Involving law enforcement or criminal prosecutors (collectively, “LE”) during a parallel asset tracing investigation is generally not a question of if, but of when and how. When approached promptly and properly, LE may provide efficiencies, new intelligence or evidence, and a certain amount of weight to civil counsel in a settlement or asset recovery. The range of cooperation, however, can vary greatly depending on the case, circumstances, and personalities.
The vast majority of investigators and attorneys agree that LE can be helpful in an asset tracing investigation or legal action. LE can provide critical new information or evidence, facilitate a settlement or recovery, and create efficiencies during the civil investigation or legal action. In one civil asset tracing investigation, after contacting LE, we were able to pinpoint certain affiliations that led to offshore jurisdictions where the fraudster maintained banking relationships with considerable proceeds of the crime. These relationships were not readily available to the civil investigation.
LE, however, can also become an obstacle since criminal actions always supersede any civil action or proceeding, which could result in a delay in discovery or a stay in the civil action. Moreover, LE may decide for political reasons to take over an investigation that may be sensitive or whether other types of indictment could be pursued. In one particular investigation in Central America involving the authors, a civil asset recovery team was assembled to identify stolen assets from the preceding president. LE at the US Embassy intervened to convince the host government they would investigate the crimes and recover any ill-gotten gains, at no cost. The approach de facto ended the civil investigation and did not yield any indictments or recovery as the case eventually was not a priority for the US government.
Timing and, most importantly, how to approach and manage LE are crucial for success. With respect to timing, we must keep in mind that a criminal investigation or prosecution will take precedence and may potentially stay, thwart, or delay a civil investigation or action. The decision as to when to approach and involve LE would depend on what stage the asset tracing investigation or action is and how far along LE is in the criminal investigation or prosecution.
As a rule of thumb, if intelligence or evidence is lacking in the civil investigation or if there is a need to exercise some pressure, it may be better to have LE involved at an earlier stage. Another case where it may be advantageous to bring LE early is when dealing with a prospective client whose claim appears to be weak; LE may be able to provide relevant and valuable information about the client’s claim or true motives before being engaged by the client. If the civil investigation is advanced or an action is already filed in a particular jurisdiction, bringing LE in could accelerate closure since the mere prospect of a criminal investigation or prosecution can bring an adversary to the negotiating table to settle.
At times, there is a concern that LE and the civil client may be in competition for the same assets and that, therefore, LE should not be enlisted. Generally, that would be a mistake. No matter at what stage LE is brought in, if LE seizes the assets, a client may file a third party claim as a victim. The key is to establish a credible claim as a victim, as early as possible. Presenting a claimant as a victim to LE establishes the claim and more so facilitates the flow of information. LE is more apt to interact with a victim. In one matter, not only did LE provide updates to the claimant but gave civil investigators more access to the LE investigation. In that matter, LE asked for a delay in the civil action to not alert the fraudster of the location of certain assets that LE was about to freeze. The client complied, which gave LE the element of surprise and, most importantly, the seizure.
If a third-party claim as a victim is not available, other remedies may be available. For example, the client could obtain moiety in the form of a reward if the client provided the initial information that resulted in the LE seizure.
It should be noted that many times, the relationship between a civil action and criminal action requires a formal agreement, particularly when there are competing interests. Generally, LE prefers an informal relationship to avoid arguments of conflicts of interest. In some cases, however, a formal agreement could allow for the exchange of discovery, witness statements, disposition of assets and the like.
How to approach and manage LE is even more essential than timing. If the approach is not done properly or if the relationship is not managed well, all the benefits of having LE involved could disappear or backfire. The best way to approach LE is through an investigator who is a former LE. Utilizing a former LE officer or agent provides credibility with LE and the investigator will know and understand LE needs, requirements, and processes. Specifically, the investigator will know the evidentiary requirements, the proper arguments to formulate, and the thresholds required by the relevant agency or department. In addition, a skilled and experienced investigator will also know when some processes, thresholds, or requirements could be waived in a well-articulated and evidenced referral.
Once LE is approached, liaising with the LE team is the next challenge. Whereas the exchange of information is the overall goal of the relationship, the exchange could be delicate and present its own challenges due to privacy and protected information concerns for both the civil asset recovery team and the LE team. For example, in the United States, LE would be prohibited from disclosing information or evidence derived from a grand jury investigation, and in certain civil proceedings, a party may be precluded from disseminating discovery information to LE or others without a subpoena or court order. In the latter, an experienced and skilled investigator, working with counsel, could find ways within the confines of the law to provide leads to LE such as the identification of certain witnesses, the location of documents and repositories, or the financial institutions where the assets may be located. LE could then re-interview those witnesses and subpoena records to develop their case, which in turn would enhance the relationship between the civil and LE teams and, therefore, boost the civil action and recovery.
In conclusion, it is an important tool in a civil matter to liaise with LE in an effort to obtain intelligence or evidence, and the upper hand. The key is to have a civil investigative team with LE experience, credibility, and a reputation that can facilitate a lawful exchange of information or evidence.
This article was created for inclusion in the ICC FraudNet Global Annual Report 2024. Te read to full report click here.
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