Investigating Fraud: The Considerations and Process

What critical strategic considerations are essential for success in a complex fraud investigation or asset recovery?

1. Where is the documentation/information I need?

Understanding where documentation is held, what form it is in, the ability to acquire it (whether provided at source, for example, in internal investigations, or if it has to be obtained through legal discovery tools) and being cognizant of the data protection laws of certain jurisdictions, are initial key considerations.

Complex frauds are often multi-jurisdictional, understanding international legal remedies is key in determining a successful strategy.

2. Where are the assets?

Getting reliable and usable information about where the assets are, is key if the investigation is likely to result in successful asset recovery. Whilst an entity (corporation or trust) that is the focus of a fraud investigation may be incorporated in the Cayman Islands, it is unlikely that any assets derived from fraud will actually exist here. There is no use pursuing causes of action and incurring the time and expense of those proceedings (including the risk of adverse costs being order against you) if you are not ultimately pursuing a recovery, particularly in complex multi-jurisdictional cases.

3. Are these in jurisdictions where there are robust legal remedies in place?

Complex frauds are often multi-jurisdictional, understanding international legal remedies is key in determining a successful strategy. We have heard many times from litigants pursuing claims (and maybe even having successful judgements) that they made no recoveries of assets. Too often we hear stories of wasted money and time spent pursuing a remedy that was not viable, or worse obtaining a judgement but failing to bring in a recovery. It is critical, therefore, that you do some research upfront to ensure those advising you, particularly offshore, have the relevant knowledge and experience to get you the best result. We use a range of remedies depending on the most efficient route to recovery. For example, we may use insolvency tools if there is debt owed, and in some fraud causes it may be possible to obtain a winding-up or receivership of a legal entity which could provide additional discovery powers regarding its assets, and possibly additional causes of action to be pursued.

 The main difference will arise between civil law and common law jurisdictions; it can be more problematic to obtain discovery in civil law jurisdictions.

When undertaking cross-border investigations and asset recovery, how can processes differ across jurisdictions? What misconceptions and assumptions are often made about the ability to recover onshore and offshore?

One of the main challenges in complex financial investigations and asset recovery cases is their multi-jurisdictional nature. In cases where it is discovered that the perpetrators have used offshore corporate vehicles to conceal their proceeds of fraud, a common belief is that with bank secrecy and there being little public information available, there are few options to investigate the fraud and recover the assets. However, whilst the means in which to obtain information and pursue assets will differ, the reality is that many principles in obtaining information to assist in investigations or asset recovery apply equally in offshore jurisdictions as they do onshore, particularly in common law jurisdictions such as Canada, Australia, Ireland, Scotland, Hong Kong, Cayman Islands, the Bahamas, British Virgin Islands, the Channel Islands, and Gibraltar, just to name a few.

Therefore, obtaining disclosure from third parties through the Courts e.g. Norwich Pharmacal, or Bankers Trust Orders, are widely available and often used, making it possible to obtain details of bank accounts and assets from banks, auditors, and registered agents, (all of which should hold detailed KYC information on clients) which may be critical to the investigatory and asset tracing process.

The main difference will arise between civil law and common law jurisdictions; it can be more problematic to obtain discovery in civil law jurisdictions. However victims in civil law countries are not left without remedies, and assumptions about what can and cannot be done often occurs where there is a lack of experience in international asset recovery. We ensure we work with experienced local counsel to navigate the most effective and expeditious path to asset recovery.

We may reveal hidden files, recover deleted files, uncover timelines and other relationships among documents and communications and indeed this has often been the case when the perception was that the information had been deleted and was no longer available.

How does digital forensics and e-discovery tools help you and your clients in this line of work?

Using forensic software and other tools, we apply investigative and analytical techniques to examine digital devices in order to identify, preserve, recover, and analyse data for evidence or other relevant material. We follow industry standards to capture and present this information in a forensically sound manner which can then be used in a Court of law.

We may reveal hidden files, recover deleted files, uncover timelines and other relationships among documents and communications and indeed this has often been the case when the perception was that the information had been deleted and was no longer available. For example, in a recent money laundering and corruption case, we were able to forensically image mobile phone data to recover deleted messages and texts so that we could identify key persons and the level of involvement/knowledge in the fraud.

We often use e-discovery tools whereby through a series of complex processes, data is loaded into a platform where it is organised, and displayed in a manner where we may search, review, and analyse it. The data may be the result of a legal hold, in response to a request for production, or part of an investigation, and may include emails, stand-alone documents like Word and Excel, instant messages, calendars, and social media. Regardless of the format, the content, or the source of the materials, eDiscovery professionals and technology provide us with the ability find the needle in a haystack, quickly, accurately, and cost effectively. For example, I worked with a client whose legal counsel had obtained documentation in support of a corruption and money laundering investigation and was seeking to obtain a worldwide freezing order on a defendant. Fortunately the information had already been uploaded onto our e-discovery platform when we were first engaged to seize and image the data around 18 months prior. Within 48 hours we identified the transfer of millions of dollars from a construction project into the personal bank account of the individual concerned.

What differentiates you and your firm’s approach to financial investigations and asset recovery cases?

First is our hands-on approach. Our firm is markedly different in that we are heavy at the senior level, so each assignment is led and has the integral involvement of a senior member of staff. We do not delegate to junior staff the responsibility of the project. Nor do our senior team members only “front and end” the assignment; they are there step by step, and this allows us to be nimble and creative in addressing issues.

The second is our independence, we are focused on the client’s interests, and not from a prospective audit or tax relationship, which also means we very rarely have conflicts of interests. We are proud of the diversity in our team which includes a wide range of professional expertise, including asset tracing and verification, forensic accounting, insolvency practitioners, former law enforcement and IT forensic experts; having a multi-disciplinary team with experience in a wide range of recovery mechanisms, empowers independence and free-thinking that enables a truly practical approach for our client’s needs.

Thirdly, whilst we incorporate the assimilation of publicly available information as part of our methodology for identifying targets for asset recovery, KRyS Global differentiates itself from other firms in our knowledge, and use discovery tools and on the ground intelligence gathering, to find critical information outside the scope of our peers. We have unrivalled expertise in locating and recovering hidden assets in offshore jurisdictions, and understand that asset recovery is not just the acquisition and analysis of information and assets through technical expertise, but in implementing a considered but creative strategy in conjunction with legal counsel in criminal, civil or commercial dispute proceedings.

Angela Barkhouse

Director

Angela.barkhouse@krys-global.com

+1 (345) 947 4700

Angela Barkhouse is Managing Director at Krys Global, an international asset recovery firm with an expertise in offshore focused fraud investigations, cross-border insolvency and restructurings, and dispute resolution and litigation support. The firm has grown to over 50 outstanding professionals working from eight offices worldwide, predominantly situated in offshore financial centres; she leads the Cayman Island office.

Angela has over 15 years of professional experience consulting with governments, law firms, banks, corporations and NGO’s in investigating financial fraud, bribery, corruption, conflicts of interest, embezzlement, stolen sovereign wealth, and making cross-border asset recoveries, having assisted in a broad range of investigations using criminal, civil and insolvency mechanisms to provide practical solutions in ascertaining the facts and repatriating stolen assets.