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I am interested in learning about financial asset discovery / forensic accounting. In particular, I'm curious as to how an investigator would locate a 'hidden' investment account. By this I mean an account that has not been disclosed upfront, is not listed on any tax returns, and has not received direct payment from the targeted individual's bank accounts or employer.

Is there a centralized (for the USA at least) database of investment accounts that is easily subpoenaed for records? In my research I've found plenty of forensic accountants offering their services to find accounts like this, but no explanation of the specifics of the process or what is done to locate them.

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Obviously, there are more possibilities than can be covered in this sort of forum. There are entire books on forensic accounting.

At the most basic level, though, if you're trying to hide assets, you have to move them from a known account to a hidden account. That's going to mean that there is a very high probability that there is a transaction from one of the target's known bank accounts into this unknown account (though the money might flow between multiple interim accounts first). So the simplest first step is to trace all the outbound transfers looking for something that isn't what it appears to be. For example, if Mr. Moneybags has regular transactions to Frank's Fabulous Fly Fishing, a forensic accountant would want to determine whether that is actually a legitimate business or a front company, whether the amounts made sense, etc. If Moneybags is going to be hiding money, the simplest route is to set up a company that looks legitimate but that he controls, and transfer money there regularly.

If you're opening a personal account in the US, you're going to be furnishing the bank with your Social Security Number and the bank is going to be reporting your interest, dividends, and capital gains to the IRS. So you'd have to report those accounts on your taxes. If you want to hide money from the IRS (which is a really poor plan), you'd be doing things like opening offshore accounts in countries with weak banking regulations, likely owned by companies that you control without having to be listed publicly. Even if you open such an account, though, you have to get money into it which generally means that there are transactions an accountant can follow. If they look at Frank's Flyfishing and find that it's a shell company incorporated in the Cayman Islands with murky ownership, that's a pretty good clue that Moneybags is funneling money into that particular offshore account. You can then use the legal system to either get more information about who owns that account or to get that account's financial transactions to see whether the money is staying there or getting sent along to other accounts before ending up in an account that Moneybags does control.

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  • "the bank is going to be reporting your interest, dividends, and capital gains to the IRS" -- but what if you choose an account that pays no interest? Not a ridiculous thing to do right now when interest rates are quite low to begin with.
    – nanoman
    Nov 25, 2019 at 21:20
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    @nanoman - Sure. You can hide money in a checking account that doesn't pay interest and avoid the IRS reporting. But there is still a trail of payments to the account from an account you control and the fact that the account is under your SSN makes it really easy when someone supeonas the bank's records. You're much better off with an offshore account or at least an account for an incorporated business that will be harder to track. Nov 25, 2019 at 21:47
  • What if the money never went through any of their (non-hidden) accounts to begin with? For instance, suppose Mr. Moneybags performs services for Frank "off the books" and Frank transfers the money directly (or indirectly) to the hidden accounts? Since Frank never shows up in Mr. Moneybags accounts, it seems like if he is really careful and Frank is really discreet, nobody can link him to Frank.
    – user12515
    Nov 26, 2019 at 0:00
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    @Michael - Sure, that makes it more difficult. If Frank is going to be discreet, that implies that he's close enough to Mr. Moneybags that he knows there is something shady going on and is willing to participate which means that he's close enough to be an audit target. Generally, someone else is going to know that Moneybags was working with Frank and Moneybags is going to have expenses related to the work that will show up and can't be mapped to a known job. But, yeah, there are way more options than can be discussed exhaustively in this forum. Nov 26, 2019 at 1:14
  • Thank you for the detailed response. I understand that it's a massive topic with many books written on the subject, so the overview that you provided was most useful. It seems that the answer to my direct question of 'is there a single government database of all financial accounts in the USA' is a solid 'no' but I see some of the basic steps that a forensic accountant would begin to follow in order to begin the process.
    – Brian R
    Nov 26, 2019 at 14:51

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