The Absconded: Finding and Recovering Stolen Assets

Spy craft, car chases, yachts churning oceans into froth and details of the inevitable offshore bank account — in the moviemaking world, plots based on recovering money stolen by a thief who needs to be brought to justice make for dramatic and fast-moving storylines. In the real world, though, locating money someone has illegally run off with doesn’t seem quite as exciting.

International asset recovery can even seem tedious, as it involves tireless hours of combing through vast datasets, not to mention navigating mounds of jurisdictional impediments. But while not as glamorous or turbocharged as depicted in “Absconded Assets, The Movie,” the work it takes to reclaim wrongfully appropriated funds is far from dull. Done properly, it requires a high level of creativity and can be mentally stimulating. Due to the unique skill set required, it attracts talent from a wide-ranging set of specialties. Those with backgrounds in law, intelligence, cybersecurity and investigative journalism all have a role to play in bringing debtors to justice.

Generally, absconders operate across two broad categories: individuals and entities. The public is more familiar with individuals who don’t pay their debts, not just because these individuals are often larger-than-life characters with lavish lifestyles but also because their cases are often more clear-cut: Party A wronged Party B. Corporate cases are far more complex and typically involve multiple individuals and entities to attach and enforce a judgment award.

Hidden assets can take on many forms. Typically, one pictures cash, land, vehicles, investment accounts, offshore accounts, rare pieces of artwork and cryptocurrency. Lesser-known but equally as lucrative are patents, brands, entire subsidiaries and streams of revenue. Pinning down these more opaque stores of value is crucial when dealing with an individual or company that is avoiding enforcement. Suppliers, for example, can be good counterparties to pursue. If they have balances due to the debtor, enforcement teams can get in the path of that payment and seize the outstanding balance.

Seizing a company’s assets or a subsidiary outright is also not as straightforward as pulling over and impounding a luxury car. Not all assets are domiciled in jurisdictions where a judgment is enforceable. A parent company might disappear funds by transferring assets between such subsidiaries. A capable team will track these transfers in real-time while being aware of the nuances of local law.

Deciding whether to pursue stolen assets

The process of tracing assets can begin at any time — prior to the issuance of a civil action to ensure a judgment can be enforced, or after a lawsuit or arbitration has concluded. Counsel for the creditor(s) will typically contract a team of experts tasked with locating assets as part of a cost-benefit analysis, as they must consider the amount they’re willing to spend to find assets next to their prediction for how easily they can seize them. Judgment enforcement can be defined by a claimant’s appetite for risk. However, for some, it’s more about the principle than the results. Risk vs. reward is an irrelevant equation — they will not stand for another party defrauding them, period.

And it’s not only the petitioner who takes on the odds. The process starts with a legal claim, so the law firm might also share in the risk — counsel’s fee often hinges on the successful retrieval of the hidden assets. Numerous parties can be invested in returning assets to their rightful owner, including litigation funders, who have changed the landscape of the asset recovery field in the past decade by helping finance such lawsuits. Indeed, the emergence of litigation funders is indicative of the tremendous amount of growth this space has seen in recent years.

Data collection requires both information and human intelligence

Once the case is articulated and the claimant’s recovery team has been assembled, data collection becomes the first step toward tracing assets. Data collection is composed of two elements: information and human intelligence. The right data is useless without team members who can generate leads by identifying banks and commercial entities for discovery, as well as freezing or garnishment orders. Human intelligence leverages key assets including skilled investigators, former journalists and external advisers — experts with backgrounds in government, military, banking and multinational corporations.

Surprisingly, most of the data these teams use to chase funds that have been absconded is readily available to the public. These can include land records, business directories, trade data, litigation filings, aircraft and vessel tracking services — even social media. Say a team is looking for proof that a Russian oligarch is failing to pay required sums owed as part of a judgment against them. Targeting social media of family members may yield a video on Instagram with a yacht or vehicle in the background, which can then be tied directly back to the subject.

Local legislation defines the rules of engagement

Recent tech innovations like the digitization of corporate registrars have made the data collection process easier, but roadblocks remain. One such obstruction is dealing with jurisdictions that do not require limited liability companies (LLC) to declare their beneficial owner. If an LLC is in a country with non-reciprocal treaties or unfriendly U.S. relations, it can be difficult to get transparency. And this doesn’t only apply to foreign countries. Counterintuitively, many places within the U.S. do not require LLCs to declare their beneficial owner, such as Delaware. When it comes to the law, America is not a monolith. This applies not only in data collection but also when planning the seizure of assets. For example, Florida’s Homestead Law can prevent the sale of a primary residence to creditors.

That said, many of these difficulties in declaring the beneficial owner of an LLC may have been resolved when the Corporate Transparency Act (CTA) became effective Jan. 1, 2024. This federal law requires LLCs to define the beneficial owner as any person who has “substantial control” or owns or controls a 25% “ownership interest” in the company. Interests below this threshold will remain a challenge to unmask.

