant with the protection of the attorney-client
privilege.
The landmark decision in U.S. versus Kovel 37 extended the attorney-client privilege to
communications between a client and an accountant (non-testifying) hired by an attorney to assist
in providing legal services. The Kovel court acknowledged that an arbitrary line was being drawn
between cases in which the client communicates first with its own FA and then later consults with
its lawyer (no privilege exists), and those in which the client initially retains an attorney who then
hires an FA or the client consults with the lawyer and FA simultaneously (privilege exists).
The boundaries of the Kovel rule are tightly drawn, and application of the privilege is strictly
interpreted. It is paramount to the attorney-client privilege that the communication be made in
confidence for the purpose of obtaining legal advice from the attorney. If the accountant’s advice is
what is sought, rather than legal advice, then no privilege attaches. Even legal advice is
unprivileged if it is merely incidental to business advice.38
Common sense safeguards are essential to preserve the privilege. First, the attorney, not the
client, should hire the FA. Unless absolutely necessary, the client’s existing accountant should not
be hired to perform forensic accounting services. In the case of a corporation, outside or in-house
counsel, not corporate management, should hire the FA. Given the higher standard applied to in-
house counsel to trigger application of the attorney-client privilege, any and all steps or procedures
that delineate between business and legal advice should be employed by the corporate client.
Next, the attorney should document the relationship with the FA using a written engagement
agreement that precisely sets forth the legal purpose of the forensic accounting services (Segal
1997). If appropriate, the engagement agreement should state that the FA is being hired in
anticipation of litigation. The engagement agreement should state that all communications among
the attorney, client, and FA are incidental to rendering legal services and are intended to remain
confidential (Tigue, Skarlatos, and Lacewell 1994). The FA and client may communicate outside
the attorney’s presence as long as they do so at counsel’s direction. Any work product prepared by
the FA should be furnished directly to counsel and not the client. Moreover, the attorney-FA
engagement agreement should state that all documents, including workpapers, are the lawyer’s
property and are to be returned (Tigue et al. 1994). Finally, the FA should directly bill the law firm
for whom they work.

CONCLUSION
Numerous sources indicate that hidden/stolen assets are often difficult, if not impossible, to
recover. Albrecht et al. (2008) suggested that further research identifying the steps to take in
investigating asset misappropriation would be helpful. Accordingly, this paper has focused on
domestic asset tracing and freezing techniques and sources of information to assist academics,
students, regulators, lawyers, FAs, CPAs, and other interested parties in conducting asset tracing
and freezing.
It is absolutely essential for the FA to work closely with the victim/client’s attorney to ensure
that federal, state, local, and international laws are followed; that evidence is correctly preserved
for any possible legal proceedings; and that attorney-client privilege is protected. A cost-benefit
analysis should be conducted before beginning any asset tracing investigation (and periodically

37
296 F. 2d 918 (2d Cir. 1961).
38
Durham Industries, Inc. v. North River Ins. Co., 1980 U.S. Dist. LEXIS 15,154 (S.D.N.Y. 1980).

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Pacini, Hopwood, and Sinclair A63

revisited as the investigation progresses) to ensure that the assets are worth more than the cost of
recovering them.
Many resources are available to assist the FA in finding people, places, and assets in a tracing
investigation; therefore, it is important for the FA to narrow down the scope of any investigation by
developing theories as to the who, what, where, how, and when. Link analysis software and other
high-tech tools may be useful for identifying relationships between organizations, people, assets,
and transactions. It is important to gather intelligence rather than just information.
Once hidden/stolen assets have been identified and located, the attorney and FA should take
action to freeze such assets to ensure that they can be recovered. Before seeking freezing orders,
it is important to understand the jurisdictions involved in order to determine whether they are
favorable to asset recovery and in what form. Each jurisdiction has its own statutory scheme for
providing state courts with authority to issue freezing orders. Once asset freezing begins, the
fraudster may become aware of the investigation and take measures to hinder, delay, or frustrate
it; therefore, counsel and the FA must carefully strategize to ascertain the actions that will best
serve the client’s objectives and tolerance for risk.
Asset tracing and recovery often involve difficult judgments in the face of significant
uncertainty about outcomes. Potential areas for future research include: determining the ‘‘right’’
amount of time and research to invest in identifying and locating hidden/stolen assets before
commencing freezing activities; analyzing the freezing activities and the means of implementation
that could tip off a suspect, and how to prevent or discourage the target from moving assets once
they become aware of the freezing activities; identifying the order in which to initiate asset freezing
and recovery actions to minimize the likelihood of tipping off the target and maximize asset
recovery; and understanding the impact of different jurisdictional laws on asset freezing and
recovery. Another area of potential research is the specialized area of international asset tracing
and recovery. Other considerations include: Does the nature of the asset to be recovered have any
effect on the tracing, freezing, and recovery process? Has technology enabled fraudsters to better
hide and move assets? Has technology enabled forensic accountants to locate assets more
efficiently and economically? What role does technology play in the recovery process? What kind
of coordination is necessary between asset recovery experts and law enforcement personnel
pursuing the fraudster?

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APPENDIX A
Websites for the Forensic Accountant: http://dx.doi.org/10.2308/jfar-51549.s01

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