Why “human intelligence” is vital to asset monitoring litigation
By Adrian Leppard CBE, former City of London Police Commissioner
Investigations into trade disputes and money laundering primarily focus on evidence that is both publicly available and easily retrievable. However, finding evidence of the truth can be difficult, especially when those motivated to hide the evidence have taken extensive measures to ensure the paper trail turns cold. The records, signatures, and testimonies available to investigators often prove inadequate in trying to ascertain the full facts behind any event or the actual ownership of certain assets.
Human intelligence (HUMINT) can help uncover these facts. It is used extensively by law enforcement agencies through covert surveillance, confidential sources, or undercover officers. HUMINT also serves as a powerful weapon in corporate investigations – to gather evidence from individuals, often through face-to-face conversations, and obviously recorded in a format acceptable for legal proceedings. This can be the “smoking weapon” some cases need to be successful.
HUMINT can be used to support a wide variety of investigative and regulatory needs: litigation and asset recovery, cross-border mergers and acquisitions, high quality Politically Exposed Due Diligence (PEPS), and anti-money laundering and compliance matters.
In litigation, witnesses willing to testify in court always provide evidence in the form of formal written statements. However, in the course of bribery, corruption and money laundering investigations, there are often many people who are aware of the relevant events but fail to bring them forward, often by deliberately withholding them. Human intelligence is an effective method of discovering the truth of these individuals, sometimes through deliberate deception to create an environment in which they are willing to speak openly. The practice must of course be lawfully carried out in each jurisdiction in which it is carried out and carried out in such a way as to ensure the safety of all parties involved.
National laws governing the surveillance and recording of conversations vary widely across the world. Using HUMINT requires comprehensive legal assistance covering both the jurisdiction and the specific tactics used to assist each individual case. This is an expensive but necessary element to ensure the honesty and admissibility of the evidence gathered in legal proceedings.
Gathering evidence this way can be complex and requires skill and patience to find the right people to approach them and then build trust with them. However, the approach is no different from the tactics used by law enforcement officers when tackling organized crime. It is also necessary and proportionate to ascertain the truth behind some corporate deals that can reach billions of dollars. In some parts of the world where bribery and corruption have become endemic and where evidence is not readily available, HUMINT may be the only effective tactic to uncover the truth.
The largest cases of fraud and corruption can often involve lack of assets valued at hundreds of millions, sometimes billions of dollars. In obtaining judgments against frozen assets that need to be enforced, it is not uncommon for court orders to be issued, but often with valuable information about where they are hidden. After trying hard to find them, the path can still reach a dead end unless sophisticated methods of human intelligence are used.
Grisham’s novel “The Firm” may seem fanciful, but depicting a complex web of business units whose sole purpose is to make audit trails difficult to follow is close to the truth. From my past police force and now in the corporate sector, I have seen the forensic challenges of determining exactly who owns what and where. Such asset tracking is expensive, time consuming, and requires significant expertise. Often times it leads to a dead end and shows why traditional desktop research just isn’t enough to uncover the truth.
The historical worldwide lack of corporate beneficial ownership reporting has undoubtedly facilitated this systematic asset hiding and often facilitated tax evasion and money laundering related to organized crime, bribery and corruption. We’ve all had a chance to peer into this dark world thanks to prominent leaks in recent years – the Panama Papers, the Paradise Papers, and most recently the U.S. government’s Financial Crimes Enforcement Network (FinCEN) files, in which 2 U.S. Dollars listed trillions of potentially corrupt transactions that washed through the US financial system. These leaks have helped raise public awareness and create a bigger call to action.
Fortunately, new laws came into force in the EU and the US in January to increase transparency. The fifth EU Anti-Money Laundering Directive (AMLD) requires member states to set up centralized bank account registers that identify account holders, including their ultimate beneficial owners. At the same time, the US Congress passed the Corporate Transparency Act (CTA), which imposes comprehensive reporting obligations on the beneficial owners of most companies founded or operating in the USA.
The new AMLD and CTA specifically focus on eliminating the potential use of Shell companies to hide assets so that all beneficial owners must be captured and disclosed to law enforcement. These changes will inevitably help investigators, but past experience has shown that dishonest people will resort to other means of hiding their assets, such as hiding their assets. B. Trade-based money laundering: the transfer of assets into less suspicious goods to avoid financial transparency regulations.
When examining the most difficult cases, it is particularly difficult to determine real beneficial ownership. When information is not written or recorded in emails, bank accounts, corporate structures, or other documents, HUMINT remains the only viable way to track down assets and gain ownership.
About the author:
Adrian Leppard CBE, former London City Police Commissioner and Head of National Anti-Fraud UK Police, is now a member of Black Cube’s Strategic Advisory Board, which specializes in complex global asset tracing and corporate investigations.