How Do People Hide Assets?
Finding concealed assets rarely requires
a private plane to the Caymans.
Most money is hidden closer to home.
People hide money and income to evade creditors, dodge judgments, avoid taxes and conceal criminal activity. Hiding assets can be accomplished in all sorts of ways, ranging from the simplest methods – such as hoarding cash at home – to complex global schemes involving corporate shells, offshore banks and certified accountants.
These are the most common ways to hide assets:
Special Purpose Entities and Shell Companies
Family, Friends and Associates
Trusts
Real Estate
Cash Reserves
Cryptocurrency and Digital Assets
Foreign and Offshore Accounts
Private Equity and Hedge Funds
Payment Apps (Zelle, Venmo, CashApp)
Safe Deposit Boxes
Cars, Planes and Yachts
Custodial Accounts for Minor Children
Deferring Compensation, Commissions or Bonuses
Delaying Accounts Receivable and Business Invoices
Intentional Tax Overpayment
Prepaid Debit Cards
Gold Coins, Bullion Bars and Precious Metals
Fine Art and Antiquities
Jewelry and Diamonds
Luxury and Designer Goods
Being aware of the most common methods of asset concealment can help creditors and legal claimants become more effective at collecting debts and enforcing judgments. When leading an asset investigation, it is important to search for all assets beneficially owned by the subject, even if those assets are not formally registered under the debtor’s name.
Below is a discussion of the most common places and methods to hide assets – and how they can be uncovered through diligent research.
Business Entities and Shell Companies
Special purpose entities and corporate shells can be easily established to hold assets and accounts. Enhanced privacy and tax advantages can be found by forming companies in business-friendly states like Delaware, Nevada, New Mexico and Wyoming, where it is possible to create and control a limited liability company without disclosing the owner’s name in public records or corporate registries. Investment interests can also be disguised in closely held businesses through silent partnerships and off-book arrangements.
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Are the subject’s known salary, wages and investments sufficient to support their lifestyle? Or do their personal expenses seem to consistently outweigh their net assets and extent of consumer debt? If their behavioral pattern does not match their financial profile, there might be alternate sources of earnings and income. A more intensive search for undisclosed business interests may be merited, even if the subject’s name does not appear in corporate records as an owner, officer or director of any company.
Family and Friends
Transferring assets to a relative or associate is a common strategy for concealing funds. This may involve placing funds in their hands for temporary safekeeping with expectation of full repayment at a later date. It can also entail piggybacking on their bank accounts and freely using their debit cards, checks and cash withdrawals. Non-liquid assets such as luxury vehicles may also be newly titled or transferred to a family member without any change in possession.
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If the utility accounts and mortgage for the subject’s residence are registered under the name of his son, daughter or spouse, then that’s probably the name on his bank accounts.
Comparing expenditures against known sources of funds is one method of circumstantially proving the existence of concealed assets or undisclosed income. Another way to approach the matter is to identify all assets acquired over the past two or more years, to determine if their total value exceeds the subject’s reported income for that period.
Trusts
Asset protection trusts are legal devices for wealth preservation, which can be used to keep money within a family while placing it beyond the reach of creditors. Trusts are created and governed by the terms of their trust agreements, which are private legal documents that do not need to be recorded with any public agency. The non-transparency of trusts makes them ideal instruments for concealing assets.
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There are many specialized types of trusts – bypass trusts, totten trusts, pour-over trusts, etc. – but a key consideration for creditors is whether a debtor’s trust is revocable or irrevocable.
An irrevocable trust removes assets from legal ownership by the person who forms the trust (variously known as its trustor, settlor, grantor or donor), placing those assets under the control of a manager (trustee), who administers them on behalf of a designated party (beneficiary). Irrevocable trusts cannot be changed or terminated without the beneficiary’s consent or court order. They generally have their own tax identification numbers and are considered legally distinct and independent from their original funder. The trust’s assets are generally protected from direct seizure by creditors seeking to settle debts of the trustor. However, distributions and disbursements of trust funds represent income that can be garnished to satisfy debts of the trust's beneficiaries.
A revocable trust can be formed, funded and controlled by its beneficiary. Revocable trust assets remain part of the personal estate of the trustor, and are therefore susceptible to being seized by creditors to pay that person’s debts.
Cryptocurrency
Virtual currencies like Bitcoin were first popularized a decade ago by illicit actors in online black markets and money laundering rings, due to its perceived privacy and the speed and ease in which funds could be moved across borders without relying on banks. Cryptocurrency eventually exploded into the mainstream to become a $3 trillion market at its peak in 2021, before suffering a series of setbacks, bankruptcies and high-profile fraud convictions. More than 20 percent of U.S. adults – predominately high-income earners – have owned, sold or traded cryptocurrency and digital tokens, according to published estimates. Today, it is not uncommon to encounter suspicions and allegations of undisclosed virtual assets in all manner of financial disputes, including contested divorce proceedings.
