M2: RELEVANT FINANCE PROFESSIONAL LAWS Flashcards
(27 cards)
What is money laundering?
Money laundering is when criminals try to mask the origins of illicit funds and make them appear legitimate.
i.e. All forms of handling or possession of criminal property (including money and intangible property), including processing the proceeds of one’s own crime and facilitating any handling or possession of criminal property.
What is the threat of money laundering associated with cryptocurrencies?
- Cryptocurrencies can be traded anonymously and thus harder to track in the placement stage.
- Lots of transfers can be made for low cost.
- Big jumps in wealth could be explained by volatile cryptocurrencies.
What are the 3 offences of money laundering, under the Proceeds of Crime Act (2002)?
- Laundering
- Failure to Report
- Tipping Off.
What is a legal defence to all three of the AML offences?
If the alleged offender makes an authorised disclosure to the police or a nominated officer at the first available opportunity.
Why is money laundering a crime and how can finance professionals help combat money laundering?
Its a crime because it covers up the illegal means of having that money and then trying to wash it to make it appear legitimate.
Finance professionals can help by:
- Adhering to the AML legislation
- KYC - Know your client ( Understand business, assess risk profile, ascertain source of funds)
- Enhanced due diligence on high risk clients e.g. PEP
- Help look at suspicious transactions
- Hold onto client identification and risk assessment/transaction files for 5 years
- Suspicious Activity Reports (SAR) must be done if suspicious to the National Crime Agency
- Appointing a designated person to oversee AML compliance
What are the three key phases of Money laundering?
- Placement - Introduce illegal money into system by putting them into legitimate financial institutions. E.g. invoice fraud (phantom shipping etc), Large sum into lesser transactions below legal threshold through Smurfs (People helping), Blended via cash intensive businesses.
- Layering - Separating the proceeds of criminal activity from their origin through a complex series of transactions. (Investing into shell companies, converting into shares etc)
- Integration - Reintegrating the money into the legitimate economy using laundered funds to invest into property, cars, jewellery etc.
What are the key areas covered by AML regulations?”
- Risk assessment and controls.
- Customer due diligence.
- Registration and supervision of relevant businesses.
What processes must firms follow and what must individuals (finance professionals) do if they suspect Money laundering?
Processes:
* risk assessment and controls
* staff training
* customer due diligence
* supervision and registration
Individuals must report any suspicions to their firms Money laundering reporting officer.
What is “Enhanced due diligence” and when is it needed?
More checks on that client.
Required where the client is, for example, from a high-risk third country or is a politically exposed person (PEP).
Are there other restrictions on providing accountancy services you should be aware of?
Providing any kind of services to a person on the sanctions list. These people are known as designated persons.
Its a criminal offence to provide professional/accountancy/business dealings with these people.
What is the scale and impact of fraud in the UK?
Scale - Fraud is c. 40% of all reported crime in the UK every year, even though only 20% of all fraud is reported.
Impact - Small businesses, vulnerable individuals, repetitional damage to businesses.
What are the offences of fraud in England and Wales and Northern Ireland and in Scotland?
England, Wales, NI (The Fraud Act 2006):
1. Making false representation: Dishonesty, Intent to make gain (for themselves or another) or cause loss to another, A representation that is untrue or misleading, The person making the representation knowing that it is, or might be, untrue or misleading.
- Dishonesty by failing to disclose information: Dishonesty, Intent to make gain (for themselves or another) or cause loss to another, Failure to disclose information where there is a legal duty to disclose.
- Dishonesty by abuse of position: A person in position where they are expected to safeguard, or not act against, another person’s financial interests, Dishonest abuse of that position, Intent to make gain (for himself or another) or cause loss to another or expose them to a risk of loss.
- Revenue fraud and Fraudulent evasion of income tax.
Scotland:
1. Common law fraud: Proving an intention to deceive .
- Uttering: Using a forged document to the prejudice of another person.
- Embezzlement: Misappropriating property including money without the owner’s consent.
- Statutory frauds: Any fraud that is outlined in official acts.
How is fraud investigated?
Via different agencies etc:
- Police services
- National Fraud Intelligence Bureau
- Action Fraud
- Financial Conduct Authority
- Trading Standards
- Department for Work and Pensions
- Crown Office and Procurator Fiscal Service
- Serious Fraud Office
What does the future hold for fraud legislation, in terms of the new two UK reforms?
- Material Fraud Statement - amend the Companies Act 2006 to require directors of large companies to include a Material Fraud Statement in their Directors’ Report.
- Failure to Prevent Fraud Offences (Organisations) - An organisation can be made liable if: A specified fraud offence is committed by an employee or agent, The fraud is for the organisation’s benefit, The organisation did not have reasonable fraud prevention procedures in place.
What are the four offences under anti-bribery legislation?
- Offence of bribing another person
- Offence of being bribed
- Offence of bribery of foreign public officials
- Offence for a commercial organisation to fail to have measures to prevent bribery
What are the implications for a commercial organisation?
Commercial organisations can be liable to criminal prosecution where a person associated with a commercial organisation (such as an employee or agent) bribes a person with the intention of obtaining or retaining business for the commercial organisation.
A company has a defence under the Bribery Act where there are adequate policies and measures in place to prevent bribery.
What are the implications of gifts and hospitality on an organisation under fraud law?
if it does not have adequate controls in place then the company can be liable for failing to prevent bribery.
What personal data protection legislation exists in the UK?
The Data Protection Act 2018.
Governs how personal data is collected, processed, stored, and shared.
What are the seven principles of UK GDPR?
- Lawfulness, fairness and transparency
- Purpose limitation
- Data minimisation
- Accuracy
- Storage limitation
- Integrity and confidentiality
- Accountability
What is the role of data controllers and data processors?
Data controllers are the ones making the decisions. They decide which kind of data is to be collected and what it will be used for.
Data processors process data on behalf of the data controller but do not have any decision-making power over how the data is being used.
What rights do individuals have over their personal data?
Individuals (data subjects) have the right to know what personal information is being collected about them, how it will be processed, and for what purpose.
Also:
- Right to access their personal data,
- Right to rectification if data held about them is inaccurate and to request its deletion if it is no longer necessary for the organisation to hold it.
- Choose to withdraw their consent to it being processed by the holding organisation.
What responsibilities does The Data Protection Act 2018 place on organisations handling data?
Duty that all organisations to report certain personal data breaches to the ICO within 72 hours of becoming aware of the breach.
It is mandatory for public authorities and for organisations carrying out certain types of processing activities to have a Data Protection Officer.
What are the penalties for non-compliance with UK GDPR law?
The ICO has the authority to issue fines of up to £17.5m or 4% of a company’s annual global turnover, whichever is higher, for serious breaches of data protection rules.
What is intellectual property and what are the main types of interest that the law seeks to protect?
IP law aims to protect intangible creative things such as musical works, stories, ideas, brands, product designs and inventions from being stolen or copied.
