For many people, “asset tracing” serves as a catch-all description for trying to collect on a debt or legal judgment. However, we have found “asset profiling” to be one of the most beneficial activities in helping companies be more successful in getting monies owed to them.Asset profiling in the pre-litigation stage
Litigation is expensive, hence companies must determine if counterparties have assets that will make the whole exercise worthwhile. Here is where asset profiling can deliver a valuable advantage.The key is to take a holistic approach whereby you connect the dots between people and relationships to understand where assets exist. You must look at a constellation of interests — the people involved with the defendant, both friends and foes; the relationships and links between them; and the activities they have engaged in, either historically or on a current, continuing basis.

To have this intelligence on a counterparty’s assets at an early stage in litigation is especially critical. It lends an element of surprise that a company can use to its advantage to potentially freeze assets before a defendant can hide or shift them.

Looking beyond bank accounts post-litigation
Asset profiling can be equally critical after a company has won its claim and it is time to enforce a judgment. People often only consider the most obvious assets, ie, money in bank accounts. Books and records would normally make this fairly easy to discover, except in jurisdictions where a company cannot examine bank records without a court order, which can be difficult to obtain due to burden-of-proof obligations.

Therefore, accountants are unable to follow the trail of assets, leaving lawyers with no way to determine a legal strategy to successfully enforce payment. In these cases, and especially when dealing in emerging markets, a different skill set is
needed … the investigative, intelligence-gathering skills that Kroll is renowned for.

In order to successfully enforce a judgment, it is imperative that you explore alternative assets.

Examples of alternative assets are an individual’s majority share in a thriving company, or a successful manufacturing company’s long-term accounts receivables. Another alternative is to focus on something that enhances a defendant’s status, something that he would be embarrassed or dismayed to lose, such as ownership in a racehorse or membership in an exclusive country club. The assets might not be valuable enough to fulfill the judgment, but pursuing them may well serve the purpose of getting the defendant to the negotiating table. All of these approaches require a creative mindset and investigative expertise to develop a strategy for gathering the most useful information and intelligence.

Multifaceted intelligence and information-gathering

Once two parties are in a dispute, understanding the behaviour patterns of how defendants may try to make themselves judgment-proof is key to effective asset profiling. Here at Kroll, we have investigated countless schemes where defendants have transferred assets to related parties to avoid paying on debts.

Offshore vehicles may also be used to hold assets, but finding them requires creativity and tenacity. For example, it is not unusual for Asian businesses to set up related companies for convenience’s sake, such as a secretarial service, through offshore vehicles. Examining the public record may uncover the fact that the defendant has a history of using offshore companies to invest in other companies. Isolating the name of the incorporation agent may also lead to the ultimate prize of other investments in offshore entities.

Many companies fail to collect on a debt or judgment because they have too narrow a view on what constitutes an asset. By taking a creative approach that employs international investigative experience, companies may well find that there are indeed significant assets that are not only potentially easier to get hold of, but also take less time and effort to do so.


Tags: Disputes, Due Diligence, Investigations
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