How to Identify Financial Fraud in Divorce & What to Do About It

Going through a divorce is one of life’s biggest obstacles. Not only are you having to deal with heartbreak and loss (and yes, it is still a loss even if it is you who initiated the divorce), but there are also a lot of other things you need to figure out.

One of the major points of contention in a divorce is, of course, money. Deciding on a fair way to divide up your assets isn’t as simple as splitting them down the middle. There are a number of different factors that are taken into consideration in this decision. For instance, one spouse may be the main breadwinner, but the other spouse may have given up their career to raise their children. Or maybe one spouse came into the marriage with a significant amount of savings while the other was deep in debt.

Unfortunately, there is no set of rules or laws that one can refer to when it comes to these decisions. Ultimately, it is up to the separating spouses and their attorneys to come to an agreement about how to divvy up the assets. But that’s not all, decisions also will need to be made regarding child and spousal support.

Before any discussions regarding finances must be made, both spouses must put all their cards on the table. This means declaring all their financial matters such as income, assets, etc. However, if there is any concern that one of the parties is hiding money or not being entirely truthful, this needs to be investigated!

How to Spot Signs of Financial Fraud

If you are suspicious that your spouse may be hiding something at the time of your divorce negotiations, think back to your marriage. Chances are that the beginning signs of mistruth began way before you began speaking of separation.

For instance, if your spouse was prone to being secretive in their money matters or overly controlling with your financial matters, such as restricting access to accounts/statements, it is likely a sign that they are trying to keep you in the dark. Further proof of financial fraud is if they have a history of lying, especially about money. They may also tend to make a large number of cash transactions so as not to leave a paper trail or move cash around constantly to confuse you.

If you’ve been coerced to sign legal documents that you aren’t allowed to read or don’t understand, talk to a lawyer immediately. Premarital affairs and/or other financially irresponsible habits such as gambling or drugs are also reasons to be cautious.

A couple of red flags don’t always mean that your spouse is committing financial fraud, bit it is reason enough to dig deeper and find out if there are more signs that point to hidden money or improper spending. The more of these signs you catch, the more likely it is that there is fraudulent behavior going on. Here are some things to check up on:

  • If they have bank accounts or credit cards you never knew about
  • If they have a separate stash of money, in case you have joint finances
  • If valuable assets seem to have suddenly disappeared

What to Do If You Suspect Financial Fraud in Divorce?

Before you agree to go forward with a divorce settlement or trial, make sure that you are aware of the full picture – financially speaking. Take matters into your own hands and begin gathering all the information you can about your finances.

This includes having statements from bank accounts, credit cards, investment accounts, retirement accounts, and any other accounts that you may have individually or share with your spouse. If there are any accounts that you don’t know about or don’t have access to (since you are not registered on them), your attorney will be able to get the documentation for them as part of the discovery phase of your divorce proceedings.

There are 3 main ways to find out the financial facts about your marriage and divorce:

Look at the Numbers Yourself

The initial investigation into your financial matters can be done by yourself. This way, you can reduce the billable hours of an attorney or forensic analyst. Start by gathering all your documents and organizing them in a way that you can understand them. Go through each transaction and mark ones that seem suspicious.

If there seems to be a lot of suspicious financial activity, then you can go to your lawyer, who will then advise you on how to proceed.

Ask Your Attorney to Look Over Your Finances

Experienced divorce lawyers have likely seen and dealt with numerous divorces, which gives them a better idea of how to spot financial fraud. They should be able to give you an initial assessment of the financial statements, regardless of whether they are a pro at numbers or not. They should also be able to advise you on whether there is a need to hire a forensic accountant if they feel like there needs to be further analysis made into the finances.

Hire a Forensic Accountant

Forensic accountants are sharks at drawing out information about money, regardless of where it is hidden. So, if you suspect that there may be financial fraud going on in your divorce, or if you suspect that your spouse isn’t being truthful about money matters, a forensic accountant will be able to determine one way or the other.

However, keep in mind that these experts charge heftily for their services, so you should be prepared to pay upwards of $10,000 for it. However, even with such high charges, their hourly rates are still probably lower than your divorce attorney’s – so be prepared to part with a chunk of change no matter what!

At The End

Divorce is devastating, but it doesn’t mean you have to lose everything. Be smart about the choices you make and make sure that you are fully informed about your financial situation. Otherwise, how will you make sure that the settlement offer is fair?

If you think you have spotted some of the red flags mentioned above, be extremely vigilant. However, keep in mind that they do not automatically prove that your spouse is committing financial fraud. An amicable divorce is best for everyone, especially in case you have children, so try to keep the proceedings as civil as possible while also making sure to protect yourself and your future.