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Asset Recovery: Would a Bank Lie?

A look at basic evasion tactics that some banks use to foil the efforts of asset recovery lawyers.

October 2016 | More Articles

 

This is part one of a fascinating and controversial three-part series of articles examining a question that is central to successful asset recovery: “Would a bank lie?” This installment is focused on the simple but effective evasion tactics some banks use in concealing their clients’ accounts.

To be clear, Cachet International and its two principals do not provide legal advice. We are asset investigators, not lawyers. However, in this article we will share with you a few of our observations regarding the behaviors of some banks when approached by asset recovery lawyers seeking to freeze and seize financial assets. At the same time, we want to make it clear that we are not suggesting that all banks follow deceptive practices such as those described below.

We have frequently seen lawyers and their employees approach banks on the branch level to seek the confirmation of financial accounts, as well as their freezing and seizure. In too many cases, the banks respond – at least initially – that they have no record of such an account, the account numbers are not correct, or they have never heard of such a person. Often this happens even though precise and accurate information regarding these accounts has been developed. Which leads to the previously posed question, “Would a bank lie?”

We will outline some basic suggestions for dealing with banks in demanding account information. While our suggestions carry no guarantee of success, they reflect our experiences and observations over two decades of keeping a watch on bank interactions. We leave it to you to decide whether banks lie.

Basic Evasion Tactics

One major U.S. bank – which, after being found to be in league with major drug cartels, was closed and bought by a larger bank – employed several basic evasion tactics that many other banks have adopted as their evasion method of choice. The following suggestions are offered as a way of defeating those tactics.

First of all, it is not a good idea to make an “informal” approach or send “advance notice” of intent to confirm, freeze and/or seize an account. As this is not a formal request by the courts, many banks believe they are within their legal rights to alert the account holder, move the account and, occasionally, destroy or “misfile” the bank records. In such cases, it is reasonable to assume an absence of “fair play.”

Second, instead of taking an informal approach, it is advisable to make a formal legal request at the bank’s corporate headquarters. Many bank branches have standing instructions that they are not to confirm any accounts or account holders – even in response to a court order. Rather, a court order must be provided to the legal department at the bank’s corporate headquarters. (Note: We frequently hear the lament, “I went to the branch where the subject account was reportedly held, and they denied knowing about it.” In the bank’s view, it did not lie. In fact, this is now so common that it is literally cliché. Approaches to bank branches normally reduce chances of success and frequently lead to accounts being moved.)

Third, a legal request to the bank must include not only the name of the account holder but also all of its variations, as well as the birthdate and any possible identifying numbers. The now-defunct bank to which we alluded above would insist on opening accounts in a variation of the account holder’s name. For example, John Quincy Citizen would have an account opened under, for example, “J. Quincy Citizen,” “J.Q. Citizen,” “Quincy Citizen,” etc. Therefore, unless these variations were specified, the bank would not “recognize” the account holder. That same bank also made a habit of “accidentally” changing the month and/or year of birth, so that bank, if pressed, could even say, “We found the same name, but the birthday appeared to be different and, therefore, we could not confirm the ownership of the accounts.”

We should point out that some banks will have slight “typographical” errors in the names of the account holders. Clearly, for example, Slavic, Chinese and Arabic names have a variety of ways of being transliterated into “English.” Therefore, the bank can claim that it was “transliteration error.” For English names, during registration it is common to omit an “e” from the account holder’s family name. In some cases, we have seen that the name on the printed checks or the signature did not match the relevant bank’s records. However, the routing and account numbers on the checks were correct, and the checks were routinely cashed.

In this same vein, we notice that many successful asset recovery lawyers ask for any and all accounts owned or related by the subject, in all variants of their names. Case in point, asking for only one singular account by identification number can be perilous if the bank has some “challenges” in their bookkeeping system.

Fourth, be prepared for missing taxpayer numbers on accounts held by business entities. While some small businesses have accounts listed under the individual owner’s Social Security number (SSN), most use the IRS-issued employer identification number (EIN). However, it is not unusual to find that there is no listed EIN for a company, which makes finding it in the bank’s database very difficult. While it is a legal requirement in most U.S. states to have such a number when opening a bank account, bank employees will often accept excuses such as “I forgot to bring it with me today,” “I am about to apply for it but need the account in a hurry,” etc. In each case, the account holder promises to furnish the EIN in the near future but never does.

This “oversight” often goes on for years and, oddly enough, most bank software seems to “overlook” this deficiency. Critics claim that bank employees do this for “good customers” in order to help them increase the secrecy of the account (and avoid taxes). While that may seem hard to believe, we have a colleague who, in his former position at the U.S. Treasury Department, issued hundreds of warnings to banks and sent 16 senior bank officials to jail over a five-year period. Those 16 officials made it a regular practice to open accounts for domestic and foreign account holders without requesting and receiving their Social Security numbers and/or U.S. tax identification numbers (EIN). In other words, the absence of a Social Security number or, for companies, EINs is not an unusual problem to encounter when trying to identify an account.

Further, in some states, such as California, banks will allow accounts to be opened with only a passport and do not have to require a SSN or EIN. In short, account searches by EIN and SSN are far from fool-proof.

Fifth, in recent years, we have seen an increasing number of cases in which some banks claim that they cannot locate target accounts – even if furnished the account numbers – and that is another obstacle that should be anticipated. This is most common with “investment accounts” or “brokerage accounts” in which the account holder has a Relationship Manager (RM). Some banks claim that only the RMs have the details of these accounts, in which cases they do not seem to show up in the bank’s central database. Further, the RMs sometimes use “internal routing numbers” when accessing these accounts. When these critical internal routing numbers are added to the account numbers, the banks often claim that they do not have any accounts that match these numbers and, in fact, do not even have account numbers that have the same number of digits. In a sense, they are telling the truth, but they are also concealing the existence of accounts that they actually know to exist.

In other words, many banks are looking for excuses not to identify their account holders or their assets.

Banks’ Motivations

Lawyers new to asset recovery ask the question, “Why would a bank do this?” or “Why would a bank take such a risk for relatively small accounts?”

Three of the most common reasons heard over the years are as follows:

First of all, “small” account holders add up, and, for many banks, those accounts are their lifeblood. Banks not only want to keep individual account holders, but have a reputation for “confidentiality” that encourages new account holders and retains the current ones.

Secondly, the chances of someone pursuing the bank and convicting them of obstructing justice or another offense are rather small. Bankers rarely go to jail and, even though many banks pay billions of dollars in fines every year, they still have higher profits than losses. Further, most persons seeking to recover funds are not willing to pay out the large legal fees to prove that the banks intentionally sought to obstruct justice. Even then, the banks have lawyers on retainer and a multitude of ready excuses to claim that the “error was unintentional.”

Third, many of the legal demands on the bank are not drafted thoroughly and encompassing enough to deny the bank a variety of methods to attempt avoiding compliance.

Therefore, we continue to note that, in asset recovery, “experience counts.” Obtaining expert legal assistance from experienced asset recover lawyers in drafting demand letters and approaching financial institutions is a cost-saving measure.

 

To discuss a corporate intelligence or financial investigation matter, or to learn more about Cachet International’s investigative resources in your jurisdiction, contact Michele Palmer by email or at 602-912-5730.

 

 
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Copyright © 2016 by Cachet International, Inc.

All rights reserved. This article or any portion thereof may not be reproduced or used in any manner whatsoever without the express written permission of Cachet International except in the case of brief quotations embodied in noncommercial uses permitted by copyright law. This article does not constitute a legal opinion or advice and should not be interpreted as such.