Asset recovery is booming, with real growth over the past decade due to increasingly sophisticated tracing mechanisms and large volumes of major frauds. The practice is “so international now it is virtually global” reported interviewees, who observed, “Asset recovery work gets more complex by the year as fraudsters become ever more sophisticated.” In the face of this growing complexity, heightened regulatory requirements and new challenges posed by cryptocurrencies, the need for expert legal advice is greater than ever.
Jurisdictions such as the UK, the US and number of offshore markets have been leading the way as litigation centres and have long been home to a number of skilled practitioners and well-developed case law. More recently, market sources have observed “an awakening in countries where people hadn’t thought about asset recovery before; where people are now utilising global asset recovery tools and strategies as a way to level the playing field”. They cited India, Brazil and Central European countries as examples of such jurisdictions. Furthermore, interviewees noted that “work in Latin America has grown exponentially over the last few years” with high-activity jurisdictions including Brazil, Colombia, Argentina, Ecuador and Venezuela.
Market sources observed that “social and political factors drive the litigation cycle” and this accounts for varying volumes of work for asset recovery lawyers worldwide. In the UK, one practitioner posited that “Brexit is not likely to be pertinent because of the nature of our practice and the kinds of clients we have, who tend not to be domestic clients.” However, “sanctions coming out of Russia may have a knock-on effect on a number of City of London practices, though it is hard to predict whether this will increase the number of disputes or reduce that workflow” reported another.
In Russia, the nationalisation of three out of the country’s four major private banks has given rise to high volumes of work as large quantities of assets, both inside and outside of Russia, are recovered from former stakeholders in order to address deficiencies in the banks’ balance sheets. Similarly, in Ukraine “the major trend is the recovery of assets stolen and withdrawn from Ukraine”, and “the market is very active in trying to recover these assets”. Lawyers from jurisdictions including the UK and Austria have reported “a busy financial industry with respect to these countries, as a lot of past transactions may have been critical to helping Russian or Ukrainian banks to transfer money into offshore companies. There is a significant amount of work to be done in this area.”
Brazil has also been an area of high activity. The Car Wash Scandal involved “huge funds transferred and hidden around the world”, and practitioners ranging from Switzerland to the Bahamas have been kept busy with wide discovery orders. Meanwhile, South Africa continues its anti-corruption drive. Lawyers told us that “the state capture narrative has put a lot of focus on state-owned entities. There are allegations of a lot of wrongdoing in terms of corruption and fraud, and this is keeping the legal market very busy”.
In some jurisdictions, by contrast, “the fraud element has come off the boil” as many long-running investigations have been concluded. However, “It will only be a matter of time before the next bad actor pops up and generates work,” reported one practitioner in the Cayman Islands.
As regulators around the world tighten their controls on fraud and money laundering, practitioners predict that this “may cause incidents of cross-border fraud, with money passing through these more heavily regulated jurisdictions, to drop”. Transparency is a hot topic, and the BVI is “under huge pressure with beneficial joint owners”. The UK has recently passed legislation that will require British Overseas Territories including the BVI, Cayman Islands and Bermuda to make public its beneficial ownership registers. If the names of company owners became readily available, practitioners told us “this would result in a litigation boom, before companies move to more friendly jurisdictions”. Meanwhile, Panama is “now a more transparent jurisdiction and there is more financial information available, which goes hand in hand with heightened compliance requirements.” With this in mind, “courts have become much more open to piercing corporate veils and to going beyond banking secrecy”, one practitioner told us.
Meanwhile, technical advances and the emergence of the digital economy have “changed the model” for fraudsters and asset tracers alike. Cybercrime will “undoubtedly be a growth area” and practitioners “receive inquiries from around the world” for assistance with digital cases. Tracing cryptocurrencies “raises unique and interesting issues”, as it is extremely difficult for claimants to identify who is responsible for the money laundering and to trace funds. Platforms and exchanges for trading in these currencies are not yet centrally regulated and often disclaim their liability for security measures. Practitioners report that they are “seeing a lot of victims who have been defrauded in this way” and are certain that “there will be a lot of cryptocurrency work in the next few years”.
