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PwC Fraud Forum Forensic tools and legal aspects of asset tracing in Russia and abroad 30 ĐœĐ°y 2013


Expert panel Chairman Edwin Harland Partner, Forensic services Chairman of PwC FraudForum PwC Russia

Alexei Dudko

Irina Novikova

Mark Anderson

Alexander Khaki

Partner,

Partner,

Partner,

Head of Dispute Resolution

Forensic Services

Global Corporate Intelligence Practice

Assistant Manager, Corporate Intelligence

Hogan Lovells (CIS)

PwC Russia

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PwC UK

Forensic Services PwC Russia

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International asset tracing and recovery: tools and techniques Mark Anderson


Повестка дня

1 Introduction 2

Different scenarios for asset tracing and recovery

3 International tools and techniques 4

Working alongside legal counsel / other mechanisms

5 Questions

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1. Introduction

Our Corporate Intelligence Team

Our asset tracing work

Our clientsРђд

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2. Different scenarios for asset tracing and recovery Fraud or other economic crime

Debt recovery

Investigation to recover theft from fraud

Pre-litigation decision

In support of civil or criminal legal action

Post court decision or arbitration award

In support of administrative action

Financial institutions Pre-recovery proceeding

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3. Asset tracing: tools and techniques (1)

For each project consider…

• Key objectives • A research strategy which fits the situation • Access to information • Legal / recovery strategy • Risk

Four typical project stages Internal data review / lead generation

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Open source research

Human and other intelligence

Analysis and presentation

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3. Asset tracing: tools and techniques (2) Internal data review and lead generation In ternal data rev i ew / lead gen eration

Open sou rce research

Hu m an and oth er i n telligence

A n alysis and presen tation

• Access to internal data is key to generate leads • Data analytics to cut down scale of exercise and identify patterns • Interviews of key witnesses • Document review processes and platforms

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Recent case examples • Project Varta – asset tracing on key executives for Irish bank • Project Apple – a multijurisdictional banking fraud investigation, asset tracing and recovery

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3. Asset tracing: tools and techniques (3) Open source research In ternal data rev i ew / lead gen eration

Open sou rce research

Hu m an and oth er i n telligence

A n alysis and presen tation

• Understanding availability / location of information • Search aggregating technology (OSINTA platform) • Social media analysis • Corporate assets: property; banking information; machinery; stock • Personal assets: property; shares; credit data; lifestyle / unusual assets • Be inventive – fraudsters make mistakes…

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Recent case examples • Project Carlo – asset tracing and recovery in Ireland, Spain, Poland • Project Moat – asset search linked to debt recovery on Chinese company in Australia, USA, Canada

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3. Asset tracing: tools and techniques (4) Human and other intelligence In ternal data rev i ew / lead gen eration

Open sou rce research

Hu m an and oth er i n telligence

A n alysis and presen tation

• Identifying and vetting informants • Building and using networks • Risks and issues • Turning intelligence into evidence

Recent case examples • Project Charles – Lifestyle review of key company executives in France, Australia, USA • Project X – Stolen asset recovery for North African government post Arab Spring

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3. Asset tracing: tools and techniques (5) Analysis and presentation In ternal data rev i ew / lead gen eration

Open sou rce research

Hu m an and oth er i n telligence

A n alysis and presen tation

• Link analysis • Use of i2/Ibase tools; other database building • Fund flow and timeline analysis • Charting and presentation for courts

Recent case examples • Project Smith – pension fund fraud investigation in Caribbean and Asia • Project Apple – a multijurisdictional banking fraud investigation, asset tracing and recovery

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Example link analysis chart

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Example iBase connection chart

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Example fund flow analysis chart

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4. Working with legal counsel / other recovery mechanisms • Information and intelligence used to inform legal strategy / civil proceedings (e.g. disclosure and freezing orders)l assets also monitored over time for attempted disposal / acquisition. • UK and ROI legislation allows asset sale reversals if it's decided that owners were trying to put assets out of creditors reach.

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• Trustee in bankruptcy has investigative powers, and insolvency practitioners have special powers to request further information in the UK and some other jurisdictions. • Also work with financial institutions to help inform strategy for debt portfolios

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Asset tracing: Application to Russia

Irina Novikova Alexander Khaki


Asset-tracing: application to Russia

What?

When?

How?

