The Decision Maker’s Most Critical Tool – Part 1
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As certified fraud examiners (CFE), we all know the nuts and bolts of our
respective areas of specialty, and hopefully, we are all growing professionally at
an astounding pace. Crime does, unfortunately, pay – just not for the criminal.
After conducting asset research for over 14 years for such demanding institutions
as FDIC, FSLIC, and RTC, as well as major hotels and casinos in the gaming
industry, property management firms, and many of the nation’s larger law firms,
one thing that has emerged is a distinct lack of information – not about the type
of items searched, but the depth and quality of other searches.
In cutting to the chase, the following is the result of the compilation of asset
search guidelines, and should serve to assist in setting at least a baseline
standard for developing a viable domestic asset search strategy.
Subject Identification
Prior to beginning the acquisition of information on any subject of an asset
search, the subject should be properly identified.
Studies have shown that as much as 30% of the American population uses
undisclosed aliases and/or "akas" to conduct and transact various levels of
personal and professional business. This statistic does not take into account the
existence of corporate, DBA and/or partnership entity names, which are created
to transact the various forms of business on behalf of the principals of said entity.
To properly identify a non-corporate subject, the following minimum
recommendations are made for non-law enforcement environments:
Obtain credit reports from the three major credit bureaus, per Fair Credit
Reporting Act (FCRA) requirements. However, make sure that obtaining the
reports is in compliance with permissible purposes as defined in Public Law 91-
508, Title VI (FCRA), to avoid tainting your pursuit should the matter ever be
litigated. Remember, in the context of this discussion, we are focused on asset
searches as recovery medium, and the basic assumption is that the asset search
has already been determined to be sanctionable. This could be determined, for
example, by a loan in default, a judgment that has been rendered, or a court
order obtained for the release of the credit information in cases that are not
clearly defined under the FCRA.
Remember this simple guideline: credit reports are legal post-judgment, for
purposes of collection, and/or where consent has been given somewhere in the
stream of the creditor/debtor relationship. In the case of a receivership institution
(i.e., where a director is being scrutinized for alleged conversion of assets),
consent may also have been given for a credit history during pre-employment
evaluation or as a policy-based condition of employment.
This is referred to as "extended consent," and constitutes valid use, especially in
matters where a criminal investigation is under way, and where the conversion of
assets is factually alleged as the result of a forensic audit or proven by
admission. Be careful, though, as "extended consent" from the employment
perspective is still a gray area under the law.
The following two items are available from credit bureaus and their sub-vendors
but have less coverage extended to them under the FCRA, yet the "FCRA
compliance attitude" should be used when accessing them:
· Obtain social security traces from the three major credit bureaus.
· Obtain address update/credit report header information from the three
major credit bureaus.
· Obtain voter registration information for the applicable jurisdiction
germane to the primary, or most recent, residence of the subject. Some
states have compiled voter data through private repositories, which should
be checked for movement.
Match the information obtained through the independent sources to the
information presented by the candidate in the form of the credit application with
the institution, and/or the information developed independently by the institution
in the initial credit qualification process.
Many other methods of identification exist, but the above represents the very
least that should be done.
The reason for obtaining the information from all three bureaus, instead of only
one, is to develop any alias and/or aka data, as well as current addresses (not
specified), and/or any additional addresses that may provide venue data. This
will assist the asset searcher in determining whether to advise the client to
proceed with asset discovery in additional areas unknown to the client at the time
the asset search was requested.
Address verifications are usually difficult without a physical inspection of the
address in question, including a visual identification of the subject entering and/or
leaving the address. Address information that is cross-referenced and verifiable
through the major credit bureau repositories is usually presented in an asset
search, and in most cases is very reliable.
To discover the current telephone number of the subject, methods available to
the fraud examiner include nationwide telephone directories, criss-cross
directories, directory assistance contact, and attempts at contact existing
telephone numbers known by the client. There are other methods of telephone
number development available. However, these methods should not be utilized
by a CFE in order to avoid tainting the legality of the pursuit, in the even that
litigation is ultimate undertaken.
Assets Determination
Assets determination usually constitutes an integration of certain liability data to
offset the assets "worth" in order to arrive at a net equity position. This is
especially true in identifying and analyzing real property assets. There are
multiple forms of asset determination, which are described as follows:
Real Property Ownership: A search should be conducted of the applicable
county jurisdiction. The exception is in California where a statewide assessor’s
index is available, usually through the "lien date" of the prior year. This
repository is made available through a private company, and is in no way
sanctioned by any public jurisdiction. For traditional searches throughout the rest
of the U.S., per jurisdiction research is conducted at the assessor’s office to
determine if the name exists on the assessor’s roll, and/or if the known property
(address) cross-verifies to the suspect owner.
