What is asset tracing?

Legal Floris LLC

Investors who lose or are about to lose their investment, bank customers who fear that their deposit is at risk, and other nervous creditors and stakeholders may wish to take action to prevent and mitigate risk. A first step is to look into the contract and then to establish where the funds currently are. With cross-border transactions and international investments, lost money can these days be anywhere. Asset tracing aims to locate the misappropriated assets so that victims can decide on the recovery strategy. Asset tracing is however not an easy task. It often involves entry into different legal systems and local legislation, and advanced forensic accounting.

Both legal systems around the world, common law and civil law, have their own approach to asset tracing and recovery. In common law jurisdictions the money trail must have direct causality with the misappropriated funds. This is quite difficult where funds mingle, are used to pay contractors and others, or even cross borders. Civil law makes asset tracing and recovery a little easier because when the judge allows for it, civil parties can file direct claims for losses occurred to the wrongdoer.

When disputes arise and court intervention is required, the court has exclusive jurisdiction over matters that happen within the country. Misappropriated funds that are used to pay for expenses or are funnelled to other countries, are difficult to recover. Yet, when embezzled assets are deliberately taken out of sight of creditors and the authorities, a court may take further action. To accomplish a successful reimbursement of such assets, asset tracing procedures must follow the money. Depending on the jurisdictions involved, asset tracing may take a long time and may not even be as successful as anticipated. Asset recovery is not a guarantee.

Getting money back after an alleged wrong occurred is often a lengthy and difficult process. In general, victims who act fast and ensure a priority position for themselves gain the most beneficial position when matters enter into a downward spiral. Especially where private investment firms and financial institutions are involved, an extensive, yet complex framework of rules, regulation and frameworks applies. Finding your way through this minefield requires dedication and determination.

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