Subpoenas: Second Stage of an Asset Search
Subpoenas are an important tool for identifying assets in support of judgment enforcement, civil litigation, divorce proceedings and post-fraud recovery.
When embarking on this stage of an asset search, it is important to understand where to look, what to ask for, and how to use the information obtained.
Subpoenas for records – also known as subpoenas duces tecum – are used to gather account information and transactional details from financial institutions and other sources. They do not require the recipient to appear and testify in court, unlike witness subpoenas (subpoenas ad testificandum).
This forensic guide reflects the perspective of an expert financial investigator with insights for judgment creditors and legal counsel on using subpoenas to maximize the results of an asset search investigation and related due diligence. It is not meant to convey legal advice. Any party wishing to draft or serve a subpoena should first consult an attorney.
Where to Send Them: Identifying Banks and Brokerage Firms
To begin preparing the roadmap – an initial list of suitable targets for subpoenas – relevant information on the debtors’ relationships with financial institutions should be compiled from details developed during litigation and prior discovery. However, such sources may be outdated and limited in value. Post-judgment interrogatories and debtor examinations can also be pursued, although this direct approach – asking the debtor to declare where they’ve hidden their money – is, unsurprisingly, not always fruitful and can potentially be counterproductive. Many litigants will empty and close accounts after they have been disclosed or discovered during court proceedings.
To identify current accounts, it may be necessary to retain an investigator to conduct an asset search. Locating financial institutions where debtors and defendants maintain open accounts is a primary objective for asset investigations in support of judgment collection, fraud recovery and related matters.
In best-case scenarios, an asset investigation will identify well-funded accounts with balances sufficient to satisfy the judgment – which can be followed immediately by bank levies or garnishments to claim the funds. Yet even the most diligent asset searches do not always provide instant gratification, especially when seeking to enforce large judgments of more than a million dollars. It is relatively rare for defendants in high-stakes litigation to keep all their assets in personal deposit accounts under their own names, susceptible to seizure.
Debtors with serious legal and financial liabilities often take steps to conceal, remove or transfer funds from their own accounts in an effort to place those assets beyond the immediate reach of creditors. Personal assets might be transferred to family trusts, business entities and family members; deposited in foreign banks and offshore havens; or invested in opaque sectors such as hedge funds, private equity and cryptocurrency markets. In such cases, subpoenas are used to obtain details on transactional history in order to trace the movement of funds from known accounts – based on the initial roadmap – and determine the ultimate destination and disposition of transferred assets.
What to Ask For: Scope of Record Requests for Financial Institutions
Subpoenas served on banks, brokerage firms and mutual fund companies generally include requests for identification of all accounts (active and inactive) for which the subject is a registered owner, accountholder, beneficiary, trustee, fiduciary, executor, guardian or applicant. They should include all additional accounts for which the subject has had signatory authority or right of withdrawal, including accounts of any other entity in which the subject may have a financial interest. Subpoenas might be served independently or in conjunction with levies, garnishments or court orders.
Basic requested details in a subpoena can include:
Account type;
Account balance;
Accountholder name(s);
Opening date;
Address of opening branch;
Account status; and
Date of last activity.
Subpoenas are also used to demand production of copies (preferably electronic copies) of pertinent account documents, such as:
Account statements for a minimum of 24 months;
Copies of original account applications and supporting documentation, including copies of tax returns, statements of net worth, etc.
Records of all communications with the accountholder(s);
Safe deposit box numbers and minutes reflecting dates of entry or access, etc.;
Credit records;
Internal communications regarding suspicious activity on accounts;
Compliance records related to Anti-Money Laundering (AML), Bank Secrecy Act (BSA), Know Your Customer (KYC), sanctions and risk assessments, including internal communications, investigations, reports, notes, memoranda and supporting documents.
All other documents reflecting the source and/or destination of funds, including:
ACH slips
Wire transfer receipts and confirmations
Copies of personal, business and cashier’s checks
Copies of money orders
Credit card authorizations
Internal/external account transfers
Authorized third-party application (e.g., Zelle) transactions, etc.
The date range of requested records and account information can be specified within the subpoena. It should extend back to the period when the defendant/debtor first received notice of a potential claim by the plaintiff/creditor, which might have triggered substantial transfers of assets.
There may be limits to availability of historical banking records. National banks, federal savings associations, and domestic branches of foreign banks regulated by the Office of the Comptroller of the Currency (OCC) are generally required to maintain records for at least five years for most deposits and transactions over $100. Broker-dealers are required to retain blotters (records containing details on purchases and sales of securities) for at least six years, but they are only required to maintain trade confirmations for three years. Many banks and brokerage firms have longer record retention periods, depending on the policy of the institution.