Money, real estate property, Russian and international legal entities, jewelry, works of art

Case1. Integrity Due Diligence review of a potential business partner Case 2. Fraud investigation, search for stolen assets Case 1: open sources research, enquiries to market experts Case 2: much more complicated‌

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Asset-tracing: application to Russia If assets are stolen: 1. . Identification of amount of the stolen assets, schemes of their withdrawal and the involved parties (both legal entities and individuals)

Amount of stolen assets

2. Analysis of information, identification of affiliated parties and their assets, identification of sources of the assets

What assets are stolen? Did this ever happen before? If yes, then what was the amount of the earlier withdrawn assets?

Schemes of assets withdrawal How the assets have been withdrawn: goods supply, provision of services by affiliated parties and (or) at inflated prices, technical loans, investments projects, computer hackers attacks etc. Which accounts were used during the assets withdrawal process?

What assets are known to be owned by the identified people and companies (and by their related parties) as of today

4.Provision of the identified information to lawyers for the further representation before international courts.

Involved parties The involved parties can comprise of: the company’s management, shareholders, line managers, relatives and friends of the above listed people, third parties

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3. Fixation of the identified information in the form of a report and evidentiary materials 30 Đœay 2013 18


Asset-tracing: application to Russia What information can be obtained in the course of Integrity Due Diligence review? CI on legal entities: Registration data Beneficial ownership structure Identification of related parties Mass registration addresses Mass directors Identification of affiliated entities / individuals • Financial information • • • • • •

Industry sourcing: • Previous colleagues / employees • Industry experts • Competitors w www.fraudforum.ru

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Media information: • Media profile (business projects, relevant experience, clients’ feedbacks) • Negative information • Identification of affiliations

Litigation checks International watchlists: • Politically exposed persons (PEPs)

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Asset-tracing: application to Russia Example of visualization of ultimate beneficiary research results

Owned by XXX based on analysis of corporate data w www.fraudforum.ru

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Asset-tracing: application to Russia Example of assets withdrawal scheme

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Asset-tracing: application to Russia Case-study Brief description:

• TOP-5 CIS bank approached an international law firm for the purposes of tracing and recovery of stolen assets on the total sum of over USD 5 bln. The international law firm hired PwC Forensic • In the course of interviews with the Bank’s employees and analysis of relevant documents, it appeared that some piece of the stolen assets was invested by alleged suspects into land plots and other real estate assets located in different regions of the Russian Federation. • Bank’s documents provided an outdated information (over 4-5 years old) about the land plots, sometimes it was even not possible to identify cadastral numbers and borders of the land plots. • The PwC Forensic’s task was to IDENTIFY THE LAND PLOTS, their current borders, ownership rights, encumbrances and any current constructions / building, located on the land plots. The identified findings should have been fixed for the further representation before international courts.

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Asset-tracing: application to Russia Case-study Information available at the initial stage

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Asset-tracing: application to Russia Case-study Analysis of cartographic information and cadastral data has identified the following:

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Asset-tracing: application to Russia Case-study

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Asset-tracing: application to Russia Case-study

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Asset-tracing: application to Russia Case-study

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Asset-tracing: application to Russia Case-study

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Asset-tracing: application to Russia Case-study

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Asset-tracing: application to Russia Case-study

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Contact information:

Irina Novikova

Alexander Khaki

Partner, Forensics PwC Russia

Assistant Manager, Forensics PwC Russia

Tel.: +7 495 232-5735 Fax: +7 495 967-6001 irina.n.novikova@ru.pwc.com

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Tel. : +7 906 722-3945 Fax: +7 495 967-6001 alexander.khaki@ru.pwc.com

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PwC Fraud Forum Legal strategies on the conduct of a fraud claim and recovery of assets: global context and Russian specifics Alexei Dudko 30 May 2013 Dispute Resolution / Moscow


I. Uncovering international commercial fraud: objectives and methodology Objectives: asset recovery – who else is involved? – to make an example of the fraudster – distancing itself from the fraud – personal?

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I. Uncovering international commercial fraud: objectives and methodology Methodology: – systemic approach – legal issues: • getting them right

• defendants • jurisdiction • money • evidence

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I. Uncovering international commercial fraud: objectives and methodology JSC BTA Bank v Ablyazov: the biggest international fraud uncovered – US$10 bln of assets siphoned off – US$ 6 bln – value of the claims brought – 49 reported court decisions – multiple jurisdictions involved – 30 – 40 barristers (15 – 20 QCs) – 300 fee earners, 155 lawyers and 40 partners at Hogan Lovells

"Extraordinary case" "being fought by means of the forensic equivalent of trench warefare" Teare J.

