If you are thinking about separating from your partner or even getting a divorce, it is important to understand the financial assets of your partner. This is because you may have a claim to share in the value of some of these assets, depending on your situation.
But what do you do if you suspect your partner may be hiding assets from you? We have covered a short overview of how to address a situation where a spouse is hiding assets with our blog What Happens If One Spouse Hides Assets During Divorce?. However, there remains the question of how you could come to suspect that assets or income were being hidden in the first place. Here are some indicators that you might encounter where one spouse is trying to hide assets or an income source from their partner:
Structured Cash Deposits and/or Withdrawals
Your partner receives or makes a high volume of cash deposits and withdrawals into their bank accounts. It is difficult to identify the ultimate recipient of such cash amounts. As such, it can be used to funnel money slowly into and out of an account, where it can be accumulated somewhere else and then used to purchase an asset. Such cash deposits and withdrawals may also be structured, under the amount of $10,000 and made in non-round amounts. These are methods that may be used in order to circumvent mandatory reporting thresholds that are often present in the banking industry for transactions in the amount of $10,000 and above.
Purchase of Cryptocurrencies
Your partner is purchasing cryptocurrency, without a reasonable explanation as to why. Once cryptocurrency is purchased, it is very hard to track payments that are then made using the cryptocurrency. When cryptocurrency is purchased, it is often held in a virtual “wallet”. Funds from one wallet can then be dispersed through many different wallets in a process called layering which obfuscates the ultimate recipients of the funds. Cryptocurrency is particularly attractive for this purpose because it can be transferred through hundreds of different wallets in short periods of time. Funds held in cryptocurrency wallets can also be withdrawn in multiple different ways, and there are even some vendors of goods and services that will directly accept payment in cryptocurrency.
Unusual, New or Large Business Expenses and Comingling of Funds
If your partner is self-employed or owns their own business, it is prudent to be aware of sudden increases in large business expenses that do not align with the business type or are otherwise abnormal. Overinflating business expenses can disguise an attempt to classify certain personal purchases as a business cost that they are not.
On the other side, making regular or large overpayments to debts like credit cards can also be a way for an individual to obfuscate the purchase of an asset. Once they have moved enough funds into the credit card, they are able to make a purchase through that credit card. This may render the purchase less detectable when looking at a basic online banking interface, if there is no outstanding balance on the card afterward.
An individual with corporate accounts might also comingle deposits from their business accounts into their personal accounts. This makes it difficult to discern the exact source of the funds in the account and makes it easier for an individual to claim that any subsequent depletions out of their personal accounts are related to business matters. It is thus easier to disguise funds that are removed from a personal account to purchase assets, as simply paying back funds that are due to the business accounts.
Creation of New Accounts in Offshore Financial Centres
Individuals that are seeking to hide assets from their partner might open accounts in Offshore Financial Centres. These are jurisdictions that offer financial services to non-residents and are well-known for advantages such as a high degree of privacy regarding beneficial ownership of accounts, low taxation and little regulation. Some of these jurisdictions include Cyprus, the British Virgin Islands, Panama, the Seychelles, Belize, the Marshall Islands, the Cayman Islands, Bermuda, the Bahamas, Singapore, Hong Kong, Luxembourg, Jersey, Guernsey, the Isle of Man, Mauritius, Ireland, and the Cook Islands among others.
Once funds are transferred to accounts held in such jurisdictions, it is difficult to trace what happens to the funds afterward. As such, they provide an attractive way to pool funds from other regions, and then obscure purchases that may then be made with funds in the accounts afterward.
High Control and Secrecy regarding Bank Records and Passwords
If your partner has become controlling over their banking records or increasingly vigilant regarding not sharing their passwords for online banking- this could be a red flag. Behavioural indicators like this, on their own, may not necessarily mean that your partner is hiding assets. However, it is important to consider reasons why your partner may suddenly be changing the passwords to their online banking and why they are reluctant to share same with you.
If your partner has always been private about their finances, this may not be as relevant as a situation where they were previously open about this information, and have become secretive.
Overall, it should be noted that none of the above factors are determinative, nor does their presence absolutely indicate that your partner is hiding income or assets from you. Rather, these indicators should simply be viewed as red flags which may suggest that your partner’s finances warrant a deeper analysis. If you believe that your partner is exhibiting multiple of these red flags and you are considering separating or getting a divorce, we advise you to consult a licensed Family Law Practitioner.