An asset search is a formal name for "follow the money." Assets are anything, tangible or intangible, that can be converted into cash, or that has a cash value. Not all assets are of public record, however. Many are covered by privacy laws and other expectations of security.
Finding so-called “hidden” assets, or merely accessing the records of assets held in security, is an essential step in conducting business, investigations, and credit checks.
Here’s everything you need to know about asset searches.
What Can Be Uncovered by an Asset Search?
As mentioned above, assets are not necessarily cash, although bank, brokerage, trust, and retirement accounts are part of the search. These assets are not part of the public record. Asset searches reach further than these types of accounts.
- The search may turn up vehicles, including airplanes, automobiles, and boats.
- Real estate, while easily found in public records, is also an asset that is not always traceable to a specific entity.
- Business affiliations hold clues to hidden assets, particularly in the form of a business entity (C-Corps, S-Corps, LLC).
- Estate information and other income sources yield information about an individual’s assets.
Attorneys, businesses, investment companies, corruption investigators, individual investors, and creditors all rely on asset searches as part of due diligence, divorce proceedings, and criminal investigations.
Reasons for an Asset Search
A common reason for an attorney to order an asset search is to support divorce proceedings. One or both spouses may hide assets to bolster the argument for alimony and other settlements. The collection of child support is another reason to leverage a search for assets.
Estate and probate proceedings rely on asset searches, especially when an individual dies without revealing where everything is hidden. In the same way, debt collectors may institute a search to identify financial resources that may be available to a debtor claiming to be broke.
Businesses and individual investors use asset searches for due diligence before finalizing partnerships, investments, or other contracts. Knowing the financial strength and stability helps avoid a bad business investment.
Asset searches can also turn up personal property or real estate records that show judgments or liens that can cloud an otherwise stellar financial picture.
Criminal investigations make use of asset searches for several reasons.
- To corroborate testimony by informants and undercover officers.
- To identify new witnesses for a trial.
- To support witness testimony.
- To generate new leads in an investigation.
- To seize significant assets from criminal activity to ensure crime doesn’t pay.
- To help with restitution.
Lawyers can determine whether or not to litigate by understanding the likelihood of recovery or settlement. Once litigation begins, assets can be frozen or secured, so they are recoverable in the event of an award. Without the freeze, assets may mysteriously disappear, so it's best to know what is there, how much it’s worth, and to ensure they are available when the time comes to pay.
Asset searches should be performed before filing litigation, during investment research, as part of background screening and judgment recovery, and to gain leverage in business dealings or investigations.
How to Perform an Asset Search
The first step is asking the right questions. Set parameters on the search, so you don't go down a rabbit hole. What are the objectives of the search? Are you assessing the viability of recovery, enforcing an existing decision, or are you afraid assets may be hidden?
Leave aside anything that doesn’t fit into the parameters or objectives of the search. Develop a strategy and ask more questions as you go.
Financial investigations have two stages.
The first stage is gathering all the information.
- How much are the assets worth?
- Where are they located (jurisdiction)?
- What is the value of the asset? How liquid is it?
- How is ownership structured?
- Are other parties making a claim?
- Are the assets recoverable, and how?
- Should you apply for an asset freeze order?
As you implement your search strategy, find answers through surveillance, interviews, as well as searches of easily accessible records.
The second stage is analysis. Learn the source of the income, whether it’s legitimate or illicit. Find out the disposition of the income and establish which assets are connected with a crime or business dealing. During analysis, other records and accounts may come to light.
Investigators use three types of analysis.
- Timeline analysis: organizing assets chronologically according to when they were acquired or sold.
- Link analysis: Creating a graphic representation using information collected from an array of sources to find patterns. Link analysis focuses on relationships between assets and individual holders.
- Money-flow analysis: illustrating the flow of money from the time it enters a financial institution or other entity and tracing its movement.
You can trace the assets forward from a transaction or crime. This method is often used to investigate criminal conduct by literally “following the money.” You can also trace assets back from the asset itself. When you create a chain of property ownership, you start from the current disposition of a piece of real estate back in time to the first owner. Tracing backward can identify where the asset came from and providing proof of previous ownership.
Categories of Financial Information
We have written many times about the use of open information sources, otherwise known as public records.
Open sources have no expectation of privacy.
- Buyer and seller data.
- The identity of the attorneys and title companies.
- Property tax information.
- Building permit requests.
- Lien information.
Other open sources of information are court records, required financial disclosures from public officials, and campaign filings. The internet is a rich open source of information.
Restricted sources are available only to law enforcement. The sources include DMV records, utility company records, asset forfeiture, and money laundering databases, and information from mail covers. Trash is also considered a restricted source. Confidential records are kept at the local and state level, by foreign agencies, and by private institutions providing information on a confidential basis to law enforcement for investigations.
Protected sources are not open to public inspection and may not be disclosed without a search warrant or subpoena from the court. Protected sources include bank account information, insurance data, brokerages, credit card companies, attorney and accountant files, and credit bureaus. Telephone and cable records are also protected.
If you receive government benefits, provide grand jury testimony, or file taxes, the information is protected from public and law enforcement searches without a warrant.
The Gramm-Leach-Bliley (GLB) Act
In the course of an asset search, there is one thing you are not allowed to do. You may not use pretense, make fraudulent statements, or use impersonation to get financial information that is not open to you. Others, such as investigators, friends, or family members, are prohibited from this activity as well.
To be clear, pretexting to obtain protected information is strictly illegal.
If you are a business person or investor, or if you are considering a divorce, an asset search (and potential freeze) is in your best interests. Asset searches may become necessary if someone dies without leaving word of where and what assets are held.
Most asset searches are best performed by professionals, but you can get started with a public record search at CourthouseDirect.com. We provide a full range of property records for the state of Texas.