Locating hidden assets: How criminals hide assets and what you can do to find them
Straw ownership is still the preferred method of hiding assets for fraudsters
In the spring of 2018, I was asked to sit in on a probation interview in a gated community in the Phoenix metro area. This was an odd request for a local police officer, so I decided to go. The probationer, a man looking more like Santa than a felon, sat quietly on a dark tan leather couch while his son brought us refreshments. The man on the leather couch didn’t seem scared or nervous to speak with us but was the exact opposite – cool, calm and collected.
After a few minutes of the normal chit-chat, the man on the leather couch turned to his probation officer and said, “Look, guys, you don’t have anything on me. I am retired. I did what I had to do, now it’s done.”
It finally hit me; criminals want to retire, too.
We drove back to a police station to debrief our interview. The man on the leather couch served 10 years in prison for laundering mafia money and was on lifetime supervised probation. He made millions illegally, kept it and retired. Why? Because he strategically used straw owners to hold, hide and manage his assets.
There are two types of straw ownership:
- Legal – a technique used to protect personal and corporate assets;
- Illegal – a technique used to protect personal and corporate assets obtained through illicit or nefarious means.
Using straw owners help conceal the true owners of an asset, which is why white-collar criminals use them.
For police, we want to focus our attention on illegal straw ownership, those straw-owners linked to criminal activity.
Criminals hide assets to:
- Avoid paying taxes;
- Avoid civil forfeiture;
- Avoid apprehension.
It is pretty simple. The man on the leather couch retired with a significant amount of assets because he used straw-owners to hide his assets, making it difficult for criminal investigators to uncover.
Criminals hide assets by using friends, manipulating family, or creating businesses. Luckily for law enforcement, computer-based technology makes uncovering hidden assets easier than ever before.
Before we jump into investigation techniques, remember the trick to straw ownership investigations is understanding that ownership of an asset is significantly different than control of an asset. The goal of any fraudster is to give up ownership of their assets, but keep as much as control as possible.
Hiding assets using friends
Non-seasoned or entry-level organized criminals choose to hide assets using friends. Typically, the friend knows about the scheme but does not care because he gets some benefit from helping. Using friends as straw men, however, is the riskiest since most of the control and the ownership lies with the friend. The friend can easily say, “It’s mine,” and the fraudster wouldn’t have any recourse to reclaim his asset. Since there is no honor among thieves, and because most friendships fall apart, friends are not the best choice for the fraudster.
Hiding assets using family
Hiding assets in family names is a popular technique among mid-level fraudsters. When the fraudster uses family as straw men, he can still give up personal ownership of the asset but has significantly more control over it. It is also a lot easier and quicker to transfer, deed, or title assets in family names. Plus, family are more loyal than friends making it a better choice for the fraudster.
Hiding assets using businesses
Hiding assets in a business name is the preferred method of high-level fraudsters. Not only can the fraudster hide assets, but they can also depreciate, sell, transfer and comingle them to make legitimate money. When fraudsters use businesses to hide assets, they give up all personal ownership but still keep most, if not all, control. This is exactly what the man on the leather couch did.
Investigating straw-owner cases can be tricky, but by remembering that ownership is different than control will start you in the right direction. Find the asset first, then work backward to find out who has the control.
To start straw-ownership investigations, do the following:
1. Conduct old-fashioned police work
Once you identify a possible fraudster, find out who is driving what and who is living where. If a vehicle or home is under someone else’s name, or better yet, a business name, start digging. Ask, yourself why the user of the asset is different than the owner that is listed on the paperwork of the asset.
2. Use software or internet-based systems
You can search for public records of assets using specialized software or internet-based systems. Look for insurance information, deed and title information, related persons or businesses, and past addresses. In the case of the man on the leather couch, he registered his criminal business using an old address from a previous legitimate business. The legitimate business, a car dealership, of course, was owned by his wife even though she never stepped foot on the property.
3. Search police records
The last step of proving ownership is to search police records. Here are a few specific questions to ask yourself during the investigation. You should look for the answers using any of your police records databases:
- Vehicles: Do the police have a record of any traffic stops with the asset (vehicle) in question. If they do, how long ago? Is he still driving the car? Does he pay insurance, was he involved in an accident?
- Homes: Have you been to his house before? If so, how long ago? Does he pay rent and to whom? Does he live there with his family?
Back to the man on the couch
After the statute of limitations passed, investigators found that the man on the leather couch was involved in several vehicle accidents that were linked to straw-owned vehicles. He tilted his home under a fictitious business, his ATVs and boat under a family trust, and most of his accounts were hidden under another fictitious financial company that he created for the sole purpose of hiding money.
Straw ownership is still the preferred method of hiding assets for fraudsters. Thanks to computer-based technology, software and internet-based systems, uncovering these assets is easier. Remember ownership is different than control and always be leery of assets registered in other names.
When a fraud case comes across your desk, stop and remember the man on the leather couch.