Hidden Assets And Financial Misconduct: Signs Your Spouse Is Hiding Money In Divorce

When dealing with finances as part of divorce, there is an obligation on all parties to provide full and frank disclosure of their resources. Without this the court is unable to discharge its duty under section 25 of the Matrimonial Causes Act 1973.

It is only by undertaking this exercise of disclosure that the parties will understand their true financial position and the total sum of the matrimonial pot. You can then consider how best to divide this between the parties, remembering to account for all circumstances of the case and key influencing factors, such as minor children, earning capacity, and needs.

Failure to provide full disclosure can impede the ability to engage in meaningful negotiations, lead to increased costs or financial penalties such as costs orders, mislead the court and the parties and lead to unfair settlement agreements on separation.

Listed below are some examples of early indicators that a party may be hiding money in divorce. They are not definitive but can be considered as early warning signs for when non-disclosure may be an issue.

1. Unexplained delay or reluctance in providing disclosure

Parties will normally agree a date for disclosure to be mutually exchanged. If proceedings have been commenced, the court will direct the parties to exchange disclosure by a set date.

One of the first indicators that a party could be attempting to hide assets is when they seek to delay exchange or expresses a reluctance to provide disclosure, frustrating the discovery process. Efforts to delay or avoid disclosure could indicate an attempt to conceal assets.

2. Undisclosed income sources

Another common tactic used to hide assets is when a party conceals additional sources of income outside of what is documented. This can include income received in cash payments, rental income or inaccurate reporting by self-employed parties.

Exchanging full and frank disclosure is essential to ensuring a fair financial agreement.

Also Read: How to value a business in divorce proceedings?

3. Unusual bank activity

Unusual bank transactions, especially when coupled with ambiguous or unrealistic explanations can indicate potential non-disclosure. Examples of this can include large or frequent cash withdrawals; unusual investments; transferring funds to unknown accounts; and making unusual purchases in various sums. Transactions which cannot be traced or explained can indicate that your spouse is hiding money.

4. Undisclosed accounts

Parties can attempt to conceal assets by failing to disclose open and active bank accounts or through using offshore accounts. They can also hold accounts in other names (e.g. maiden name), or even jointly hold an account with a third party while indicating that they have no entitlement to the funds in the account.

These accounts may not be disclosed during voluntary disclosure or proceedings unless specifically requested. It is important to be vigilant about unexplained deposits or withdrawals which could be linked to hidden accounts.

5. Cryptocurrency

If a party were to suddenly commence investing in cryptocurrency, this may suggest an attempt to hide assets due to the difficulty in tracing such investments.

6. Passwords changes

Occasionally, parties choose to share passwords to accounts with their partners. They may also hold joint accounts and inadvertently have access to other accounts held in sole names. Altering or removing access to shared account passwords may signal concealment efforts. However, this may not always be the case as such actions can be expected when a relationship comes to an end.

7. Lifestyle changes

Drastic lifestyle changes, particularly where a party’s lifestyle does not coincide with their declared income, could indicate an attempt to conceal assets. For example, lavish spending whilst claiming financial hardship. While changes in lifestyle will not always indicate that there has been material non-disclosure, it can indicate that further investigation may be required.

8. Manipulating employee benefits

Parties can attempt to adjust their employment benefits or delay the timing of performance-based income, such as bonuses, to reduce the available funds in the matrimonial pot.

Although performance-based income is not always guaranteed, new or sudden adjustments to benefit schemes should be investigated to ensure that a party is not attempting to hide additional income.

9. Transfers and loans to family members or friends

Another common tactic of hiding financial assets is by transferring them to a family member or to a friend. This can be done through gifts, loans or even sales of property below market value. Any recent or sudden transfers of property should be properly investigated to ensure that the party has not attempted to hide assets.

If a party were to include an a previously undisclosed and unexplained loan to or from a family member or friend within their disclosure, this could lead one to suspect that they are attempting to reduce the available assets in the matrimonial pot through this manufactured loan.

It is important to ask questions and request supporting documentation to determine the validity of a purported loan.

10. Investing in Valuable assets

Another tactic used to conceal money is through purchasing assets such as art, jewellery, or cars and misrepresenting their value, by either undervaluing or overvaluing the asset to distort its true worth. It is important to consider obtaining professional appraisals for all significant assets to ensure accurate valuation.

Undisclosed assets can have a significant impact on the outcome of a financial settlement. Recognising these behaviours is the first step in addressing the issue of hidden assets during financial settlements.