What is Financial Fraud

For many people, the financial aspect of their divorce is one of the most stressful. There are many questions that come up regarding what marital assets are available, what debts have been incurred, and how the two individuals are going to be able to afford to live separately. One member of the couple may feel out of their element when dealing with finances and have more questions and concerns in this area than their soon-to-be ex-spouse. The fear that arises can lead to the feeling that their spouse is hiding something … sometimes this is true, others not … but a trained financial professional can help to discover the truth.

Financial Fraud. Wow, that’s a scary phrase. Financial Infidelity. That certainly can push some emotional hot buttons. So, let’s get down to defining what those terms are and the differences between the two before we talk about how to deal with them. Fraud, in any circumstance, is defined as “wrongful or criminal deception intended to result in personal or financial gain”. The key word here is criminal. The most common types of financial fraud are tax evasion, money laundering, embezzlement and insider trading. More often than not, these are not the types of things that happen during a divorce. On the other hand, financial infidelity which is defined as the act of hiding money or information about money and finances from the other spouse, does happen more than you think. Common activities include having a separate, previously undisclosed savings account, wracking up huge amounts of credit card debt on a personal card and losing money because of gambling or addiction.

There are definite red flags of suspicious behavior that can point to financial infidelity. Is your spouse very controlling over the household finances and spending? Is your spouse suddenly engaging in very expensive habits or hobbies? Is there a history of lying about money? You may feel a bit paranoid. Understandably so. Have you noticed that there are a lot more “cash transactions” than in previous years? Is money moving around from account to account making things more confusing? Are statements coming in the mail from banks and credit cards that didn’t exist before? Have valuable assets suddenly disappeared?

Taking control of the situation is essential and the first step is to hire a financial professional … a CDFA (Certified Divorce Financial Analyst) or a Forensic Accountant to help you get to the bottom of it all. This individual will act as your financial advocate and be there to help uncover whether there is financial infidelity or fraud and work with your legal team to best serve your interests. The financial professional will need as much back-up documentation as possible in order to help you figure the puzzle out and put together the right picture. Copies of statements from bank accounts, financial accounts, credit cards and retirement accounts will create a paper trail that can lead to the answer you need in order to be prepared when you sit down at the negotiating table.

If you feel that you are the victim of financial fraud or financial infidelity, please contact me for a free consultation at 516-234-7522.