Financial Crime

Question 1

What is money laundering?

Answer 1

Money laundering is the process by which criminals disguise the source of their proceeds of crime

Question 2

What are the three stages of money laundering?

Answer 2

Placement
Layering
Integration

Question 3

In terms of money laundering what is placement?

Answer 3

Placement: injection into the financial system

Question 4

In terms of money laundering what is Layering?

Answer 4

Layering: separation of criminal proceeds from their source

Question 5

In terms of money laundering what is Integration?

Answer 5

Integration: the provision of apparent legitimacy

Question 6

What is the key theme of the Money Laundering Regulations (MLR) 2017?

Answer 6

Customer due diligence (CDD)

Question 7

Under the MLR 2017 what obligations do firms have for ordinary customers?

Answer 7

o Obligation on firms to pursue customer due diligence

• Identify the customer
• Obtain information on the purpose and intended nature of the business relationship

Question 8

Under the MLR 2017 when must enhanced due diligence occur?

Answer 8

• Non-face-to-face business
• Correspondent banking relationships
• Politically exposed persons (PEPs), e.g. heads of state, government ministers

Question 9

What does the Joint Money Laundering Steering Group (JMLSG) provide?

Answer 9

Gives practical assistance (guidance) in interpreting the MLR

Question 10

What are the main requirements of the Joint Money Laundering Steering Group (JMLSG)?

Answer 10

o Internal controls, policies and procedures
o Identification procedures
o Record keeping for 5 years
o Recognition and reporting of suspicious transactions

Question 11

What is the FCA’s principle/ informal guidance (SYSC) on money laundering protocol for firms?

Answer 11

o Appoint a Money Laundering Reporting Officer (MLRO)

Question 12

What is the difference between terrorist financing and money laundering?

Answer 12

Terrorist financing can occur from a legitimate source and funds. Terrorist financing is often using legitimate funds and doesn’t go through the same process as money laundering

Question 13

What crime act covers money laundering?

Answer 13

Proceeds of Crime Act (POCA) 2001

Question 14

Under POCA 2001 what is the maximum term for assisting a money launderer

Answer 14

up to 14 years’ imprisonment and/or an unlimited fine

Question 15

Under POCA 2001 what is the maximum term for Tipping-off

Answer 15

5 years’ imprisonment and/ or an unlimited fine

Question 16

Under POCA 2001 what is the maximum term for failure to report

Answer 16

5 years’ imprisonment and/or an unlimited fine

Question 17

Under POCA 2001 what is the maximum term for failure to comply?

Answer 17

two years’ imprisonment and/or an unlimited fine

Question 18

What has to occur for something to be deemed as inside information?

Answer 18

Price sensitive’ information of a ‘specific and precise’ nature
o Not a rumour

Question 19

What is a primary insider?

Answer 19

someone has info first hand

Question 20

What is a secondary insider?

Answer 20

knows info from primary source

Question 21

What act covers insider trading and what are the offences under this?

Answer 21

Criminal Justice Act 1993 offences:
o Dealing while in possession of inside information
o Encouraging another to deal, knowing or reasonably believing that dealing will occur
o Disclosing information to another (other than in the proper performance of one’s duties)

Question 22

What investments are covered under the insider trading criminal justice act 1993?

Answer 22

o	Shares 
o	Debentures (forms of bonds) 
o	Public sector debt securities (e.g. gilts)
o	Options
o	Warrants

Question 23

What investments are not covered under the insider trading criminal justice act 1993

Answer 23

o Commodities

o Foreign exchange

Question 24

If accused of insider dealing what would a ‘general/idiot’ defence refer to?

Answer 24

Passed on information in proper course of duties but did not expect the recipient to deal

Question 25

If accused of insider dealing what would a 'specific' defence refer to?

Answer 25

Stabilised a new issue under the FCA’s stabilisation rules

Question 26

Aside from a general/ specific defence what defences may be used if accused of insider dealing?

Answer 26

o Deal not done to make a profit or avoid a los

Question 27

Aside from a general/ specific defence what defences may be used if accused of insider dealing?

Answer 27

o Deal not done to make a profit or avoid a los o Market maker had inside information but acted bona fide for that business o Only had information that certain securities were to be issues, acquired or disposed of, so it was therefore reasonable to deal

Question 28

What are the penalties for insider dealing?

Answer 28

o Magistrates’ court: Six months imprisonment and/or a £5,000 fine o Crown court: Seven years imprisonment and/or an unlimited fine High burden of proof needed often to prosecute in crown

Question 29

Which legislation covers market abuse?

Answer 29

FSMA 2000 and also further in regulation 2005. & EU Market Abuse Regulation (MAR) 2016

Question 30

List the types of behaviours that may constitute market abuse & where these arise from

Answer 30

``` o Insider dealing o Improper disclosure o Misuse of information o Manipulating transactions/ devices o Dissemination o Misleading behaviour and distortion ``` taken from the FCA Code of Market Conduct:

Question 31

What type of offence is market abuse and what does this result in?

Answer 31

Civil offence (so can’t get prison time) has a lower burden of proof

Question 32

Who is free to give fines for market abuse?

Answer 32

Regulator is free to give fines

Question 33

What in effect is needed to be proved to prove market abuse?

Answer 33

proven is the effect act has had on the market

Question 34

What are penalties for market abuse?

Answer 34

unlimited fine (and/or FCA sanctions)

Question 35

What act covers bribery offences

Answer 35

UK Bribery act 2010

Question 36

List bribery offences

Answer 36

o Paying bribes o Receiving bribes o The bribery of foreign officials o Failure of commercial organisations to prevent bribery

Question 37

What does a company need to demonstrate to prevent bribery?

Answer 37

demonstrate that it has 'adequate procedures'

Question 38

What is the penalty for bribery by an individual?

Answer 38

7-10 years imprisonment

Question 39

What is the penalty for bribery by a company?

Answer 39

Unlimited fine