Hiding Assets With A Plastic Spending Account
Posted on Wednesday, June 21, 2017
When a bankruptcy or divorce case involves embezzlement, fraud, defalcation or hidden assets, the most difficult item to trace is cash. It's fungible and leaves no record of ownership or transfer if kept outside of the banking system. Few of us keep track of the serial numbers on our currency.
However, cash is useless unless it can be spent. Thus, the perpetrator is faced with a significant problem - how to convert cash to economic benefit without leaving a traceable trail. In large-scale and sophisticated schemes, there may be offshore accounts, multi-layered wire transfers, dummy corporations, and elaborate money laundering schemes to convert ill-gotten gains into disposable income.
For the most part, though, it's typical to encounter more "vanilla" sorts of crimes. Money orders are easy to obtain, require no substantial identification, and are readily negotiable. However, it's inconvenient to utilize them as currency and unwieldy to maintain a significant amount of funds (many have expiration dates, as well). Credit card companies, on the other hand, are quite accustomed to receiving payments on accounts in the form of money orders.
Therein lies the solution for some perpetrators: Overpay a credit card account. The account will then carry a credit balance from which future charges will be deducted.
A lazy (and not-too-bright) perpetrator uses an existing credit card for this scheme. More sophisticated people apply for new credit cards - perhaps in a fictitious name.
To uncover this ploy, a credit report must be obtained and all credit inquiries traced to determine if they represent the issuance of a new card. Additionally, the appearance of recently-acquired assets, trips, vacations and other items must be traced to discover the source of payment.
Requests for discovery of invoices associated with these assets are essential to this effort and the failure to produce them is a red flag. Once credit cards have been identified, all transaction records must be obtained from the issuer. Examining these reveals if overpayments have occurred and also identifies transactions that may point to other unreported assets. For example, payment of utility bills with the credit card should be traced as it could lead to the existence of unknown real estate.
When your case involves fraud, defalcation, embezzlement or hiding assets in a divorce or bankruptcy situation, or other incidents of financial wrongdoing, turn to forensic accountants who are financial investigators who know how to follow the cash.
Posted in Fraud & Forensics Group
Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.