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ACA study > Criminal Law > Flashcards

Criminal Law Flashcards

1
Q

Proceeds of crime act

A

Proceeds of crime act offences:
1. Money laundering
2. Failure to report suspicion of money laundering
3. Tipping off

Money laundering regulations mean extra duties on professional persons.

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2
Q

Money laundering

A

Proceeds of crime converted into assets which seem to have been from a legitimate source e.g smuggling, drugs, tax evasion & bribery.

Examples of money laundering:
- Buying luxury goods
- Overpaying tax
- Cash based business
- Buying casino chips and cashing them in
- Depositing funds with solicitor / accountant then seek repayment.

Red flags for money laundering:
- Unusually large or frequent activity for business
- Cash deposits which can’t be justified
- Large increases in account balances
- Transferring large amounts of cash using transfer services (especially overseas)
- Not willingness to discuss business activities or provide other business information.
- Inconsistencies in info being provided

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3
Q

Implications of being a chartered accountant

A

If you become aware / suspect money laundering of happening and fail to report.

Need to maintain an awareness of the transactions, concerns should be noted and to follow appropriate procedures to protect yourself.

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4
Q

Offences (proceeds of crime act)

A

Money laundering:
- Concealing (or helping to) criminal property.
- Acquiring or using criminal property.
- Inciting others to do so.
- 14 YEARS OR UNLIMITED FINE

Failure to report:
- MRLO OR NCA of suspicion or knowledge of money laundering.
- Test is if a reasonable person would have been suspicious.
- 5 YEARS OR UNLIMITED FINE

Tipping off:
- Disclosing that a report has been made to NCA where the disclosure would prejudice the investigation.
- 2 YEARS IMPRISONMENT OR UNLIMITED FINE

Defence of a reasonable excuse is narrow, can cover extreme situations e.g. extreme situations and physical violence.

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5
Q

Tax evasion (money laundering)

A

Criminal finances act makes companies and other organisations liable if employees / agents are involved criminally liable.

Defence for company - realistic prevention procedures or was unrealistic to do so.

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6
Q

Money laundering regulations

A

Apply to all relevant persons and enforce record keeping, client due diligence and staff training.

  • Allows suspicious transactions to be recognised and reported.
  • Provide an audit trail for future investigation.

Non- compliance with these regulations is a criminal offence punishable by FINE AND OR 2 YEARS IMPRISONMENT (whether money laundering or not)

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7
Q

Relevant persons

A
  • Credit and financial institutions
  • Accountants
  • Legal professionals
  • Estate agents
  • Casinos
  • High value dealers (cash trans over £10,000 euros)
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8
Q

Requirements

A
  • Records keeping
  • Internal controls
  • Whole firm risk assessments
  • Policies and procedures
  • Identification of politically exposed persons
  • Processes when reliance on third parties
  • Customer due diligence
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9
Q

Customer due diligence (know your client)

A

When rules apply:
- New business relationship
- Business formation service
- Occasional transactions
- Money laundering / terrorist activities suspected
- Accountant doubt validity of info provided.

Action:
- Identify customers and verify
- Identify beneficial owner who have significant influence e.g. executive director, shareholders, loan creditors.
- Obtain info on nature & purpose of business relationship

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10
Q

Confidentiality

A

Account owes a duty of confidentially but this is overridden by legal duty to disclose money laundering.

LEGAL PRIVILEGE CAN apply to professionals who give advice in LITIGATION.

Solicitors may claim a general legal privilege which applies to all communications not the case for accountants.

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11
Q

Reporting requirements

A

Knowledge - report:
- Actual knowledge or virtual uncertainty, unless converted by specific privledge.
- Report to MRLO / NCA

Suspicion - report:
- Red flags show , report
- Professional judgement and awareness of transactions & changes in a situation important for enabling professional judgement.
- Must inform companies house when doing customer due diligence if discovery a discrepancy of beneficial owners and information on CH register of persons with significant control.

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12
Q

Bribery

A

Bribery act 2010 creates 4 main offences:
1. Bribing another person
2. Being bribed
3. Bribing a foreign official
4. Corporate failure to prevent a bribery

‘Relevant function or activity’ - where person performing function is in a position of trust including:

  • Activity of public nature e.g planning permission
  • Activity of a connected business.
  • Or in the course of employment
  • Need not have any connection with the UK

‘Improper’ - does not meet the standard which a reasonable person in the UK would expect.

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13
Q

Bribing another person

A

Person offers promises or gives financial advantage to another person to induce or reward them for improperly providing a relevant function function for an activity:

  • Bribe need not be offered to the person who performs the function.
  • Benefit may be for a third party.
  • Can be given before or after improper performance.
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14
Q

Being bribed

A
  • Person requests accepts or receives financial or other reward for improper performance of a relevant function or activity.
  • Bribe need not be offered to the person who performs the function.
  • Benefit may be for a third party.
  • Can given before or after the improper performance.
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15
Q

Bribing a foreign official

A

Where a person offers promises or gives any financial or other advantage to the official or a third party with officials consent or acquiescence and that official is not permitted by law to be influenced.