The impact of foreign governments

The CTA’s passing is part of a broader trend: In recent years, legislators and government officials are making a concerted effort to aid in the recovery of hidden assets. Authorities aren’t just cooperating at a domestic level. Foreign governments are making it easier to trace assets within their borders. This is because many countries, following Singapore’s lead, are working to solidify themselves as business-friendly jurisdictions. If they can show a strong commercial legal system, they are more likely to lure inbound foreign direct investment from the U.S. and other geographies.

When international courts such as The Hague demand that a government pay a sum to a foreign creditor, the government’s business-friendly status becomes irrelevant. Pursuing funds that a government has wrongfully seized can be even more difficult than pursuing a corporation. Governments can own property and businesses and can sell these assets to private companies to further make those funds inaccessible. The reverse is also possible — private companies selling assets to governments in hopes that the buyer will prevent their disbursement to foreign creditors. Here at S-RM, a recent major case involving state-owned assets required us to map out a South African sovereign’s global portfolio of assets and demonstrate their use for commercial purposes. This allowed us to aid in the enforcement of an arbitral award against both the South African sovereign, as well as a state-owned utility company.

Cross-border challenges

However, actions taken by international courts do little to combat the largest pitfall in asset recovery: No matter the amount of effort put into locating and tying funds to an individual, there are some countries where teams simply do not have jurisdiction. The stereotype of Swiss banks being impenetrable to creditors has eroded somewhat since the financial crisis, replaced in recent years by countries like Myanmar and Venezuela, places where extradition is nearly impossible. The game criminals play is to move their funds from jurisdictions most accessible to creditors to those least accessible, while still being accessible to an absconder. This is one of two common methods of misappropriating funds, the other being putting funds in another individual’s name. The team retrieving the funds is, of course, best off intercepting them before they have been transferred across international borders.

Once the funds have crossed the border, teams need to engage in a different approach, forging or tapping into relationships with foreign authorities and developing a comprehensive understanding of local law to retrieve the asset. Investigators have a modicum of hope when funds are transferred to a country that is a signatory to the UN’s New York Convention, which established guidelines for international arbitration. However, this compact is far from a guarantee that the judgment will be enforced. There are geopolitical realities that must be acknowledged — there are many nations who signed on in 1958 whose relations with the U.S. have since deteriorated.

Because a large portion of untraceable funds cross international borders, recovery teams must have a truly global network to succeed in this highly challenging task. Fluency in multiple languages gives lawyers and investigators a leg up when tracing assets. Keep in mind, a mistake as minor as misspelling the thief’s name when tracking down their foreign bank account can result in a dead end.  

Successful asset recovery often means refusing to accept defeat. Even if the funds are stashed, say, in Myanmar, all is not lost. A capable team will exhaust every option. They might analyze historical trends and conclude that many companies in a particular industry that exist in Myanmar were originally incorporated in Vietnam. From there, they’ll notice that the Vietnamese co-founder is no longer a part of the company. They’ll discover that his business with the debtor deteriorated, and they’ll leverage his discontent to obtain the next clue. The process mirrors investigative journalism — map out what you know through public records and then follow the clues to get to the unknown.

Interpersonal skills lead to successful recoveries

Strong people skills are necessary in establishing relationships with the many human resources that must be tapped, such as business analysts, academics, regulators, government officials, suppliers, creditors and witnesses of fact. Interpersonal relations between lawyers and investigators are equally important. The asset recovery space is a tight-knit community. A friend made at an asset recovery conference might be key in cracking open a case several years down the line.

These personal connections can lead the claimant’s team to the end-game, a local court attaching a judgment to misappropriated assets. That being achieved, the claimant’s team has the option to seize the asset or transfer it to a company that specializes in liquidation. 

The option to transfer the asset to be liquidated can be leverage. Suppose there is a large judgment issued against an oil company that is refusing to pay in cash, even though it has the means to do so. The lawyer could then bring the judgment to a port, such as Aruba, where the oil tankers are docking. Together with local law enforcement, the lawyer can prevent the tanker from moving, leaving hundreds of millions of dollars’ worth of oil in limbo. The oil company will (probably) then agree to a settlement to restore their business operations. On an individual debtor level, leverage is created when similar principles are applied, say, to a property that has been in the thief’s family for generations.

After a settlement is reached, the asset recovery team can see the fruits of their labor: The claimant is satisfied, and justice has been restored. The degree of challenge to achieve this result makes the work all the more rewarding — public records have to be meticulously examined, complex legal documents have to be translated and the nuances of various cultures have to be understood. This is only possible if an asset recovery team is detail-oriented, worldly and ruthlessly driven.