Tracing assets of convicted criminals

Collin Greenland, Contributor

Despite the reported setback suffered by the island's hard-working Financial Investigations Division (FID) by the High Court's refusal of its application for certain restraint orders related to collecting of nearly $1 billion from convicted drug dealers, Adrian and Patrick Fogo, they should be lauded for their efforts, so far, at pursuing forfeiture of these assets for the State. We note with interest that the FID's boss, Justin Felice, has declared that the FID will resubmit its applications so, hopefully, whatever legal hurdles prevented initial success, will be overcome so that Jamaica's coffers can be enriched by these drug dealers' ill-gotten gains.

Why trace assets?

Before our law-enforcement officials can secure crime-related assets for forfeiture, they must be located, or traced, which can be time consuming and complex, and involves grappling with strategic, organisational, investigative and legal challenges. According to the World Bank, the cross-border flow of proceeds from criminal activity, corruption and tax evasion is estimated at between US$1 and US$1.6 trillion per year. Tragically, half of this amount is looted from developing and transition economies such as Jamaica, and US$20-40 billion of this flow originated in bribes received by public officials from developing and transition countries.

Admittedly, tracing assets can be required for other reasons than forfeiture of criminal assets, as persons filing suit to recover property from a former business partner, trying to enforce a legal judgment to receive financial damages, ascertaining their spouse's full empire during a divorce, child-support hearing, etc., may all necessitate tracing concealed assets. However, although the legal intricacies involved in tracing are complex, even to lawyers, tracing claims typically tends to involve crimes of both the white collar and violent varieties, and a number of key aspects of the law remain ambiguous in many countries.

What is asset tracing?

Laws related to asset tracing originated in English common-law doctrines, some of which were first applied hundreds of years ago. According to the International Centre For Asset Recovery, tracing the proceeds of crimes such as fraud, drug trafficking, money laundering, and corruption involves identifying assets with or from their criminal origins, through all mutations, if any, to the eventual form and state in which they exist at the time they are located. During mutation, proceeds mingle with lawfully accrued resources and can diminish or grow in quantity or appreciate in value. The FID, like its international counterparts, has equipped itself to expose and identify ownership interests often concealed by changes in the form and nature of ownership. They are increasingly developing their competences to untangle hidden controls over, and interest in, property and in their ranks are some of the force's most qualified and brightest personnel with whom this writer has the honour of relating to from time to time.

We can expect to hear of further successes by our Jamaican crime fighters, guided by our well-criticised judiciary, based on the well-established doctrines in tracing assets that have been carved in precedents from famous cases such as AG for Hong Kong v Reid, and the reasoning of The House of Lords in Foskett v McKeown [2001] AC 102. More recently, in the US, the Attorney General's Office for the Southern District of New York ordered the infamous Bernie Madoff to forfeit over US$170 billion of assets to settle claims in the case of the biggest Ponzi scheme in US history, of more than US$17.5 billion fraud exposed by the 2008 financial crisis. Whereas some doubted at the time that Madoff actually have that level of assets, his spouse, Ruth Madoff agreed to forfeit more than US$80 million worth. By September 30, 2012, The United States Department of Justice for the Southern District of New York and the United States Marshals Service had traced and recovered, or entered into agreements, to recover almost US$9.2 billion of assets.

The case of the Fogos involved collaborations involving US, Jamaican, and Canadian authorities, which is typical of tracing efforts these days, which are characterised by cross-border cooperation between law enforcement, internationally.

Conducting asset-tracing investigations

Financial intelligence units (FIUs) throughout the world are generally trained to utilise a focused and consistent approach but have found it difficult to conduct investigations according to a pre-designed checklist, as there are different factors that can influence the direction of the investigation. However, like its international counterparts, I'm sure the FID understands the one requirement consistent with all asset-tracing investigation - document the findings! Not only will this be a legal requirement but will assist in the investigative process which involves knowing the parties involved - research, intelligence, etc; analysing electronic files and databases - data mining, forensics, etc.; identifying and analysing relevant contracts and other documents reflecting ownership; analysing accounting documents and bank statements; and, of course, the human factor - interviews, witnesses, etc.

The role of intelligence

What is intelligence? In the case of complex economic crime and corruption investigations, where there is often myriad personalities and different complex financial vehicles often used in overseas jurisdictions, the use of differing forms of intelligence has become a 'must have' tool and proved important to initial research into allegations of corruption, but also subsequently in substantive investigations.

There is great deal of conjecture on what precisely intelligence is and, as a result, raw information is often perceived incorrectly as intelligence. Information received from disparate sources such as informants, telephone-complaint lines or banking records, is just raw information with little context and, often, therefore, no intrinsic value. It is the drawing together of such raw data assessed for validity and reliability and its analytical processing that provides the all-important intelligence product for law enforcement agencies.

The International Association of Law Enforcement Intelligence Analysts states that intelligence is an analytic process, ".....deriving meaning from fact. It is taking information collected in the course of an investigation, or from internal or external files, and arriving at something more than was evident before. This could be leads in a case, a more accurate view of a crime problem, a forecast of future crime levels, a hypothesis of who may have committed a crime or a strategy to prevent crime."

Suggested investigative resources

Despite the limitations of general legal restrictions and limitations (operating in differing jurisdictions); organisational limitations (unavailable/outdated info., etc); economic limitations (budgetary restrictions, etc.), enlightened investigative agencies have learnt that asset-tracing efforts can benefit from numerous sources of information at their disposal and include the following:

Intelligence, as defined above, which can include financial intelligence from other FIUs throughout the world. In fact, the FID should become a member of EGMONT, a network of the financial-intelligence units of over 100 countries, which permits law enforcement to request data in support of a significant money laundering or terrorist-financing investigation. No subpoena, prosecutor or court involvement is needed, and law enforcement can make the request through the Financial Crimes Enforcement Network (FinCEN) a bureau of the US Department of the Treasury.

Human intelligence - informants, whistleblowers, etc.

Open-source intelligence, which are publicly available sources, wide-ranging and includes - all types of media; directories; databases of people, places, and events; social-networking sites and web-based communities such as chat rooms, government reports and documents; scientific research and reports; statistical data bases; publicly available databases; commercial vendors of information; websites; search engines, etc.

Using legislation such as the Proceeds of Crime Act, that facilitates law enforcement to access critical information from financial institutions, and other institutions required to file currency transaction reports, foreign bank account reports, suspicious activity reports (SARs), and similar documents.

Mutual legal-assistance agreements/treaties that allow formal requests for records, or enforcement action by a foreign country, is made through the appropriate agencies.

FEDWIRE: One of the world's largest central banks, The New York Federal Reserve Bank, can search names, addresses and account numbers for any fund transfers done through its system. Often, this will reveal previously unknown beneficiaries and accounts.

Clearing house interbank-payment systems accessed through the appropriate legal mechanism (eg. court order, subpoenas, etc) used by financial institutions to process wire transfers.

Postal authorities can provide invaluable information. For example, a request through the US Postal Inspection Service will provide the information featured on the outside of envelopes. Often, this will identify financial institutions the subjects of the investigation deal with, as well as shell corporations, virtual offices and phone companies.

Tax returns, again obtained through court orders or other appropriate legal mechanisms, can be examined, which often will yield the location of accounts, as well as front companies and shell corporations through which individuals launder money.

Collin Greenland is a forensic accountant.