A search of the applicable jurisdiction’s Recorder’s Grantee/Grantor index (or
general index as it may also be known) is then undertaken to determine if the
property is still vested to the subject, and if any open Deeds of Trust and other
liens exist which identify liabilities against the property. The search in the
recorder’s venue should also identify (in jurisdictions where this is possible) the
Documentary Transfer Tax Stamp amount, which should be divided by the
applicable factor. This yields a sales price for the property, which should then be
scrutinized by contacting a local realtor to verify the current market value. This
"thumbnail" market value determination would then be subtracted from the
outstanding Deeds of Trust (encumbrances) for a net equity value of the
property.
Additional research of real property ownership comes in the form of updating the
assessor’s rolls through the recorder’s offices to determine if the subject’s name
has come into title to additional parcels of property, subsequent to the "lien date"
of the assessor’s records, which is in many jurisdictions up to sixty to ninety days
old.
The searches in the recorder’s offices should also identify recent transfers of
ownership of an individual’s real property, wherein the ownership may have been
transferred to a family member, closely held corporation, or other entity. Based
upon the guidelines established by the client, the searches can be permutated to
include additional research on additional names developed during the study,
which the examiner may feel has a direct relationship to the subject of the report.
It is important to note that asset searches are usually requested on specific
names of individuals, and it is an industry standard of practice to conduct the
research on the specific subject name. Competent investigative agencies
contact the client in some way to disclose additional names discovered during
the searches.
Searches should also include information developed on real property assets
jointly held in the name of the husband and wife. This information is usually
indexed by virtue of the husband’s name, or the first name that appears on the
conveying deed.
It is important to understand that an asset search does not automatically research
property held in the name of a wife unless the asset search is specifically ordered
on the wife’s name. If so, the wife’s name would then be included as a primary
search name (parameter), and assets held in the wife’s name would then be
covered. Quite simply, an asset search on a husband should usually also reveal
information on spousal assets held jointly, but not necessarily include assets held
by the wife individually or as sole owner, or under different name styles such as
aliases or maiden names.
Vehicle Searches: Searches should be conducted of the applicable states
Department of Motor Vehicles to identify all vehicles owned under the name and
address given to the state repository for search purposes. Several states do not
provide this service, as the tax registration responsibility for vehicular ownership
rests with a county or parish jurisdiction. Where states will not provide this
information, the applicable jurisdiction or jurisdictions should be researched to
determine if vehicles are owned by the name given as primary search parameter.
It is also important to understand that most assets search requests are not only
based upon single name searches, but usually single jurisdiction searches as well.
Some examiners may feel justified in providing additional "over-the-county-line"
information in order to bolster the information developed without an additional
asset search. However, single county or parish jurisdictions should be expected
as an industry standard.
Analyze credit reports to determine if current (outstanding) and/or previous loans
may have existed, linking this type of asset to the subject. Many times vehicular,
vessel, and aircraft assets are not identified through standard search parameters,
but are identified if the subject may have the asset registered in a different
jurisdiction; if the asset may be registered under a different name; or if the subject
may be a guarantor on the loan.
Vessel Ownership: There are three possible forms of accessing vessel ownership
information. The first is on a state-by-state basis at the Departments of Motor
Vehicles. The second is at the county or parish level. The third is a search of the
U.S. Coast Guard’s Watercraft Index, a nationwide repository of registered vessels
over a certain length. Depending upon the location of the asset search to be
conducted, one or all of these methods should be utilized.
Aircraft Ownership: Other than by "intelligence" information which may have been
submitted to the institution at the outset of the credit qualification process, the only
method of developing aircraft registration information is to perform an FAA
Airman’s Search to determine if an FAA Pilot’s license has been issued, and/or if
an individual has an aircraft registered in his or her name within the Federal
Aviation Administration’s files. As with the vessel ownership search through the
U.S. Coast Guard Watercraft registration, there is only one national root repository
that makes this service available. The service is resold through other database
repositories, yet it is advised that the "root" repository be utilized in order to
minimize data transfer/loss from vendor to vendor.
Banking Information: Bank account searches may be the world’s "second-oldest
profession." There is no specific way to access bank account information, other
than by a multitude of artistic pursuits including the development of information
within a consumer’s credit history; director contact with a banking institution; the
use of sources in the U.S. Federal Reserve Clearinghouse System; or by sources
and contacts developed by the fraud examiner with local, state, or national banking
institutions.
This is truly the "art and science’ of an asset search, in that the ability to
successfully identify banks rests heavily with the fraud examiner’s prowess in this
arena.