Other emerging trends include jurisdictions around the world becoming “much more aggressive in the enforcement of international judgments”. This has been a key shift in locations including the UK and Turks and Caicos. Enforcement “sits side by side with asset recovery”, say lawyers, in recognition of the fact that “a judgment is not worth anything until you can recover some assets”. Some forensic accountants we spoke to have noticed “more thought given to the asset tracing investigations at the early stages of the dispute process, which can only be a good thing”. Litigation funders in particular are adopting pre-litigation asset assessments at the outset of a dispute, in order to inform the entire decision-making process. One forensic expert told us, “We’re increasingly brought in by law firms at the early stages of a dispute to produce asset profiles before litigation. This is a positive trend as it enables us to help drive the litigation and investigation strategy.” However, practitioners note that “it is still common for enforcement not to be given as much thought as it should during the litigation process”.
In terms of judgments, “the courts appear to be far more prepared and creative in their thinking when dealing with disputes”, as one UK-based practitioner put it, although it is a trend that is being mirrored in courtrooms around the world. The offshore litigation market has been “booming” with the Cayman Islands seeing a noticeable increase in trust litigation, while BVI is “becoming a trial centre”. In the words of one interviewee, “Litigants are not afraid to come to the BVI and litigate complex cases that would have otherwise ended up in the UK or US courts.” The main reason given for this is that many parties are being put off by the “high cost of litigating in the UK and US”, resulting in “litigants now looking for other jurisdictions where such legal battles can be held and where they can still get the same quality.” That being said, UK lawyers also reported an uptick in contentious work, reflecting the overall increase in disputes around the world.
It is well recognised that “asset recovery has developed more and more into a specialisation”, and as a result there is a “nucleus of people doing this work”. As the field becomes increasingly complex, commentators are telling us that “good work is becoming more concentrated in the hands of relatively few practitioners”. Due to the cross-border reach of asset recovery work, many firms’ primary competitors are not in the same city or country, and lawyers and firms must cooperate to coordinate global work. However, perhaps due to the sorts of conduct asset recovery lawyers seek to counter, when interviewees were asked to describe the competition between law firms in the market, the response was one primarily collegial in nature. In the words of one lawyer, “Sharing experiences and updating each other on our own jurisdictions enables us to be much more effective in ensuring wrongs are addressed.”
Asset recovery is a growth area in the legal market, and offshore markets such as Bermuda are receiving a lot of new and well-established entrants. Boutique firms are “springing up” in jurisdictions such as the UK, US and Russia, as partners from large law firms move to more specialist practices. Abundant work provides ample opportunities for large and boutique firms alike. In this area of law where cases are almost inevitably multijurisdictional, firms rely on a global network of offices or robust relationships with local firms in order to serve clients effectively. “Clients are so savvy”, say sources, and in the face of new challenges “are rushing to quality and stability” when selecting legal representation. Reputation therefore plays an important role, as “there is nothing like experience to enable lawyers to know where and how to get things done”.
Recent high-profile discoveries of major frauds and corruption activities across jurisdictions worldwide have focused regulatory activity in this area, and governments the world over are tightening regulations and placing an increased emphasis on compliance in order to reduce such incidences. Issues such as cryptocurrencies and the digital economy continue to pose challenges, and require practitioners to adapt in order to address the heightened risk of fraudulent activity. The increasingly complex and international nature of the work makes this a “dynamic and multidimensional” area of law.
In the past year, practitioners the world over have been “busier than ever”. They told us of “increased diversification” within asset recovery practice, where “asset recovery cases are now so much broader and encompass matrimonial and commercial disputes, insolvency and trust litigation, as well as the more typical fraud and corruption cases”. Asset recovery tools are now being used by individuals and companies in a much larger range of geographies to address these multi-jurisdictional issues. Having highly skilled counsel in these jurisdictions is more important than ever, and our listings now feature individuals in 83 jurisdictions worldwide.