Hidden Assets and Forensic Accountants: Tracing the Money in Family Law

In family law proceedings involving property settlement, full and frank financial disclosure is not just a formality – it is a legal obligation. Yet, in many matters, one party suspects the other of hiding or undervaluing assets. Whether it is an undisclosed bank account, a conveniently forgotten cryptocurrency wallet, or assets diverted through trusts and corporate structures, allegations of concealed wealth can significantly complicate litigation.

Legal Duty of Disclosure

Under Rule 6.06 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, parties must provide full and frank disclosure of their financial circumstances. This includes income, assets, liabilities, superannuation, financial resources, and any interest in trusts, companies, or partnerships. The duty is ongoing and continues throughout the proceedings.

Failure to comply can result in cost orders, adverse credibility findings, or even the setting aside of final property orders under section 79A of the Family Law Act 1975.

Common Methods of Concealment

Hidden assets can be concealed in various ways, including:

• Transferring assets to family members or third parties before separation

• Underreporting income from businesses or cash-based work

• Failing to disclose bank accounts or investments, including overseas holdings

• Using company structures to retain control of assets while distancing personal ownership

• Purchasing cryptocurrencies and failing to list them in financial statements

Uncovering these tactics often requires more than just standard disclosure requests. This is where forensic experts become critical.

Role of Lawyers and/or Forensic Accountants

Legal Representatives and, particularly, Forensic Accountants bring an investigative lens to family law disputes.

While your lawyer may assist you in reviewing and examining the other side's bank statements and financial disclosure documents, further in-depth work may need to be done by a forensic accountant to attend to the following:

• Tracing the movement of funds between accounts

• Analysing tax returns and financial statements for discrepancies

• Valuing businesses or interests in complex corporate structures

• Identifying patterns inconsistent with disclosed income or assets

• Preparing expert reports admissible in Court

Forensic accountants can be appointed by a party or jointly by both parties as a single expert under the rules of evidence. A forensic accountant's report can carry significant weight in court, especially when credibility is at issue.

Case Law Insight

In a case of Black and Kellner [1992] FamCA 2 the husband’s failure to provide full and frank disclosure of his financial circumstances, including his income, materially impeded the trial judge’s ability to accurately identify the full asset pool available for division. His deliberate non-disclosure also obstructed the Court’s proper assessment of the parties’ respective future needs.

As a consequence of his conduct, the Court reduced the husband share and awarded him only approximately 6.3% of the known net asset pool by way of property settlement. This decision highlights the seriousness with which the Court approaches the obligation of disclosure and illustrates that a party who breaches this duty may face significant adverse consequences, including a markedly reduced share of the matrimonial assets.

Practical Considerations for Clients

Clients suspecting non-disclosure should:

• Inform their legal representative early

• Retain copies of relevant bank records, tax documents, and emails

• Note any changes in lifestyle inconsistent with declared income

• Consider engaging a forensic accountant at the interim stage

A party suspecting non-disclosure should be alert to red flags, especially in high net worth or self-employed cases.

Conclusion

In the quest for just and equitable property division, transparency is paramount. Hidden assets not only breach legal duties but risk undermining the integrity of financial settlements. Lawyers and Forensic accountants serve as a vital tool in levelling the playing field and ensuring that each party receives their fair entitlement.

When suspicion arises, proactive investigation combined with strong legal strategy can make all the difference. Proactive and urgent action is often necessary in these cases and we encourage you to contact our office as soon as possible for a free initial consultation.