And victims can't necessarily rely on government agencies. "Their resources are limited," says Wielebinski. Moreover, the priority for law enforcement agencies is to catch the perpetrator so he or she cannot commit additional crimes. For asset recovery experts, the top priority is finding and recovering client money. Wielebinski says he and his colleagues have good relationships with foreign law enforcement agencies and often share information with them, but his focus is on making his clients whole, or as whole as possible under the circumstances.

The Art Of The Steal
Baltimore-based private equity veteran Jim Little, who runs a fund that raises money to underwrite the cost of finding, seizing and recovering stolen assets, says that about 40% of the institutions and wealthy people he's talked to have lost money to fraud. "Sophisticated investors get hit too. They're chasing alpha and that comes with risk. They invest based on trust," he says.

The ACFE's 2012 study estimated that the average organization loses 5% of its revenues per year to fraud. Advisors who serve business owners and family offices might want to encourage their clients to conduct periodic fraud audits.
To avoid fraudsters, advisors may want to suggest that clients do more business with women. The ACFE says men account for about two-thirds of all fraud cases. The association also reports a strong correlation between a crook's level of authority and the significance of the losses. Owners and executives are responsible for losses about three times greater than managers. Managers cause losses about three times higher than employees. The longer a fraudster works for an organization, the larger the losses tend to be.

About 54% of all perpetrators are between the ages of 31 and 45. However, the magnitude of the loss rises with the age of the fraudster. Those over 60 are responsible for the highest losses.

The ACFE's findings comport with other studies indicating that male executives over 60, with graduate degrees (especially in accounting and finance), have a distinct advantage when it comes to committing and concealing large-scale financial crimes. Wielebinski says he's "amazed at how bright some of the fraudsters are. They have to not only understand how business, banking, finance and accounting work, they [also] have to lead a double life where they remember all the things they've done illegally and keep track of it all. They or their accomplices can be quite intelligent."

Crime Pays (For Investors)
Echemus, the private fund that Little manages and co-founded in 2009, has projected annualized returns in excess of 20%. Little oversees a portfolio of claims in 15 countries worth an estimated $4 billion. His co-founder in Echemus is renowned Canadian asset recovery lawyer Martin Kenney, who is based in the British Virgin Islands, in part because the proceeds from so many frauds are hidden in the Caribbean.

Third-party funders take a percentage of the assets reclaimed in exchange for financing the recovery process. Echemus receives an average of 30% of the amount it recovers.

"A lot of people who've been defrauded don't have any money to recover the value that's been stolen from them because their adversaries have all the money," says Little. Third-party financiers like Echemus, which often provides funding to FraudNet members, can help fill this gap. "We want the victims to get restitution first and foremost. If we make a healthy return along the way, everybody, including the victims, will be satisfied that it's OK to do well by doing good."

Echemus has about $30 million in AUM. The fund is open to accredited investors for a typical minimum investment of $500,000. The investment return cycle is usually three to five years. Little says investors include institutions and high-net-worth individuals.  

Funds like Echemus that finance asset recovery differ from funds that finance commercial litigation. For commercial litigation funds, the major challenges are assessing the liability, the amount of damages and the collection risks, before investing in a particular case. (For a discussion of how litigation funds model these risks and an introduction to some of the funds available to investors, see Courthouse Investing in the May/June 2011 edition of Private Wealth.)