One of the most frequently-asked questions new divorce-related clients ask us is: “If I need a forensic accountant can you do that?”

The answer we give is that we are not forensic accountants, but you probably need us anyway because forensic accountants don’t do what we do. And, you may need a forensic accountant as well. Fact-finding and forensic accounting go together to give you a much better shot at finding assets than either function working alone.

What’s the difference?

One forensic accountant we have worked with on assignments describes some of her practice as including corporate fraud investigations, [and] lifestyle analysis for divorce and child support.

What won’t this forensic accountant do? Exactly what we will: Searching the globe for hidden assets and conducting interviews.

A forensic accountant can do a brilliant job analyzing the flows of money into and out of a business to see if funds are leaking to private accounts they shouldn’t be touching. But what happens if you don’t know that a business is linked to the person whose assets you are searching?

That is where we come in. Just as we wouldn’t know what to do if presented with thousands of bank statements, tax returns and deposit slips, most forensic accountants don’t excel at an assignment that reads, “What does this person own anywhere in the world? What companies is he hiding? Which people could we talk to to find out more about him and his activities? What’s the best way to approach these people?”

As an example, we were once asked to find assets of a husband who had controlled some 30 businesses owned by him and his wife. She knew little to nothing of how it all worked, but when they were divorcing, things followed a customary pattern.

The businesses had a “bad year” and showed greatly reduced earnings and assets. What to do?

We were hired first and concluded after a week’s work that the husband was hiding what were probably his most profitable companies (over a dozen of them) while showing his wife’s lawyer the money-losers.

Our advice: Subpoena the missing company financial records, and then get a forensic accountant to tell you if the fuller financial picture makes sense.

Asset searching and accounting are specialties. You don’t ask your lawyer to fix your roof, and you don’t ask your plumber to draft a will.

When two jobs are different, two heads are better than one.

Clients who hire us for asset searches always want to know what we find. As often as not, the big news after an asset search is when we don’t find something we should be seeing but are not.

When someone is concealing the truth, they often put in place a lie to throw you off. One of the best ways to figure out if someone is lying is to ask yourself, “is this likely?”

Remember the Bernard Madoff Ponzi scheme? The people who managed not to get burned turned away from Madoff because of what they didn’t see:

  • No major accounting firm auditing what purported to be a multi-billion-dollar fund.
  • No independent custodian.
  • No regulatory filings in the last couple of years that reflected billions of dollars in holdings.

Computer programs are terrible at telling you what they should be seeing but are not, which is why so many investors never clued in to the Madoff risks that many experienced professionals noticed.

When we do an asset search, we are always on the lookout for what doesn’t make sense. In the past three years, we’ve seen the following:

  • A man who claimed to put no money in any financial institution, yet whose computer showed a browsing history at two-dozen brokerages. You can keep your money out of banks, but still on deposit with Schwab or TD Ameritrade. Next step: 24 subpoenas to those brokers.
  • A divorcing husband’s loss-making entity that did no business (zero sales) yet persisted in paying one employee $75,000 a year. And, bank accounts showed the business paid plenty of taxes.

Both of these fit the common scenario in divorce: appearing to have fewer assets that you really have. In the first case, the husband hoped to get money out of his brokerage after the divorce was final. In the second, the company may have been in partnership with another company that was holding back the first company’s share of the profits until after the divorce. The second company could also have been owned by the husband or trusted friend or relative.

As with the Madoff fraud, a computer program did not point to either of the divorce cases above and spit out a “High Risk” or “Possible Asset Concealment” result. Instead, both findings were the product of hours of slow and careful research.

The next time you wonder why an asset search takes hours and not just the feeding of a few names and numbers into a database, remember: Databases tell you (sometimes) what’s there – not what isn’t.

It may all come crashing down, but if it doesn’t the cryptocurrency market is your newest headache in trying to find hidden assets.

Long written off by many as a joke, cryptocurrencies are still dismissed by many as a bubble waiting to burst. Just the other day, the Wall Street Journal ran this piece arguing that Bitcoin (the largest and original cryptocurrency) is way overvalued.

