Section 3.7 Financial Crime Flashcards
What is money laundering
- Money laundering is the process by which criminals diguise the source of their proceedings
- The three steps of money laundering include:
1) Placement - the physical injection into the financial system of cash proceeds obtained from criminal activity
2) Layering - The sepration of criminal proceeds from their source by creating complex layers of financial transactions designed to disguise the audiot trail
3) Integration -The provisions of apparent legitimacy to criminally derived wealth.
What is the key responsibility of the Money Laundering regulation (MLR 2017)
Customer due dillgence (CDD)
When does Enhanced Due Dilligence (EDD) apply:
- Where business is conducted on a non face-face basis
- In respect to corrospeondant banking relationships
- Where the customer is a politically exposed person (PEP)
What FCA regulations are required by firms
- To appoint a MRLO (Nominated Officer) - Reporting suspicious transactions to the National Crime Agency
- To appoint a money laundering complaince officer - responsible for the oversight of firms anti-money laundering activities
- The FCA has set out a high level of principles relating to money laundering found in SYSC
What responsibility does the JMLSG group have
JMLSG - Joint Money Laundering Steering Group
- Its aim is to promote good practise in countering money laundering
- When the FCA consider whether a firm has breached the rules against money laundering, it will detrmine if the firm had followed the relevant provisions issued by the JMLSG
The main requirements of JMLSG
- Internal controls, policies and procedures
- Identification procedures
- Record keepping - kept for at least 5 years after completion of business
- Recognition and reporting of suspicious transaction - Must report one off trades or several inconsitent trades of an investor to MRLO, who they report back to the NCA.
What legislation covers insider dealing
- Criminal Justice Act 1993 (CJA)
What are the 3 key principle insider dealing offences
- Dealing while in possession of insider infomation
- Encouraging another to deal, reasonably believing, that the deal will occur
- Disclosing infomation to another other than through the required channels.
What defence does the CJA provide to insider dealing
- The CJA defines non-public infomation as **price sensitive **(as if was made public then would have significant effect on price)
- The defence it provides is that:
1) Indivdual passed on infomation in the proper performance of their duties but did not expect the recipient to deal.
2) The deal was not done to make a profit or avoid a loss - a market-maker had inside infomation in the course of their business but acted genuinely for that business
3) The person dealing only had infomation that certain secruties had been issued and therefore was reasonable to deal. - This covers predator companies
What are chinese walls when it comes to insider dealing
- Chinese walls are implemented into a firm to protect itself from insider dealing.
- It is where infomational barriers bewteen different divisions of an institution to avoid conflcits of interest
What penalties are there for those who are found guilty of insider dealing
- On summary conviction (in magistrate court) - 6 month imprisionment or fine
- On conviction or indictment (in crowns court) 7 years imprisonment or fine
What legislation covers market abuse
- The Financial Service and Markets Act 2000 and the Market Abuse Regulation in 2016
What are the changes introduced by MAR 2016
- Extending the scope of the EU market abuse regime to financial instruments traded on MTF’s and other OTF’s.
- It also has extended the market abuse regime to cover behaviour both within and outside the EU in relation to instruments admitted to trading on a EU trading venue
- A Prohibition on attempting to engage in market manipulation
