A challenging business climate and rising levels of debt have resulted in a growing numbers of law firms seeking asset searches on behalf of their clients. Drawing on our recent experience, SVA has prepared a short guide on what to consider when seeking asset search activities so as to better serve clients.

The need for asset searches

Asset searches can be of considerable value to legal advisors in various situations, such as:

• Pre-litigation appraisals, in conducting a cost-benefit analysis on whether and how to proceed;
• Post-judgment assessments, in assessing to determine how best to enforce a court ruling;
• Instances of fraud and corruption, in locating and attaching proceeds of crime;
• Financial net worth assessments, ahead of major deals or as part of the provision of a debt guarantee; and
• Examination of company interests, ahead of, or as part of, a liquidation process.

However, integrating asset search activities into the provision of legal services can create challenges.

Determining what the client wants

A critical first step for those seeking an asset search is to formulate a clear goal based on the known facts, and to agree that specific goal with the client.

The goal will usually dictate the strategy, and shape the asset search, in terms of nature, scope, geography, methodology, and cost-effectiveness.

Needless to say, a “plain villa” search in just one jurisdiction will differ hugely in cost and timeframe from a multi-jurisdictional, international effort to unravel complex financial engineering.

Planning how to use the information collected in the asset search process is also crucial to success.

Assets available

A separate consideration will then be to assess what assets may be available, prior to launching inquiries.

Needless to say, many litigants simplistically hope to identify a bank account containing cash equivalent to the debt – and ideally in a jurisdiction with a strong rule of law and responsive court system. Sadly, though, such a find amounts to a rarity in asset searching terms.

Certainly, careful investigations can identify bank accounts, which legal advisors working closely with SVA can then prise open with court orders, or by working with law enforcement. However, such inquiries cannot breach relevant laws and regulations, and, for all that, finding a bank account is sometimes of less use than hoped.

After all, in our experience, large-scale debtors and fraudsters seldom leave large sums ticking away in easily identifiable accounts, but, more astutely, tend to disperse funds into real estate, shares, commodities, and suchlike. It is those assets that generally prove more valuable to clients.

The actual value of these other assets, despite looking good on paper, is a separate consideration. Real estate can be “hollowed out” with debt, for instance; share interests can pose challenges in terms of valuation and liquidity; cash can vanish in a mouse click; and commodities, art and other goods can be sold or shifted at short notice by unscrupulous third parties.

Of further note is that a legal “air gap” in terms of formal ownership may exist, between debtor and asset. It is common to find that debtors place assets under the control of family members, business associates, or shell corporations, to protect the funds.

Intangible assets, such as patents, may be registered to an unknown third party – a frequent challenge in mainland China.

What to take into account

Those clients seeking to use asset searching services, then, need to appreciate that asset searching is a classic case of the “art of the possible”. It is only with careful investigative work that assets can be identified, and attached.

One major misconception is that the process can easily be automated, comprising something akin to a “credit check” by a bank. Some parties seeking assets believe that basic database searches will provide a quick read-out of the assets in question, with a rapid AI sift perhaps leading to easy pickings.

In reality, nothing could be further from the truth. Different property and company registers offer information of widely varying type and quality, while governments in some jurisdictions have enacted rules to deepen opacity. In extreme cases, individuals may bribe officials to remove certain, sensitive documents, so as to make them unavailable.

Fraudsters often alter names and addresses. For instance, Chinese speakers may rely on various systems of transliteration when registering in western jurisdictions, such as Australia, Canada, the EU states, and the US. In doing so, they make drawing connections that much harder for those who cannot speak or read Chinese.

The team performing asset searching, then, must not only collect corporate and property records, but needs also to painstakingly examine documents, cross-check dates, addresses and names, carry out social media analysis, prepare intelligence link charts, assess financial data, conduct field inquiries and suspect interviews, and collect other human source material, amongst other tasks.

Of course, the best results often come from calibrated field inquiries, and the collection of human source material – when built on a firm documentary foundation. Such on-the-ground activities require time and resource, but are crucial to understanding the “real-life” nature of ownership.

Attaching identified assets

Finally, there is the attachment process, which poses its own problems.

After all, those seeking to hide assets routinely shift interests across jurisdictions, often through opaque offshore financial centres. In doing so, they can easily remove evidence of links between the asset and the individual or company in question.

Even where an evidential standard is met, enforcement of rulings can sometimes prove hard. A favourable decision in London, Hong Kong, or New York is always welcome, but enforcement in the Cayman Islands, Bangkok and Taipei poses new problems and delays.

Moreover, enforcement is becoming tougher in the current difficult international political climate. Action across multiple jurisdictions was difficult enough when governments welcomed foreign investment. Now, geopolitical tensions mean that that much more relies on the goodwill of local authorities, and also on how well-connected and respected the investigators are.

Finally, legal advisors should carefully consider timing. An early asset search certainly provides a useful “snapshot”, but insolvencies or frauds often precipitate the movement of funds, or a reorganisation of assets, aimed at evading claims.

In short, much can change. As such, legal advisors working with SVA should consider whether and when to “refresh” findings, as a case proceeds.

SVA’s approach

SVA has a great deal of experience in providing asset search services, and stands ready to assist, as needed, with any of the above.

SVA generally conducts such inquiries on a distinctly phased approach, with the initial phase aimed at “putting our arms around the problem”, and thus identifying the areas that merit most attention.

Thereafter, SVA conducts a second phase of more detailed field or source inquiries, focused on a particular jurisdiction or series of assets, as agreed with the client.

Our experience shows that clients appreciate such an approach, as this system provides a cost-effective means of moving forward, and offers the client tight control over the timeframe and cost.

If you seek such services, please do not hesitate to contact us at the numbers below. We can be of assistance to your organisation in handling these complicated issues.

SVA

SVA (www.stevevickersassociates.com) is a specialist risk mitigation, corporate intelligence and risk consulting company. SVA has a wealth of experience in asset search activities, around the world.

The firm serves financial institutions, private equity funds, corporations, high net-worth individuals and insurance companies and underwriters around the world.

SVA’s staff have a wealth of experience in investigating and dealing with asset searches, litigation support, and fraud and financial crimes.