MAKING CRIME PAY: HOW TO LOCATE HIDDEN ASSETS (NO. 98-5403)
TABLE OF CONTENTS I. INTRODUCTION About This Course...1 II. SECRET MONEY What Is Secret Money?...2 What Is the Underground Economy?...2 Escaping Taxation...3 Escaping Regulation...4 Escaping Prohibition...4 Corruption...4 What are the Vehicles of Secret Money?...4 Why is There a Demand for Secret Money?...5 International Undercover Activities and Secret Money...6 Insider Trading and Secret Money...7 Money Laundering and Secret Money...7 Tax Evasion and Secret Money...10 Review Questions...12 III. BEGINNING THE INVESTIGATION Lifestyle Indicators...18 Personal Characteristics...19 Lodging...19 Transportation...19 Leisure Activities...19 Financial Analysis...19 Vertical Analysis...20 Horizontal Analysis...21 Ratio Analysis...22 Profiles...23 The Personal Profile...23 Business Profile...30 Review Questions...36 IV. LOCATING ASSETS USING DIRECT METHODS On-Book Schemes...39 Three Types of On-Book Schemes...39 Tracing Suspected Illegal Payments...42 Off-Book Currency Schemes...44 Identifying the Source of Funds...45 Using an Inside Witness...46 Focusing on the Point of Receipt...46 i
IV. LOCATING ASSETS USING DIRECT METHODS (CONT.) Analyzing Bank Records...46 Types of Banks...47 Internal Bookkeeping Procedures...47 Retention of Records...47 Bank Documents to Be Examined...48 Obtaining Bank Records...59 Tracing Bank Transactions...61 Depositor...63 Deposit Ticket...63 Transit Items...63 On-Us...63 How to Investigate Bank Records...64 Gaining Access to Records by Financial Institution...69 Review Questions...72 V. LOCATING ASSETS USING INDIRECT METHODS Net Worth Analysis Method...75 Computing the Net Worth...76 Establish a Starting Point...77 Compute the Subject s Net Worth for Years One and Two...77 Compute the Subject s Net Worth...78 Subtract the Prior Year s Net Worth...78 Determine the Subject s Expenses...79 Determine the Amount of Income from Unknown Sources...79 Sources and Application of Funds (the Expenditures Method)...80 Computing the Sources and Application of Funds 80 Establish the Subject s Known Expenditures for the Relevant Year 80 Identify All Sources of Funds Available to the Subject 80 Determine the Difference Between Expenditures and Known Income 80 Expenditures...81 Sources of Funds...81 Bank Deposit Analysis Method...82 Computing the Bank Deposit Method...82 Total Deposits to all accounts...84 Total Funds from known sources...84 Review Questions...86 VI. SOURCES OF INFORMATION In-House Sources...87 Personnel Files...88 Other Company Records...88 Prior Audit and Investigative Files...88 ii
VI. SOURCES OF INFORMATION (CONT.) Disclosure Statements...88 The Right to Access Information...89 Freedom of Information Act (FOIA)...89 Fair Credit Reporting Act (FCRA)...90 Gramm-Leach-Bliley Act...93 Telephone Records and Privacy Protection Act...95 Privacy Act of 1974...95 Right to Financial Privacy Act...95 Driver s Privacy Protection Act...96 Health Insurance Portability and Accountability Act...96 Sources of Public Information...97 City Government...97 County Government...99 State Government...102 Federal Government...106 Where to Locate Records...113 The Manual Search...114 Public Records Providers...114 Commercial Databases and Research Reference Services...115 Directories...116 Investigative and Law Enforcement Information Centers and Databases...130 Accessing Information Through Computer Databases...140 Limitations of Databases...141 Commercial Online Services...142 Using an Online Service to Find Information...142 How to Locate People Using Online Records...143 Obtaining Financial Information and Locating Assets...144 Finding Legal Records...145 Conducting Background Checks...146 Records Service Companies...148 Useful Websites...156 Review Questions...171 VII. COMMON HIDING PLACES Concealing Currency...173 Currency Hoards...173 Cashier s Checks and Traveler s Checks...174 Deposits to Financial Institutions...175 Investing Illegal Proceeds...181 Financial Investments...181 Securities and Commodities...181 Business Investments...188 iii
VII. COMMON HIDING PLACES (CONT.) Real Estate Investments...194 Making Loans...194 Friends and Relatives...194 Business Associates...194 Other...194 Transfers/Gifts...195 Gifts to Other Family Members...195 Trusts...197 Purchasing Assets/Spending Illegal Proceeds...199 Buying Other Assets...199 Pay Off Debts...202 Spend It...203 Red Flags...203 Review Questions...206 VIII. MONEY LAUNDERING Introduction...209 Methods of Money Laundering...210 Deposits to Financial Institutions...210 Wire Transfers...210 Securities Investments...211 Insurance Policies...213 Front Businesses...214 Purchases of Gold and Diamonds...218 Fictitious Identities...218 Offshore Transactions...218 The Mechanisms of Money Laundering...219 The Cash Transaction System...221 Business Transaction System...221 Moving Between the Cash and Business Systems...222 Federal and State Law...231 USA PATRIOT Act of 2001...231 Office of Foreign Assets Control...235 The Bank Secrecy Act...236 Other Federal Laws Related to Money Laundering...246 State Laws...252 International Anti-Money Laundering Efforts...252 The United Nations...252 The Financial Action Task Force on Money Laundering...253 The Egmont Group...253 Review Questions...254 iv
IX. OFFSHORE HAVENS Introduction...257 Patterns of Secrecy Supply...259 Tax Havens...259 Types of Tax Havens...260 Low Tax Havens...260 Special Tax Havens...260 The Role of Tax Havens...261 Caribbean Islands...261 Asia and Europe...263 Case Study: Bank of Credit and Commerce International...269 Locating Offshore Assets...271 Moving Funds Offshore...271 The Offshore Bank Account...272 Methods of Moving Funds Offshore...273 Moving Funds from Offshore...277 Offshore Sources of Information...278 Office of International Affairs...279 Assistance Under Tax Conventions...280 Programs for Exchanging Information Under the U.S. Bilateral Tax Treaty System...280 Deposition by Stipulation, Notice, or Commission...282 Review Questions...283 X. RECOVERY OF ILL-GOTTEN GAINS Types of Forfeiture Cases...286 Facilitation Versus Proceeds...286 Forfeiture Statutes...287 Background...287 Criminal Forfeiture...288 Civil Forfeiture...289 Seven Questions the Prosecutor Will Want Answered Before Initiating a Forfeiture Action...292 Evidentiary Considerations...298 Close Proximity...299 Means of Support...299 Concealment Efforts and Commingled Funds...299 Pre-Trial Statements...299 Evasive Trial Testimony...299 Basic Net Worth Analysis...300 Civil Litigation...302 Will a Judgment be Collectible?...302 Review Questions...306 v
XI. CONCLUSION...308 SOLUTIONS TO REVIEW QUESTIONS...309 FINAL EXAMINATION...E-1 vi