  • Must INTEND to bribe official and to obtain a business advantage as a result
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16
Q

Corporate failure to prevent bribery

A

Any commercial organisation which fails to prevent an offence being committed by anyone who performs services for the company.

Includes employees, agents and subsidiaries.

Hospital and gifts are permitted if they encourage good business relations and NOT to persuade others to give business favours.

  • Defence - adequate procedures to prevent committing bribery.
  • Adequate - size, risk exposure, sec of state guidelines, regular review.
17
Q

Fraud act - NOT misappropriation of property e.g burglary

A

False representation:
- Dishonestly making a false representation of fact or law.
- Intending to make a gain for themselves or another.
- Or to cause loss to a third party.
- Or expose that party to the risk of making loss.

Failing to disclosure information:

  • Dishonestly failing to disclose to another person information which he is under a legal duty to do so.
  • Intending to make a gain for themselves or another.
  • Cause another party loss or expose to the risk of loss.

Abuse of position:

  • Position he is expected to safeguard or not to act against the financial interest of another person, dishonestly abusing that position.
  • intending to make a gain for himself or another.
  • Cause another party loss or to expose them to that.
  • Abuse is widely constued.

MAXIMUM PENALTY 10 YEARS IMPRISONMENT AND UNLIMITED FINE.

18
Q

Fraud and cybercrime types

A

Offence is to supply or possess any article which is used in fraud.

Electronic financial crime - online banking frauds e.g persuaded to transfer money out of a bank account OR via internet enabled card-not-present fraud - person has no knowledge funds being taken out of account.

Fraudulent sales through online action or retail sales - bogus websites which appear to be selling goods and services. Not provided once paid for e.g counterfeit tickets.

Phishing scams - mass marketing fraud e.g. fake HMRC emails for names and passwords.

Pharming - directed to a fake website that looks legit to obtain personal details.

Online romance or social networking / dating fraud - long term fraud, persuaded to part with their money or personal details believing they have a legitimate relationship.

19
Q

Fraud and cybercrime protection

A

Cyber essentials controls:

  1. Firewalls to secure internet connections - protect consumers internet connections, often built into operating systems.
  2. Applying most secure settings - ensure devices are set up with cyber security as a priority.
  3. Control who has access devices and software - physical and network procedures that restrict access to devices and software e.g. passwords / Touch ID
  4. Protect against viruses and other malware - virus and malware protection prevents and removes unwanted programmes from a system.
  5. Keep devices and software up to date (patching) - path management (ensuring devices are up to date)
20
Q

Accountancy sector and fraud charter

A

Voluntary agreement entered into by law enforcement agencies, professional subsidiary bodies and UK government.

  • Improved info regarding fraud - greater transparency
  • Fraud awareness toolkit - information to help combat fraud
  • Enhancing companies house data - reduced amount of fraudulent info on CH
  • Increase fraud awareness and change customer behaviour - education campaigns, raise consumer awareness, reduces vulnerability.
21
Q

Computer Misuse Act

A

ILLEGAL AND PUNISHABLE BY FINE OR IMPRISONMENT 2 - 14 YEARS:

  • Unauthorised access to a computer system
  • Unauthorised access with intent to commit or facilitate further offences (fraud)
  • Unauthorised access with intent to impair, or recklessness as to imparting the operation of a computer
  • Unauthorised acts causing or creating risk of serious damage
  • Making or supplying articles with the above e.g malware.
22
Q

Fraudulent trading

A

Criminal and civil offence - business is carried on with intent to defraud creditors of company of any other person for a fraudulent purpose.

CRIMINAL:
- Whether or not co is in liquidation
- Any person who is knowing of fraudulent trading.
- Test for intent is subjective, considers mindset and intentions of defendant at the time.
- May disqualify a director for fraudulent trading for UP TO 10 YEARS.
- UNLIMITED FINE AND OR IMPRISONMENT FOR UP TO 10 YEARS

CIVIL:
- ONLY if company is in liquidation.
- Liquidator will ask person to make contribution to funds of company.

23
Q

Insider dealing

A
  1. Dealing in securities (mostly shares) while in position of inside information - securities being price affected by info.
  2. Encouraging other to deal an item.
  3. Disclose information other than in the performance of employment or profession.

Dealing (buying / sell) - buying or selling relevant securities or agreeing to do so.

Encouraging another to deal - insider encourages another to deal in a price affected situation, knowing or having reasonable cause to believe that dealing would take place, still applies when:
1. Person dealing realises securities are price effected
2. Inside information is passed to that person
3. Any dealing actually takes place.

Securities - shares / debt / warranties must be on a regulated market e.g stock exchange.

