Unit 8 - Financial Crime 2 (18 of 80 Flashcards
What did the Economic Crime Act 2022 Introduce regarding property interests?
> public register requirement for overseas entities purchasing 25% direct or indirect ownership, or significant influence/ control after 1 Jan 1999
> Criminal offence - Failure to register, or submitting false information and will prevent individuals and or companies entering into property transactions
> an annual compliance requirement - file statement listing
1) any changes to registrable beneficial owners
2) confirmation beneficial owners have not changed.
What are the 5 offences and punishments under the POCA (2002)?
- Concealing
- Arrangements - it could include advising on a transaction.
- Acquisition, use and possession of criminal property.
** a fine and a jail term of up to 14 years**
- Failure to disclose
**a fine and a jail term of up to five years**
- Tipping off
** a fine and a jail term of up to five years (two years regulated sector).
What are 3 stages of money laundering?
- Placement – introduction into the financial system (bank)
- Layering – moving the criminal proceeds around the financial system, through a series of complex transactions
- Integration – ultimate beneficiary appears to be holding legitimate funds
What is a valid defence against money laundering?
if disclosed to their firm’s money laundering reporting officer (MLRO), or if the MLRO reports to the NCA
How are people and firms verified during due diligence?
Firms = MoA/Governing Docs check with Companies House
People = verified ID e.g. Passport
What is Enhanced Due Diligence (EDD)?
Increased requirements for examining the background or purpose of a transaction and increasing the degree of monitoring, If
- there is a high risk of ML or TF
- where a transaction or business relationship is established in a high-risk third country
- or any other circumstances where complex/ large/ unusual transactions are involved with no apparent economic or legal purpose
Who are Politically Exposed Persons (PEPs)?
‘an individual who is or has, at any time in the preceding year, been entrusted with a prominent public function, other than as a middle-ranking or more junior official’
The firms’ obligation to apply EDD measures to an individual ceases after they have left office for one year, or a longer period if the firm considers that it might be appropriate
What is the punishment for false statements during ML due diligence?
a fine and/or up to two years’ imprisonment
What should a firm do if it cannot verify a customer’s identity?
not proceed with the business relationship, and should consider whether this should cause it to make a report to the NCA
When must EDD be applied?
- where there is a high-risk of ML/TF
- a person in a high-risk third country
- client has not been physically present for identification
- correspondent banking relationships
- dealing with PEPs, or a family member or known close associate of a PEP
- in any case where a customer has provided false or stolen identification documents
- in any case where a transaction is complex and unusually large or there is an unusual pattern of transactions.
What is the difference between a MLRO and a Nominated Officer (NO)?
> FCA = MLRO
> ML Regulations = NO
> IN PRACTICE THE MLRO AND NO ARE THE SAME PERSON AND KNOWN AS JUST THE MLRO
What are the FCA’s 3 expectations with regard to MLROs?
- appropriate level of authority and independence
- access to resources and information sufficient enough to enable them to carry out their responsibilities.
- based in the UK.
What is the NCA and how is it managed?
> The NCA is responsible for tackling organised crime, defending the UK’s borders, fighting fraud and cybercrime, and protecting children and young people.
> led by a senior chief constable and is accountable to the Home Secretary.
What is the definition of ‘cybercrimes’ and what are the 2 types?
‘Cybercrimes are those crimes committed through the use of ICT devices, including mobile or ‘smart’ phones. Cybercrimes can be defined in two ways:
- Pure cybercrimes (or computer-dependent crimes) – when a criminal act can only be committed through the use of computers or other ICT devices.
- Cyber-enabled crimes are those that may be committed without ICT devices, but are changed by use of ICT in terms of scale and reach. e.g. online fraud; theft or sexual offending
What are the responsibilities of firms with regard to Suspicious Activity Reporting (SAR)?
Notify the MLRO who will assess if suspicious, and if so, report in a timely manner to the NCA
What is the definition of Terrorism?
- serious violence against a person or serious damage to property
- endangers another person’s life
- serious risk to public health/safety
- interferes/disrupts an electronic system
- influence the government or intimidate the public
- advancing a political, religious or ideological cause.
What is the punishment for failing to report suspected terrorism?
- up to ten years in jail, plus a fine.
What are the two differences between ML and TF?
- TF normally only “quite small sums of money”
- Difficult to identify when legitimate funds become terrorist funds.
What is the Bribery Act of 2010 and the offences under it?
> two general offences
1) offering, promising or giving of a bribe (active bribery)
2) requesting, agreeing to receive or accepting of a bribe (passive bribery)
> two further offences:
3) Section 6 - bribing a foreign public official i
4) Section 7 - corporate liability for failing to prevent bribery on behalf of a commercial organisation.
- Commercial organisations can be prosecuted for failing to prevent persons associated with them from committing bribery on their behalf.
Can companies be liable for its employees using bribery?
Yes. A commercial organisation is liable to prosecution if a person associated with it bribes another person with the sole intention to obtain/retain business or an advantage in the conduct of business
What are the principles regarding bribery issued by the secretary of state?
1) Proportionate Procedures
2) Top-level commitment
3) Risk assessment
4) Due diligence
5) Communication/training
6) Monitoring and Review
What are the 6 Data Protection Act (DPA) Principles?
1) processing must be lawful and fair
2) purposes of processing must be specified, explicit and legitimate
3) personal data must be adequate, relevant and not excessive
4) personal data must be accurate and kept up to date
5) personal data must be kept for no longer than is necessary
6) personal data must be processed in a secure manner
What are the roles and responsibilities of the Data Controller and Data Processor?
- A data controller means a natural or legal person determines the purpose and means of the processing of personal data.
- A data processor means a natural or legal person which processes personal data on behalf of a ‘data controller’.
ONLY THE DATA CONTROLLER NEEDS TO BE REGISTERED WITH THE ICO
What are the reporting requirements for data breaches?
> Data controller must notify ICO without undue delay.
> If not made within 72 hours, the notification must detail the reason for the delay
How can the ICO punish data controllers?
> a fine of up to £17.5 million or 4% of global turnover, whichever is higher.
> breaches can now also lead to criminal prosecution, potentially resulting in unlimited fines.
What is a protected disclosure (whistleblowing)?
A protected disclosure is where information revealed by a worker shows one of the following:
- a criminal offence
- a failure to comply with any legal obligation
- a miscarriage of justice
- the putting of the health and safety of an individual in danger
- damage to the environment, or
- deliberate concealment of any of the above.
UK OR ANY COUNTRY
What are the penalties to firms failing to comply with the whistleblowing process?
- For firms - max 10% of annual global turnover (£18m cap)
- For individuals - max 10% of gross income (max £50,000)
What is a Whistleblowing Champion?
> Somebody with the responsibility for ensuring/overseeing the integrity, independence and effectiveness of the firm’s whistleblowing policies
> should have sufficient authority/independence and access to resources/information sufficient to carry out that responsibility
What are the various prison sentences?
- Misleading statements/impressions = summary conviction 12 months + fine
court conviction 10 years + fine (7 years before Oct 2021) - Insider dealing = court conviction 10 years + fine
- Failure to register/submitting false info to public registry of o/s companies = 5 years
- Money laundering - concealing/arranging/acquiring+using crimal property = 14 years
failure to disclose = 5 years
tipping off = 5 years (2 years regulated sector) - False/misleading statement during due diligence = 2 years
