the risk management blog

Asset Tracing

byTom Johnson | June 23, 2014

Financial investigations are a large part of the work that private security firms perform especially when it comes to helping clients protect business and personal financial interests. With all the fraudulent activity, credit problems and indebtedness issues that exist today, investigators have to rely on a combination of strategies to deal with financial risk and debt recovery. Very often investigators begin by conducting an asset trace to gather the necessary details to develop a profile and formulate a course of action.

There are numerous reasons why businesses, insurance companies, attorneys, and individuals hire private firms to conduct an asset trace, including determining if a borrower has the means to pay back a loan, conducting due diligence when entering into a contract or merger/acquisition, in anticipation of litigation, and dealing with compensation issues arising from personal or property injuries.

Whether conducting an asset trace on a business or an individual, the primary goal is to develop useable information to help avoid making a bad financial decision or in the case of loss, collect a debt. Numerous resources exist for uncovering these details, however, it should be noted that there are limitations on what information can legally be accessed by third parties. Despite the fact that information on liquid assets, such as bank accounts, brokerage accounts, and other financial records, is considered private and protected by both state and federal laws, some companies that offer asset traces claim they can obtain this information.

For example, the federal Graham-Leach-Bliley Act, which is also known as the Financial Services Modernization Act of 1999, places certain legal and procedural restrictions on parties attempting to obtain personal or confidential financial information. Some exemptions to this include insurance companies investigating fraudulent or criminal activity and attorneys litigating domestic matters such as divorce and child support cases, however, even in these instances there is court oversight and a subpoena or writ is needed to obtain the information.

Of course, seasoned investigators have other legal means of locating these details and frequently turn to proprietary databases and public records to find court pleadings, exhibits, and bankruptcy filings that may contain this information or have other pertinent leads, so a thorough asset trace should always be grounded in a comprehensive public and database records search.

In addition to searching public records, investigators may also look for any business affiliations or financial relationships involving a subject in order to identify a security interest in a company or other organization. This is most often done by accessing state business registries and vast media databases containing both domestic and international publications.

It should be noted that in addition to searching for tangible assets, it is important to identify other debt obligations like mortgages, financial statements, tax liens, and judgments since this helps determine other creditor relationships and impacts who gets paid first, especially when it comes to collection matters.

Aside from this process, any company or private investigator claiming the ability to obtain information outside the above methods should be approached with caution as they may be utilizing a technique called “pretexting” (obtaining personal information under false pretenses), which is illegal and carries with it both fines and possible imprisonment.

As noted there are various reasons for conducting asset traces and in some instances only a simple property search is required to locate a tract of land, a home or real estate trust, but in other cases it goes far beyond that with the goal being to locate personal property such as boats, planes, cars, and other tangible assets.

An advantage to working with a licensed security company when searching for personal property is that many state agencies such as Departments of Motor Vehicles will grant firms exclusive access to a subject’s records as long as they have a permissible purpose.

The preceding paragraphs have helped define the role of an asset trace in many types of financial investigations and shown why they can help businesses, attorneys, and individuals meet their due diligence requirements, collect an outstanding debt, settle a personal injury case, and resolve divorce and child support matters. It should always be remembered that properly trained and ethical investigators will know how to utilize a broad set of skills to legally uncover information that is critical to avoid making decisions that lead to a “bad deal” or that can help in settling an outstanding debt or court case.