How to Use the Records Obtained: Forensic Analysis of Transactional History
Information produced under subpoena from banks and brokerage firms can contain valuable insights for collection purposes – if you know what to look for.
From an investigative standpoint, extra scrutiny should be given to:
Large, round-dollar transfers to external accounts
Recurring cash withdrawals
Sweep activity
Cross-border transactions
Banking and financial services fees paid to other institutions
Life insurance premium payments
Cryptocurrency exchange transactions
Major purchases of luxury goods
Mortgage, loan, lease and tax payments
Dividends, interest and related earnings
Payments for safe deposit boxes
Rental fees for self-storage units
Further analysis of these findings, in turn, can establish the existence of:
Additional bank accounts
Brokerage and investment portfolios
Life insurance with cash redemption value (whole life policies)
Limited partnership interests
So-called “silent” partnerships
Off-the-books employment
Alternative income sources
Personal and family trusts
Direct ownership of real property and tangible assets (titled to subject)
Indirect ownership of real property and tangible assets (titled under another name)
Fraudulent conveyances to family members, shell companies, etc.
Relationships with other financial institutions (and future subpoena targets)
Foreign business interests
Cryptocurrency and decentralized finance (DeFi) investments
Acquisition of precious metals, bullion, jewelry
Cash holdings in safe deposit boxes
Overseas and offshore accounts
Depending on the circumstances and scope of the subpoenas, responses from financial institutions could be voluminous. They will require time and resources to properly review.
Subpoenaed documents can later be introduced in court to confirm relevant accounts or transfers that have been disputed or denied by the opposing side. A common scenario is seen in divorce proceedings when one of the spouses fails to fully disclose their assets on personal financial statements submitted to the court. Account statements obtained under subpoena are often the best form of documentary evidence for proving the existence of undisclosed assets and establishing bad faith by the other side.
An asset search report by a reliable investigator might contain the same information – down to the dollar of a checking account balance – but the opposing side might seek to sow confusion and uncertainty by summoning the investigator for testimony, impugning the messenger and their methods. The contents of an asset search report could be assailed as hearsay, particularly if the banking details were developed through external sources. For these reasons, subpoenas are recommended for confirmation of account information contained in investigative work product and reports, particularly if that information will be introduced as evidence.
Expanding Beyond the Basics: Closed, Credit & Exempt Accounts
A common mistake during collection efforts is to disregard known accounts that are closed or contain only nominal balances. Even if a bank or brokerage account no longer contains a significant amount of money, reviewing records of past transactional activity can still prove useful for collection purposes.
Ignoring debts can also be a strategic mistake when it comes to collections. Subpoenaing account statements and applications from mortgages, credit lines, leases and loans could reveal additional accounts and payment sources used for the benefit of the debtor – which might constitute recoverable assets, even if they are not formally titled to the debtor.
Certain defendants/debtors conceal (or fraudulently convey) nearly all of their personal assets, so that they appear, on paper, to no longer have enough money to support basic sustenance. Yet some of these same individuals drive luxury vehicles and reside in penthouse apartments or multi-million-dollar mansions. There are obvious questions to ask in these circumstances:
What person – or what entity – pays the rent? (Subpoena the landlord.)
What person – or what entity – pays the mortgage? (Subpoena the lender.)
What person – or what entity – pays the utility bills? (Subpoena utility providers.)
What person – or what entity – pays the car loan/lease? (Subpoena lienholder/lessor.)
What person – or what entity – pays other personal expenses? (Subpoena the credit card issuer.)
If the defendant/debtor can be shown to be a beneficial owner of money or other personal property – enjoying the benefits of ownership, though the title is held under another name – those assets may be subject to levy by a judgment creditor, pending approval by the court.
Certain types of accounts are generally exempt from collection by creditors, including 401(k), IRA and other retirement accounts. Such exemptions are governed by state law. Yet even if accounts cannot be levied, they can still be valuable sources of information. Subpoenas served on the custodians or financial service providers for retirement accounts might yield leads to other assets, accounts and income sources that are not similarly exempted. Also, once a retirement plan begins to pay out, creditors are generally free to pursue the disbursed funds.
The Next Frontier: Subpoenas of Cryptocurrency Exchanges
Proprietary investigative tools have been developed to identify accounts held by debtors at cryptocurrency exchanges such as Coinbase and Binance, allowing creditors to substantially expand their subpoena “roadmap” beyond the traditional basics of banks and brokerage firms. More than 20 percent of U.S. adults have owned cryptocurrency and digital tokens, according to published estimates, making the multi-trillion-dollar cryptocurrency market increasingly relevant to collection efforts. For more information on this topic, read for our forthcoming article on Locating Digital Assets and Enforcing Judgments with Cryptocurrency Collections.
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.