Launched in 2009, Bitcoin was worth almost nothing for several years. At the end of 2013 it suddenly rose to almost $900, but then fell and never got back to that level until January of this year. Now, Bitcoin is worth $4,600, supposedly driven upward by residents of countries not thrilled by the prospect of devaluation of their home currencies, confiscation/destruction of other property, or both: Venezuela, Korea, and China lead the way, but you can think of other good candidates.

Some true believers in Bitcoin think it should be worth $250,000 to $500,000 in 13 years, based on the idea that by design it can’t be inflated like paper currencies, and assuming cryptocurrencies get to just five to ten percent of the world’s share of payments (and that Bitcoin has about half of that cryptocurrency share).

Most famous as a means for criminals to transact business with little trace, mention of Bitcoin has been enough to get you laughed out of the room in polite company.

But what if $4,000 today could turn into $500,000 in 2030? Would your spouse want to take a chance with $25,000 to have more than $3 million later in life? Especially when it’s hard to trace? If so, read on.

Cryptocurrencies are really nothing more than entries into a big database that record your purchase. The database uses something called blockchain technology, which ensures that the records are decentralized. The record is spread all over the chain and most importantly, once a transaction is confirmed it can’t be changed. Blockchain is for real, and many law firms are investing in it as the future of contracting. You can read more about its world-changing potential in the recent cover story of Fortune Magazine.

How can you tell if someone owns Bitcoin or another crypto? There is no ownership record by name, necessarily. In the U.S. many websites that will sell you bitcoin have to take your name and other identifying information, but they will let you send the bitcoin anywhere you want — no names required. Privacy at other sellers is higher. If you buy bitcoin overseas, the transaction can be completely anonymous.

For asset searches, the first thing to find would be evidence of dollars turned into bitcoin. Have there been bank or Western Union transfers to places named Coinbase (or anyplace with the name Coin in the title), GDAX, CEX.IO? Any cash coming in from such places to pay a few bills?

Are there any records of such currencies inadvertently left around or on the computer you and your spouse may have shared? These currencies are in the end just strings of letters and numbers that look like this: 1F5tAaz5x1HUXrCTLbtMDqcw6o5GNn4xqX. If you see such strings, cryptocurrency could be involved.

There are two ways people most often hold cryptocurrencies. Either on the website where they buy it, or on an electronic wallet (which is really just a mini-computer the size of a thumb drive that securely records their currency id codes). You may find such an electronic wallet, but more likely you will see evidence of computer traffic with one of the virtual wallets on the web.

Keep an eye on Bitcoin. If the optimists are right, there could be millions of dollars of it to get if you can find it. The higher it goes, the greater the chance that the kinds of people who like to buy gold will have cryptocurrency too.

We wrote not too long ago here about our methodology for tracking down offshore accounts and how difficult and expensive this process can be.   Well, it looks like locating offshore accounts may have just become a tiny bit easier.

As reported in The New York Times, earlier this year, the International Consortium of Investigative Journalists leaked records which disclosed proprietary information about more than 120,000 offshore companies and trusts and nearly 130,000 individuals.  The consortium also published an online database which allows users to search through more than 100,000 secret companies, trusts and funds created in offshore locales.  The database even goes so far as to identify the entities’ true owners where possible.

As investigators, we’re excited to hear about this new database, but we recognize that it is only a starting place for offshore asset searches.  The trusts in the database represent only a small portion of the offshore trusts that are out there.  If your debtor’s name does not appear in the database, by no means does this mean that your debtor doesn’t have offshore assets.  You should also keep in mind that people don’t always put money in their own name.

The New York Times article also highlights the prevalence of Americans hiding their assets offshore.  In particular, the Cook Islands have become the perfect place for the wealthy to shelter assets from existing or potential creditors.  Business with the Cook Islands can be conducted electronically and none of the items kept in trust need to be physically located there.  Further, the laws in the Cooks are written to protect foreigners’ assets from legal claims in their home countries.  Even the United States government has had difficulty going up against a Cook Island trust.  This means that locating the hidden trust is only half the battle–it may still be very expensive to ever receive a dime of it.

That said, given that Americans have put approximately $1 trillion in offshore accounts, going after a foreign trust can be worth the time and expense where enough money is at stake.