Beyond the bank statement
The hidden complexity of cash tracing
When courts ask, “Where did the money go?” the answer often seems deceptively simple. A client has given money for an express purpose, and the assumption follows: They spent it on that. However, forensic accountants know that cash tracing is rarely that easy - and oversimplifying it can lead to incorrect outcomes.
How do people hide their spending?
Bank accounts may appear to offer a clear trail of spending, but they often mask the complexity beneath.
- Mixed funds: Personal, business, and third-party money often flow through the same account.
- Circular transactions: Money may be transferred between accounts to obscure its origin or destination.
- Timing mismatches: A payment may relate to a transaction that occurred months earlier.
For example, a payment to a shop may suggest a purchase. But forensic review might reveal the purchase was returned, the funds were redirected, or the transaction was used to launder unrelated income.
What does cash tracing actually involve?
True cash tracing goes beyond simply following the money. It involves a detailed and methodical approach to uncover the full financial picture.
- Source identification: Where did the money come from? Was it income, a loan, or a disguised transfer?
- Use verification: Identifying what the money was actually used for — not just where it was sent.
- Transfers between accounts: Mapping the movement of funds across multiple accounts and entities.
- Contextual analysis: Understanding the purpose, timing, and relationship between transactions.
This often involves reconciling bank records with invoices, contracts and emails.
Why does it matter in litigation?
In family law, cash tracing is critical for uncovering hidden assets, undisclosed income, or improper dissipation of marital funds. A spouse may hide money by transferring to offshore accounts, or they could be making luxury purchases inconsistent with lifestyle claims.
In commercial litigation, tracing is essential in fraud, breach of fiduciary duty, and asset recovery cases. Misappropriated funds may be disguised through shell companies, layered transactions, or false invoicing.
The value of a forensic accountant
It can be easy to assume where money has gone based on the situation. However, the bank accounts can show a completely different story.
For example, if an individual has given £500,000 to someone under the express condition that it is used to purchase property and then that person later does purchase the property, it would be easy to assume that was using the individual’s money. However, while that is a logical assumption, it does not necessarily mean they used that money for the purchase. Bank tracing in principle involves tracing money when it has come in to where it goes out next on a first in, first out (FIFO) basis. Therefore, that money could have been used for other purposes prior to the purchases of the property.
Using a forensic accountant can help strengthen the case, maximise opportunities for recovery and meet the evidentiary standards of court.
How we can help
Our Forensic Services team have experience in cash and asset tracing for a wide range of purposes, including but not limited to fraud investigations and divorce proceedings. For further information, please contact your usual Crowe contact.
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