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Popular cryptocurrencies like Bitcoin have earned a false reputation for being wholly anonymous, leading many to wrongly assume that debtors who convert their dollars to digital assets have managed to move their personal assets beyond the realm of courts and creditors.
Cryptocurrency is semi-anonymous, or pseudonymous: certain transactional details are publicly viewable on open-source blockchains, but the identity of the counterparties are expressed solely as long alphanumeric sequences known as ‘addresses.’ Deciphering coded entries on a blockchain – and turning them into actionable intelligence for a lawsuit or judgment – requires specialized resources for cryptocurrency forensic investigations, in addition to subpoenas and traditional tools of legal discovery. The feasibility of financial recovery often depends on the technical sophistication of the parties involved, the extent of their laundering activities, and the foreign jurisdictions in which they are operating.
Real Estate
Real estate investments can be structured using companies, trusts and close associates to allow the true beneficial owner to enjoy all the financial and practical benefits of owning a property, without publicly disclosing their interests.
This is commonly accomplished using a special purpose entity or single purpose entity (SPE) – also known as a special purpose vehicle (SPV) – a legal entity formed to acquire, finance and hold a specific investment. Beyond their potential for concealing direct ownership, SPEs and SPVs have an added benefit of isolating liabilities associated with those investments, mitigating the owner’s legal and financial risks.
SPEs are generally formed as a limited liability company (LLC) or limited partnership (LP). Several states do not require public disclosure of the ultimate beneficial owners of such entities, requiring only the names of their managers or general partners to be listed in corporate filings.
A cash purchase – which refers to any property bought without financing – can be particularly advantageous for anonymous investments. When the buyer does not require a mortgage, there is no due diligence conducted by a bank or lender for underwriting purposes. This means relatively few, if any, questions will be raised regarding the source of funds. In competitive markets, it is not altogether uncommon for properties to be bought sight unseen, which means brokers might have never personally met the buyer for a long-distance transaction.
Regulatory concerns about money laundering in the real estate market have prompted calls for new rules from the Financial Crimes Enforcement Network (FinCEN), which would require title companies to disclose the true identities of individuals using trusts and corporate shells to purchase property.
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Although the real estate market is structured to accommodate the privacy and whims of well-financed investors, there are many areas susceptible to ‘leakage’ of ownership information, even if the owners have been careful to exclude their personal names from title and transfer documents.
Potential sources include utility accounts, tax receipts, tax appeals, building permits, mortgage filings, co-op agreements, homeowners’ associations, secured financing statements, litigation and liens. A diligent asset search can develop many relevant details that are not listed on the sales deed.
Foreign and Offshore Accounts
Despite their money laundering mystique, offshore bank accounts can be easily opened and maintained online. With increased access to global electronic banking and international electronic funds transfer (EFT), offshore accountholders rarely need to travel farther than the nearest desktop browser to move funds efficiently across borders.
Low-cost service providers in pass-through economies such as Hong Kong, Bermuda and the British Virgin Islands offer inexpensive formation of shell companies, mail forwarding, and related services that can be used to create and maintain offshore entities. Special-purpose entities that control offshore accounts are potential vehicles for concealing assets from creditors and tax authorities. In certain jurisdictions, nominee services ‘rent’ the name of local citizens to be listed in corporate filings as company directors, in place of the foreign investors who actually control and own the entities.
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A search for offshore accounts and foreign holdings can be warranted in asset investigations of high-net-worth families, financially sophisticated investors and multinational companies. Yet most money is hidden closer to home, particularly in the U.S., where certain states provide business owners with significant legal protections for financial anonymity and privacy.
It is recommended to initially search for assets in the country where the debtor resides, particularly if that is the same country where the creditor's claim originated and/or judgment was entered. During the initial research, careful consideration should be given to any leads pointing toward potential assets in specific foreign jurisdictions. Such leads can include subpoenaed bank records showing transfers to/from foreign banks, or domestic property owned by an offshore entity, etc. Once the initial phase of investigation is complete, the global asset search can then be expanded to pursue assets overseas. This approach helps control costs at the outset with a more efficient, evidence-driven strategy — which is preferable to attempting an overly broad “worldwide” investigation without a clear roadmap of relevant countries.
Consult an Investigator
Hudson Intelligence conducts asset searches for law firms, businesses, investors and public agencies. Investigations are conducted by our staff of Certified Fraud Examiners and Cryptocurrency Tracing Certified Examiners. If you would like to discuss a potential investigation, please complete the form below.