Strategic Wealth Protection During Investigations

In many criminal investigations and civil litigation proceedings, the examination of wealth plays a key part.

The finances and assets belonging to one or more individuals or organisations can be of importance to those looking to build a case. In many cases, that wealth is being assessed with a view to it being taken from those who own it.

In civil litigation, the wealth of one party is examined to ascertain what could or should be paid to the other party. In criminal investigations, the wealth is tracked to see if it has come from illegal activity and to determine how much of it should be taken from the owner by the authorities under civil recovery powers.

To take the UK as an example, the Proceeds of Crime Act 2002 allows for assets to be confiscated that have been obtained directly or indirectly through criminal activity. In the 2023-24 financial year, assets worth £243.3 million were recovered from confiscation, forfeiture and civil recovery orders.

It is worth noting that the UK legislation allows for what is called non-conviction based asset recovery – the authorities can remove assets that are believed to have criminal origins even when there has been no conviction in relation to them.

Approach

There are, therefore, a number of reasons why those facing investigation may need to take a strategic approach to protecting their wealth.

The approach may differ from case to case, depending on the nature of the allegations and the amount and type of wealth the defendant possesses.

A starting point can be something as straightforward as updating a will to address any potential complexities relating to ongoing or pending legal cases and any implications regarding seizure of assets. Changes can be made that ensure the will reduces the risk of assets being affected by legal proceedings. Changing beneficiaries, appointing alternate executors or devising other arrangements, such as trusts or asset transfers, to protect a person’s estate from potential legal challenges can all be considered as options.

The most appropriate course of action will depend on the nature of the assets.

To take some brief examples:

International property portfolios

It is common for investigations to examine the property owned or controlled by the subject of the investigation.

Property, unlike cash or other small or transportable assets, is in plain sight for the investigators to see. The subject of the investigation is unlikely to be able to convince the investigators that they have no financial interest in one or more properties if there is a paper trail that clearly indicates they do. In the UK, the Register of Overseas Entities (ROE), which is accessible via Companies House, contains details of the registrable beneficial owners of non-UK entities which are the registered owners of UK real estate.

The challenge for someone facing such circumstances is to argue the reason why those properties have no connection to any wrongdoing (that may or may not exist) and to put in place the necessary legal protections to ensure that the investigators cannot seize them.

Art and movable assets

Recent years have seen increasing official scrutiny of the markets for art, antiquities and other high-value items.

In the UK, the art market has come under greater examination by HM Revenue and Customs (HMRC). And the UK sanctions regime has been amended to include what the Office of Financial Sanctions Implementation (OFSI) calls high-value dealers and art market participants on the list of firms that are subject to extended sanctions reporting obligations.

Those who possess high-value artefacts are increasingly having to account for them to the authorities – and that is before there is even the prospect of the owner being subject to investigation. It is, therefore, vitally important that anyone possessing such items records and documents how, when and with what money they were purchased. This is the best way so safeguard against the risk of these items being subject to confiscation for reasons such as sanctions, criminal investigation or civil proceedings.

Yachts and aircraft operation

Aircraft and naval craft differ from a person’s real estate property in that they can be moved. This may sound like an obvious statement to make but it needs to be made clear that this does not make them immune from any attempts to seize them as part of an investigation.

To take an example, the UK’s Sanctions and Anti-Money Laundering Act 2018 contains a number of measures relating to the movement of aircraft and shipping. Such sanctions are not commonly used. But other countries and organisations have also imposed similar measures.

It is also worth considering the large numbers of seized superyachts floating unused in the waters of countries that have imposed sanctions on Russian companies and individuals since Russia’s 2022 invasion of Ukraine. There are similar situations relating to grounded jets lying idle.

Not all boat and plane seizures will be due to sanctions issues. Such vehicles can be taken by the authorities as part of any criminal investigation or civil proceedings. Those who face the loss of such assets need to be able to mount strong arguments as to why there is no legal basis for depriving them of what is theirs.

Digital Asset Protection Strategies

Digital assets have become increasingly common and important in recent years, as the world has moved online to a greater degree. This has prompted a need for many individuals and companies to develop security policies, adopt systems across their digital networks that meet the needs of such policies, and devise strict working practices to protect digital assets that are of high value and/or huge importance.

The use of the most appropriate security technology and staff training (and security clearance) cannot be over-emphasised. The precise nature of your assets and the ways in which they are stored and managed will differ from those who are in similar situations. It is, therefore, important that your asset protection measures are tailored to your exact needs and subject to regular review and, when necessary, revision.

But such measures can also be of value if the subject of an investigation has to account for how they came to possess such assets. Any records kept will be the perfect paper trail if there is a need to challenge allegations.