Asset tracing a beginners guide - - PowerPoint PPT Presentation

Asset tracing – a beginner’s guide

• www.ballamy.co.uk

It is the process of identifying assets which represent those which were initially misappropriated as a result of fraud. What is asset tracing?

the rules of common law (which recognises legal title) the rules of equity (which recognises beneficial interests) English law contains two sets of rules:

Perpetrators Accessories Recipients of the proceeds of fraud Who may a victim of fraud sue?

Electronic payments Mixed funds Limitations of tracing money at common law

• it was the victim’s money to start with, and
• the defendant received the same money.

Tracing money in equity I

the mixed fund rule the rule in Re Hallett’s Estate the rule in Re Oatway the lowest intermediate balance rule the overdraft rule the rule in Clayton’s case Tracing money in equity II

£100 Day 1 Victim’s bank account

Straightforward transaction

Fraudster’s bank account

£100 Day 1

Mixed fund

Victim’s bank account Fraudster’s bank account £80 £70 £50

£100 £50 Day 1 Day 3

Re Hallett’s

Day 2 £70 – Living Expenses £80 – Asset Victim’s bank account Fraudster’s bank account

£100 £50 Day 1 Day 3

Re Oatway

Day 2 £70 – Living Expenses £80 – Asset Victim’s bank account Fraudster’s bank account

£100 Day 1

The lowest intermediate balance rule

Day 2 £70 – Living Expenses

£50 £50

Victim’s bank account Fraudster’s bank account Day 4 £110 – Asset £30

£30 £100 £50

Fraudster’s own money Day 3 £50 £100 £30

Day 1

The Overdraft Rule

Fraudster’s bank account £50 Overdrawn Day 3 Victim’s bank account £100 Fraudster’s own money Day 2 £30 £80 – Asset

Victim 1 Victim 1 - £100 £100 £50

Rule in Clayton’s case I

£20 £40 Victim 2 Victim 3 Victim 4 Victim 2 - £50 Victim 3 - £20 Victim 4 - £40 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 £70 – Living Expenses £100 – Asset £40 – Living Expenses Fraudster’s bank account Total Victims’ bank accounts £210

Victim 1 = £30 Victim 2 = £50 Victim 3 = £20 Victim 4 = £0 Total = £100

Victim 1 Victim 1 - £100 £100 £50

Rule in Clayton’s case II

£20 £40 Victim 2 Victim 3 Victim 4 Victim 2 - £50 Victim 3 - £20 Victim 4 - £40 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 £70 – Living Expenses £100 – Asset £40 – Living Expenses Fraudster’s bank account Total

Victim 1 = £0 Victim 2 = £40 Victim 3 = £20 Victim 4 = £40 Total = £100

Victims’ bank accounts £210

• The sequence of transactions
• Pre-existing credit balances
• Clearance of overdrawn balances
• Amalgamation of balances
• Certificates of deposit
• Continuing evolution
• Clarity is crucial
• Hawala

Some further considerations

…speedy and effective interaction between lawyers and forensic accountants is vital to

• btain promptly banking documents which evidence

the onward payments of trust money ensure that freezing and restraint orders are

• btained at the earliest possible opportunity

and finally…