Multi-jurisdictional civil fraud matters often present multiple challenges that make the tracing and recovery of assets a complex, costly, and time-consuming investigative process. Making a fraud victim whole again requires navigating these challenges carefully.

A complex civil fraud matter takes many forms. Examples include Ponzi schemes, securities fraud cases, matrimonial disputes involving stolen funds, and even bankers who steal millions from the accounts of deceased clients. “It could be any fraud where a person is attempting to steal assets,” said Edward Davis, a founding shareholder at Sequor Law.

The real kicker is that a civil fraud matter almost always has a cross-border context to it. “Recovering assets is not at all straightforward, even in an entirely domestic context,” said Christopher Levers, a partner in Ogier’s multi-disciplinary dispute resolution team in the Cayman Islands. “However, it is made all the more difficult when attempting to do so in a cross-border context, as all sorts of challenges arise.”

In a multijurisdictional civil fraud case, fraudsters use all types of tactics to attempt to hide the ownership and location of assets. “This can include the use of trusts, shell companies, offshore accounts, and complex financial transactions,” said Sarah Murray, a partner and head of the commercial litigation practice at Stevens & Bolton.

Often, by the time the fraud victim realizes what has transpired, the asset has been transferred several times and across multiple jurisdictions. This is why it is so crucial to immediately engage with those who have expertise in complex civil fraud cases, including forensic accountants, investigators, and lawyers with expertise in the relevant jurisdictions at issue.

“As a subset of that expertise, corporate intelligence firms can help with providing insights into the financial health, business operations, and asset locations of the entities involved. This can include public records searches or even surveillance, where appropriate,” Levers said. Additionally, it may be necessary to use expert witnesses to explain complex financial transactions and patterns indicative of fraud, he said.

Common challenges

Even the most seasoned investigative teams, however, can bump up against numerous challenges during the investigative process.

Data-gathering challenges. In an age of Big Data, cases often involve wading through an ocean of documents and evidence. “The sheer volume and complexity of these transactions means that, in some cases, it is simply not possible to effectively run a recovery case without using data analytics and digital forensic tools,” Levers said.

Jurisdictional challenges. In the evidence-gathering process, many documents may be located in jurisdictions, each with its own unique legal and procedural regimes. “The disclosure rules and procedures can differ substantially between countries, and these challenges will be made even more difficult with different rules on privilege, confidentiality, and data privacy,” Murray said. She recommended obtaining legal advice from local counsel on the disclosure rules in the relevant jurisdiction.

Heightened secrecy laws. Some jurisdictions’ legal systems protect secrecy more than other jurisdictions. “They are built to stop you from getting the information that you need, which is usually bank account information,” Davis said. That leaves two options: overcome the bias in the system or find another way to get to the funds.

Freezing injunction challenges. “A freezing injunction prevents the respondent from dealing with its assets until judgment can be obtained or enforced,” Murray said. All types of assets can be frozen: bank accounts, shares, digital assets, and land. “This can be a very useful tool in support of fraud proceedings, but in a cross-jurisdictional scenario, it is only useful if it is enforceable in the jurisdiction where the assets are located,” Murray stressed. “This emphasizes the need to do the groundwork at the start to identify where the assets are located and what the legal regime is in the relevant country.”

Enforcement challenges. Assuming that assets can be located and frozen, and assuming the fraud victim succeeds at trial, the presence of assets in other jurisdictions can also give rise to enforcement questions. “For example, will the jurisdiction where the assets are located recognize and enforce the judgment obtained in the domestic courts?” Levers said.

Witness challenges. Failing to find witnesses willing to come forward or those willing to assist can create evidentiary challenges as in complex civil fraud claims, “which may mean that you need to rely more on the documentary evidence,” Levers said. This is particularly the case for establishing the fraudster’s intent, “which at the best of times is not always straightforward,” he said.

Witness credibility may be another challenge, particularly if the witness may be implicated in the alleged wrongdoing, Murray noted. “Documentary evidence therefore still tends to be critical in these cases, and it is always necessary to test the veracity of witness evidence against objective facts proved independently of the witness evidence,” she said.

Practical solutions

As described above, fraudsters use many discreet tactics to hide stolen assets. If those stolen assets are in jurisdictions friendly to secrecy, this can make asset tracing and recovery especially difficult. However, many best practices can be implemented to help get ahead of fraudsters and make victims whole again.

Assemble a multidisciplinary team with the necessary skill sets. This team should be made up of lawyers from relevant jurisdictions, forensic accountants, corporate intelligence specialists, and technology experts. “In the offshore world, we often have to work as part of a coordinated team to ensure that injunctions are obtained in the right jurisdictions in the right order to ensure that all avenues available to the fraudster are closed off,” Levers said. Team members should regularly and effectively communicate with one another and with the client.

Identify at the outset of a matter the relevant jurisdictions. From there, develop a comprehensive strategy that considers all potential legal and jurisdictional hurdles. “Ensure the strategy is adaptable to new information and developments,” Levers advised.

Select the most advantageous venue. When engaging in venue selection, one factor to consider is whether the jurisdiction where the assets are based will enforce a judgment from another jurisdiction, and how easy or difficult that will be, Murray said. Another consideration is how easy it will be to move assets. “It may be helpful to choose a venue close to where the assets are located,” Murray continued. “This may simplify the legal process and reduce costs. However, assets can quickly be moved across borders, and in such cases, it may be necessary to change venues.”

Acquire an injunction as quickly as possible. Timing is everything when identifying and preserving assets for recovery to avoid tipping off the fraudster that the injunction is coming. Always consider what the defendant’s reactive steps might be, as it could have implications on the location of assets, Murray said. “Practitioners need to be one step ahead to avoid any further dissipation of assets,” she said.

Use all tools available. Overcoming evidentiary challenges “requires a careful approach to evidence gathering, including using electronic discovery tools,” Levers said. In some cases, it may be necessary to use artificial intelligence to assist with large volumes of document review.

What’s key in a multi-jurisdictional civil fraud case is using all the resources at your fingertips – local expertise, legal mechanisms, and possibly help from regulators, authorities, and insurance agencies. Finally, consider any relevant limitation periods to avoid being caught up with time-barred claims.