A few years ago, a husband and wife filed for divorce. After that, the woman accused her husband of underreporting his cryptocurrency holdings.
With the court’s authorization, the forensic accountant working on this divorce case went to the husband’s house to investigate. After searching his laptop, he found a digital wallet containing roughly $700,000 of the cryptocurrency Monero.
Your husband or wife may not be a savvy crypto investor (or maybe they are), but anybody can turn into a fraudster, and anyone can suffer from financial fraud in divorce.
Dr. Cressey, the creator of the “Fraud Triangle,” theorized that there are only three elements that must be present for a person with no criminal history to commit fraud:
- Opportunity – The person believes they can commit fraud without being caught.
- Pressure – The person feels pressured because of a problem they believe they cannot share with anyone.
- Rationalization – The person doesn’t believe their act to be a fraud. They rationalize their action and view themself as an honest person caught in a bad set of circumstances.
Hence, everybody can turn into a white-collar fraudster, given the circumstances.
Do you feel you’re getting cheated out of your fair share by your spouse? But is it for real, or are you just being paranoid?
In this article, we share eight red flags of financial fraud in divorce to beware of and steps you can take to avoid getting scammed.
Red Flags of Financial Fraud in Divorce
Red flags are warning signs informing something is wrong. If you can interpret these well and early, you’ll have a greater chance of protecting your finances in the face of a divorce.
Behavioral Red Flags
- Control Freak – When it comes to financial matters, your spouse is turning or has turned into a control freak to the point that they have restricted your access to bank accounts or financial statements.
- Secrecy – Your spouse is secretly making transactions from bank accounts. If you catch them in the act, they refuse to explain what’s going on and why.
- History of financial infidelity – Your spouse has a history of lying, especially about money. For example, they may have lied about their income, hidden significant debt, or kept a secret bank account.
- A knack for manipulation or coercion – Your spouse is asking or forcing you to sign legal documents without giving you time to read and understand the information.
- Extra-marital affair – Your spouse is involved in an extra-marital affair.
Financial Red Flags
- Giving money to friends or family – In the name of helping friends or family members, your spouse is stashing the money in their accounts while using shared funds to pay for everything.
- Transfers of property or shares to children/ family members – Your spouse is trying to or has already transferred assets you thought you owned as a couple to other family members.
- A sudden “drop” in income – Your spouse may inform you that their income has considerably lessened, and they cannot uphold the lifestyle you previously had as a couple.
Remember, if you witness a few of these red flags, it’s likely not a matter of concern. But, it’s still a good idea to talk to your spouse if you have any questions regarding their behavior and attitude towards finance.
A high probability exists that you will be defrauded of your share of the money if you notice most of these warning signs.
What to Do
Vigilance is the best way to avoid getting defrauded in divorce.
Maybe you haven’t been strict with your finances in the past, which has led to this concern. However, it’s not too late to take back control if you have yet to agree to a divorce settlement or your case has yet to go to a trial.
Identify all of Your Assets
Firstly, identify how much money you have and where it is. Next, clarify which assets (mortgages, bank accounts, investments, and other assets) are in your name, which belong to your spouse, and what you hold jointly.
Separate Some Liquid Asset
If you share a joint account, it’s time to separate what you need. Set up an individual account and move a certain amount of money over. But don’t wipe out the account – only take what you need to cover your monthly expenses until attorneys can get involved.
Monitor Your Credit
If you share credit accounts, a lot can go wrong. Like, your spouse can run up loads of credit card debt without telling you, for which you may be liable. If they’re an authorized user on your credit card, they can rack up debt and leave you with the obligation. Your spouse can also use your personal information to commit credit fraud, taking out debts in your name.
So, if your joint credit cards don’t have a balance, contact the card company and close the accounts. Your spouse must be on board with the decision, so let them know and get their permission before closing any shared accounts.
If you have joint credit card debt, prioritize paying them off, then close those accounts, too.
Also, remove your spouse as an authorized user from any cards in your name. If you’re an authorized user on your spouse’s card, cut up your copy and remind them to remove you from the account.
Work with Your Attorney
Hire an attorney and work together to gather all the financial statements for all the bank accounts, credit cards, investment accounts, and retirement accounts you know of and print everything out.
There may be accounts you don’t know exist or know but need access to. Your attorney can get the documentation from them through the discovery process of your divorce.
After assembling all the data, examine the numbers to determine whether or not to hire a forensic accountant as the next step.
Hire a Forensic Accountant
Forensic accountants are experts at sniffing out hidden money and assets. They conduct a thorough investigation, review the information available, conduct a financial analysis, and present their findings to the client, the attorney, and possibly the court if the case is not settled before trial.
But, their power comes at a significant price – upwards of $10,000. So, before going down this road, analyze your spouse’s finances and assets and ensure you have enough reason to believe your to-be ex is pulling a curtain on your share.
Divorce is a crippling situation that can haunt several aspects of your life. But if you can get a fair settlement, you’ll have a higher chance of getting your life back on track.
Just be vigilant, keep your eyes open for red flags, and follow the abovementioned steps.