Tracing and Recovering the Proceeds of Crime
18 November 2021
Many victims of financial crime are not aware of the various civil options open to them in pursuing recovery of the proceeds of financial crime. As part of International Fraud Awareness Week 2021, Vicki Bell of the Victorian Bar joined McGrathNicol Partner, Barry Kogan and McGrathNicol Forensic Director, Kelly Rigby to discuss the civil recovery actions available, and legal and practical implications of such financial crimes.
2021 has seen a continued increase in forensic and restructuring assignments requiring complex asset and fund tracing, the use of freezing orders and recovery actions in order to analyse complex business structures and Ponzi schemes. Recent engagements requiring fund and asset tracing methodologies have included complex investigations, restructuring engagements, and money laundering.
McGrathNicol applies a rigorous methodology to fund and asset tracing, to account for inflows and outflows of legitimate and illegitimate money related to multiple parties to identify the ultimate application of funds. Once the application of funds has been identified, civil recovery actions can be utilised to regain possession of funds or assets which minimises the damage of financial crime.
To trace funds through complex financial statements, McGrathNicol utilises a five-step methodology:
Forensically convert bank statements
Categorise transactions based on recipient and expenditure type
Trace transactions through separate bank accounts using legal principles
Establish ultimate recipient of funds whether an individual, entity or asset
Report on flow of funds to assist with civil and criminal actions.
Importantly, key legal tracing principles are required in a robust asset tracing methodology. Vicki set out the need to identify the legal strategy and the claim to be brought in a court proceeding. Barry discussed the commercial realities and the additional powers that are available through administration processes. Kelly set out the legal principles forensic accountants adhere to and the process required to undertake a complex fund tracing assignment.
We had over 100 participants and questions from the virtual world included the technology used, crypto and its prevalence today, visualisation, the legal principles moving away from first in first out, the challenges with accessing information in other jurisdictions, reliance on law enforcement and the speed needed to gather various forms of information to ensure funds are not dissipated before orders are obtained.