Inside information - price sensitive info has the following:
1. Capable of having a significant effect on price
2. Not been made to public
3. Specific and precise - named company

Insider - has information from an inside source (has to know it is from) e.g director, advisor or someone who obtains info from such person.

24
Q

Insider dealing - defences

A

If he can show that:

  • Did not expect there to be a profit or avoidance of loss
  • Reasonable ground to believe info was spread widely OR
  • Would have done what he did even if he didn’t have info.

Defence of disclosing:

  • Not expect there to be profit or avoidance of loss
  • Did not expect person to deal
25
Q

Insider dealing - penalties

A
  • MAX 7 YEARS IMPRISONMENT AND OR UNLIMITED FINE
26
Q

Insider dealing - market abuse

A

Criminal offence - Standard of proof is high (beyond reasonable doubt) - difficult to convict.

Civil offence - Lower - individuals can be made to account for wrongs (even if not money laundering)

Generally committed an offence if they fail to observe the behaviour or a reasonable person.

27
Q

Economic crime (transparency and enforcement act)

A
  • Establishing register of overseas entities - identify true property of owners in the UK.
  • strengths ability of NCA to use unexplained wealth orders, allows to conviscate criminal assets without having to prove criminal activity, NCA has more time to prepare cases and is not liable for legal costs
  • Civil liability for party to sanctions-busting transactions, significant fines for business, even is no knowledge or reasonable cause to suspect transactions to which they are party is in breach of transaction.
28
Q

Law and ethics procedure

A
  1. Check facts of circumstances
  2. Consult to MRLO / NCA, whistleblowing or police.
  3. Refering to guidance from ICAEW or other body.
  4. Legal advice from solicitor or in house body.
  5. Discussions with senior work colleague who is responsible for work you are doing.
  6. Seeking advice from ICA Ethics Advisory Service.
29
Q

Law and ethics - threats and safeguards

A

Accountant in business:

  • Corporate oversight
  • Ethics and conduct programmes
  • Recruitment programmes
  • Internal control
  • Disiplinary procedures
  • Examples set by leadership
  • Communication with employees and seniors to report ethical concerns.

Accountant in practice:

  • Leadership team stress compliance with fundamental principles
  • Leadership team stress expectation that assurance team will act in public interest
  • Documented policies to identify and evaluate threats to implement safeguards
  • Policies to identify interests and relationships between firms, members of engagement team and clients
  • Monitor revenue received from different clients
  • Seperate teams for engagement for assurance and non-assurance
  • Timely communication of policies and procedures, training on enforcement of policies
  • Open communication with staff to raise concerns over threats to fundamental principles
30
Q

Whistleblowing

A

Workers making disclosure of wrongdoing (usually by employer), often but not necessarily criminal.

Public interest disclosure act
Employment rights act

Worker has the right to not be subject to detriment to act by employer as they have made a protected disclosure.

Examples:
- Lack of promotion
- Lack of training or opportunity
- unjustified disiplinary action
- pay issues, failure to renew contract
- dismissed or selected for redundancies as a result of making a disclosure - unfair dismissal

In order to receive protection:
- Qualifying disclosure of information
- Public interest
- Made to appropriate person

31
Q

Whistleblowing - Qualifying disclosure

A

Reasonable belief that worker making disclosure shows one or more:

  • Criminal offence committed or likely to
  • Failed or failing to comply with legal obligation
  • Miscarriage of justice has occurred or is likely to (convicted of a crime they did not commit)
  • Health and safety
  • Environment is damaged
  • Matter in above cases is concealed

Reasonable belief test - subjective and may be difficult to prove.

32
Q

Whistleblowing - public interest

A

Good faith.

If not acting in good faith, compensation can be reduced by 25% to employee.

33
Q

Whistleblowing - made to appropriate person

A

Encouraged disclosure internally when possible.

Internal - employer or other reasonable person

Legal advisor - course of obtaining legal advice

Minister - minister of crown if public body e.g NHS

Prescribed body / regulator - by sec of state e.g HMRC, health and safety exec., financial services authority- usually needs to have serious public interest.

Wider - media, police, MP’s, other non-prescribed regulator, reasonable in all circumstances, not made for personal gain and provided the worker…..

  • Reasonably believed he would be victimised if he raised the matter internally or with a prescribed person OR
  • Reasonably believed cover up or no prescribed person.
  • Already raised the matter internally or with a prescribed regulator.
  • Reasonable in circumstances depends on: seriousness of matter, whether it is continuing, identity of person whom disclosure is made, whether there is a breach of confidentiality, whether worker complied with relevant procedures.
34
Q

Whistleblowing - gagging clauses

A
  • Clause of employement or serverance of contract which restricts workers right to make disclosure, if it conflicts with act it is VOID
35
Q

EXAM SMART

A

Consider laws with sustainability in particular - social sustainability.

Organisations may profit from the proceeds of crime at expense of victims.

Social problems and inequality created by crime acts impacts society a lot, which is why laws tackle reoccurrence.

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