How a woman moved $1.2m to relatives to hide cash from ex-spouse

Hiding your money from creditors or former spouses by transferring it to relatives might seem a crafty move but a woman in Singapore who ferreted away more than $1.2 million found out the hard way that it’s a fool’s errand.

The woman was determined to prevent her spouse from getting a share of her large stash of savings, so she transferred huge sums to her relatives around a year before the marriage ended.

The gambit relied on her coming up with plausible reasons why she was transferring what was in effect matrimonial cash.

One ruse involved her claiming that she had borrowed large sums from her relatives and was now paying them back with a transfer of $440,000 to her brother, $210,000 to her sister and $162,000 to her father.

She was able to produce bank records for these transfers and statements from her relatives who supported her claim that the funds belonged to them.

Another $445,000 was moved elsewhere but since there was no document to show how this sum was used, the High Court returned it to the matrimonial pool for sharing.

When the case went before the Appellate Division of the High Court, the whole sum of about $1.26 million was added back to the matrimonial pool because the woman could not prove that she was repaying loans to relatives.

The relatives, for their part, could only make bare claims that the funds were theirs. They could not produce evidence, such as bank records, showing conclusively that they had such sums in their accounts before the couple’s marriage hit the rocks.

This case provides a compelling lesson that when it comes to money, it is very hard to make a case with just verbal claims that are not backed with genuine documents.

This is because “returning money to relatives or friends” is perhaps the most common ploy used by many people to divert cash from creditors or former spouses.

Some even go to the extent of drafting loan agreements as proof that there was such a debt that needed to be paid.

But fake deals rarely withstand scrutiny because the parties cannot show the initial transfer and deposit of funds to the supposed borrowers. Similarly, when you owe money, there should be bank statements reflecting repayments as proof that the loan is genuine.

Here are three observations from the appeals court on how the finances of divorcing couples are examined.

Hard to erase paper trail

All assets acquired during a marriage are meant to be shared and the total amount can add up, especially in long unions.

In this case, the couple, who both held executive positions, had accumulated about $4 million worth of matrimonial assets that were liable for sharing.

When the case came up for hearing, the husband cried foul because more than $1.2 million that was kept in the wife’s account went missing in 2018, not long after the couple contemplated getting divorced.

The wife produced “piecemeal” bank statements in 2019 to show that her relatives had deposited large sums into her account and that she was merely returning these in 2020 and 2021, after the break-up.

The court did not inquire about the reasons for the transfers but pointed out that the wife should have been more transparent in disclosing her full bank records to show the state of her accounts prior to these transactions.

Appeal Judge Debbie Ong noted that the wife produced only selective bank statements, ones favourable to her claim.

Without a full bank record, the court could not rule out the possibility that the wife was merely moving her own money back and forth with the help of her relatives.

If the wife already had such amounts in her account and then moved the funds to her relatives, the 2019 bank statements showing these relatives sending her money could well be nothing more than a record of them returning the wife’s own cash.

Justice Ong noted that it was telling that the relatives did not produce their own bank statements to prove the money was originally theirs.

As the wife did not make a full and frank disclosure to make her case that she was merely returning money to her relatives, the court ruled that the $1.2 million that was in her bank account before the divorce would be deemed as matrimonial assets up for sharing.

But her act of trying to dissipate her funds was not without any consequences.

Although the cash was returned to the pool for sharing, this sum would not be counted as part of her direct contribution to household income.

This meant that her overall share of the assets would not go up significantly, even though the bulk of the cash came from her.

In addition, the husband was given an extra 5 percentage points in his overall share as a result of the “adverse inference” against the wife for trying to hide her money.

Losses in investment

If you dabble in the stock market, the total value of your investment is unlikely to remain the same due to changing share prices.

When the interim judgment for the couple’s divorce was granted in 2021, the value of the husband’s investment account was around $240,000.

By the time of the hearing at the end of 2023, he claimed that he had lost close to half of his investment, which meant less money for sharing.

The wife argued that the account had a lower balance because her husband had cashed out.

But account statements showed that the value of the assets had dropped due to market forces, without any material movements or changes in the total amount of stocks.

So the court found that the fall in value of the investment account was caused by “the very poor performance of the underlying investments”, rather than by any act of wrongful dissipation by the husband.

As a result, the court put the value of the stocks at about $130,000 – a decline of 46 per cent from the original amount.

Division of assets 

Before the court ruling, the couple’s assets were valued at about $3.67 million. From this amount, the wife was supposed to get 55 per cent and the husband 45 per cent.

But after taking into the account the funds that the wife had sought to hide and the loss of the husband’s investment, the new total became $4.37 million.

The wife’s percentage dropped to 54 per cent as the “dissipated fund” was not credited to her while the husband was given a 46 per cent share.

He was also awarded a further 5 percentage point “uplift” due to the wife’s conduct, so his share increased to 51 per cent, or about $2.23 million.

His wife received $2.14 million, or 49 per cent of the assets.

While it is may be human for divorcing spouses to be bitter and count every dollar when love is lost, they should avoid unfair tactics which tend to backfire anyway as it is not easy to sweep financial records under the carpet.

Tan Ooi Boon is the Invest Editor of The Straits Times.

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.

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