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IMC Chapter 3 > Financial Crime > Flashcards

Financial Crime Flashcards

1
Q

What is money laundering?

A

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

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2
Q

What are the three stages of money laundering?

A

Placement
Layering
Integration

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3
Q

In terms of money laundering what is placement?

A

Placement: injection into the financial system

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4
Q

In terms of money laundering what is Layering?

A

Layering: separation of criminal proceeds from their source

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5
Q

In terms of money laundering what is Integration?

A

Integration: the provision of apparent legitimacy

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6
Q

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

A

Customer due diligence (CDD)

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7
Q

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

A

o Obligation on firms to pursue customer due diligence

  • Identify the customer
  • Obtain information on the purpose and intended nature of the business relationship
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8
Q

Under the MLR 2017 when must enhanced due diligence occur?

A
  • Non-face-to-face business
  • Correspondent banking relationships
  • Politically exposed persons (PEPs), e.g. heads of state, government ministers
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9
Q

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

A

Gives practical assistance (guidance) in interpreting the MLR

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10
Q

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

A

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

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11
Q

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

A

o Appoint a Money Laundering Reporting Officer (MLRO)

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12
Q

What is the difference between terrorist financing and money laundering?

A

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

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13
Q

What crime act covers money laundering?

A

Proceeds of Crime Act (POCA) 2001

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14
Q

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

A

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

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15
Q

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

A

5 years’ imprisonment and/ or an unlimited fine

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16
Q

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

A

5 years’ imprisonment and/or an unlimited fine

17
Q

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

A

two years’ imprisonment and/or an unlimited fine

18
Q

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

A

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

19
Q

What is a primary insider?

A

someone has info first hand

20
Q

What is a secondary insider?

A

knows info from primary source

21
Q

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

A

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)

22
Q

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

A 
o	Shares 
o	Debentures (forms of bonds) 
o	Public sector debt securities (e.g. gilts)
o	Options
o	Warrants
23
Q

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

A

o Commodities

o Foreign exchange

24
Q

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

A

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

25
Q

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

A

Stabilised a new issue under the FCA’s stabilisation rules

26
Q

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

A

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

27
Q

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

A

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

28
Q

What are the penalties for insider dealing?

A

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

29
Q

Which legislation covers market abuse?

A

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

30
Q

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

A 
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:

31
Q

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

A

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

32
Q

Who is free to give fines for market abuse?

A

Regulator is free to give fines

33
Q

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

A

proven is the effect act has had on the market

34
Q

What are penalties for market abuse?

A

unlimited fine (and/or FCA sanctions)

35
Q

What act covers bribery offences

A

UK Bribery act 2010

36
Q

List bribery offences

A

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

37
Q

What does a company need to demonstrate to prevent bribery?

A

demonstrate that it has ‘adequate procedures’

38
Q

What is the penalty for bribery by an individual?

A

7-10 years imprisonment

39
Q

What is the penalty for bribery by a company?

A

Unlimited fine

IMC Chapter 3 (19 decks)

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