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II. Obtaining evidence: key considerations

Disclosure from defendants: – disclosure of all assets: assets held on trust / by nominees – cross-examination – LEO restrictions

Disclosure from third parties (Norwich Pharmacal order) – disclosure from banks, offshore corporate providers – email access

Gagging orders

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II. Obtaining evidence: key considerations

– Search orders – Disclosure of third party funders – Lawyers to disclose client's contact details? – International letters of request – Legal limits on obtaining evidence:

• classified information and liability triggers • use of information obtained by detectives

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III. Seizing of assets and blocking suspicious transactions – Worldwide freezing orders and injunctions: setting them right • beyond standard form (BTA Bank case) • benefits of policing • applications offshore: need for local actions and service

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– Receivership orders • evidence that a freezing order is not enough • possible to bring clusters of companies (over 600) • receivers as "receivers and managers“ – Use of insolvency procedures

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IV. Special asset recovery techniques: criminal procedures / regulatory actions – Speed – Lack of control – Impact on settlement – Effectiveness?

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V. Fighting bad faith and procedural abuse: need for speed and efficiency – Contempt of court: Ablyazov and others

– – – –

• •

failing to disclose assets lying under oath

dealing with disclosed assets in breach of the court order

Party barred from defending the proceedings Security for costs: a double-edge sword Interim payment orders Unless orders

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VI.

Key messages

– Allocation of best resources – Integrated co-ordination of inter-disciplinary and international teams – Taking initiative – Time is of the essence: securing evidence and assets – Unorthodox thinking – Technology matters – Personal security important

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For further information, please contact Alexei Dudko Head of Dispute Resolution Partner

Hogan Lovells (CIS) Summit Business Centre 22 Tverskaya Street, 9th Floor 125009 Moscow Tel: Direct: Fax: Email: www.hoganlovells.com

+7 495 933 3000 +7 495 933 3015 +7 495 933 3001 alexei.dudko@hoganlovells.com 42


www.hoganlovells.com Hogan Lovells has offices in: Alicante Amsterdam Baltimore Beijing Berlin Brussels Budapest* Caracas Colorado Springs

Denver Dubai Dusseldorf Frankfurt Hamburg Hanoi Ho Chi Minh City Hong Kong Houston

Jakarta* Jeddah* London Los Angeles Madrid Miami Milan Moscow Munich

New York Northern Virginia Paris Philadelphia Prague Riyadh* Rome San Francisco Shanghai

Silicon Valley Singapore Tokyo Ulaanbaatar Warsaw Washington DC Zagreb*

"Hogan Lovells" or the "firm" is an international legal practice that includes Hogan Lovells International LLP, Hogan Lovells US LLP and their affiliated businesses. The word "partner" is used to describe a partner or member of Hogan Lovells International LLP, Hogan Lovells US LLP or any of their affiliated entities or any employee or consultant with equivalent standing. Certain individuals, who are designated as partners, but who are not members of Hogan Lovells International LLP, do not hold qualifications equivalent to members.

For more information about Hogan Lovells, the partners and their qualifications, see www.hoganlovells.com. Where case studies are included, results achieved do not guarantee similar outcomes for other clients. Attorney Advertising. Š Hogan Lovells 2013. All rights reserved. *Associated offices

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This proposal is not an offer in accordance w ith the Article 435 of the Russian Civil Code. It also does not set up any bligations of the proposal's addressee or proposal's ow ner. For the purposes of concluding legally binding contract the parties must conduct additional negotiations.

Pw C Russia (w ww.pwc.ru) provides industry-focused assurance, tax, legal and advisory services. Over 2,300 professionals w orking in Pw C offices in Moscow , St Petersburg, Ekaterinburg, Kazan, Novosibirsk, Krasnodar, Voronezh, Yuzhno-Sakhalinsk and Vladikavkaz share their thinking, experience and solutions to develop fresh perspectives and practical advice for our clients. The global netw ork of Pw C firms brings together more than 180,000 people in 158 countries. * Pw C refers to Pricew aterhouseCoopers Russia B.V. or, as the context requires, other member firms of Pricew aterhouseCoopers International Limited, each of w hich is a separate legal entity. Š 2013 Pricew aterhouseCoopers Russia B.V. All rights reserved.


PwC Fraud Forum  

Forensic tools and legal aspects of asset tracing in Russia and abroad

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