The doctrine known as "backwards tracing" operates where victims seek to trace and recover the proceeds of the fraud where no direct connection can be established between the funds lost and the funds found in the hands of the fraudsters.

The Privy Council in Jersey in Federal Republic of Brazil eta l v. Durant international Corporation et al, (2015) UKPC 35, considered a claim brought by the Municipality of San Paulo against two BVI companies (Durant and Kildare) which held bank accounts with banks in Jersey. The companies were connected with the former mayor of San Paulo who was found to have received more than $10 million in bribes in connection with a major road building project. The plaintiffs sought to trace the funds held by Durant and Kildare in Jersey in order to recover these secret payments. The funds had been transferred through a bank account in New York (the "Chanani account") where they were commingled with other funds before reaching Jersey. The Royal Court of Jersey held that Durant and Kildare were liable as constructive trustees for the whole $10 million which could be shown to have flowed into the Chanani account, but where only $7.7 million could be directly identified in the Jersey account.

The Privy Council noted that traditionally English court's view was that backwards tracing could not exist because the concept of tracing involved identifying a new asset as a substitute for an old one. However, the Privy Council held that "the development of increasingly sophisticated and elaborate methods of money laundering, often involving a web of credits and debits between intermediaries, makes it particularly important that a court should not allow a camouflage of interconnected transactions to obscure its vision of their true purpose and effect." It should not matter if debits and credits correspond where a court is satisfied that the various steps are part of a coordinated scheme. The court decided what is required is a coordination between the depletion of the trust fund and the acquisition of the asset which is the subject of the tracing claim, while looking at the whole transaction, to warrant the court attributing the value of the interest acquired to the misuse of the trust fund.

Thus, creditors should not be perturbed if a formal tracing exercise has been hampered by the fraudsters. There is still a means to recover by "backwards tracing."