Financial Crime and its Prevention

This article discusses various aspects of financial crime, including its types, prevention strategies, and regulatory frameworks. It covers topics such as the impact of financial crime on the economy, the role of corporate governance in preventing financial crime, and the importance of anti-corruption policies and procedures. The article also provides insights into the Financial Action Task Force (FATF) and the UK Bribery Act, two key regulatory frameworks aimed at combating financial crime.

Running Head: FINANCIAL CRIME
FINANCIAL CRIME
Name of the Student:
Name of the University:
Author Note

1FINANCIAL CRIME
Answer 1
Even in case where all the funds which are under the control of the international terrorist
organizations are very large. Only small amount of funding is required for the purpose of
financing an act of terrorism. The identification of the relatively small sum which has been
transferred within the system can be very challenging for the forces. However it is of
significant importance to prevent the transfer or flow of money to such terrorists both
internationally and domestically for the counter terrorism forces. Through keeping a track in
relation to the flow of funds the counter terrorism forces get access to information regarding
profiles, movements and links which aids towards the construction of picture of how the
terrorist organizations operate (Masciandaro, 2017).
There has been a decline in the ‘state-sponsored terrorism’ there have been a look out by the
terrorist organization for new sources of financing. They use both legal and illegal activities
for the purpose of collecting the revenue. A constant revenue stream is provided through
criminal activities. There few typical financial activities are as follows:
 Kidnapping and extortion which is generally related to protection rackets
 Goods being smuggled cross border which are sold for profit
 Imposition of levies on the dealers suppliers of drugs and drug trafficking
 Certain kind of fraudulent activities such as counterfeiting and identity fraud
 Activities like theft and robbery
 Fundraising and charities
 Wealthy donors and ethnic communities providing legitimate donations
Financing is also given through legal forms if businesses which have been created via the use
of funds which have been obtained as the proceeds of crime. It has been alleged that Al-

2FINANCIAL CRIME
Qaeda has been made investment of the forestry of turkey as well as Tajikistan holding,
African diamond trading and farming of ostrich in Kenya.
The two primary among these are that off Kidnapping and legitimate business transaction
In case of legitimate business funding funds are transferred cross borders through legal
channels so it is difficult to track for the forces. The money which is gained through activities
like kidnapping are generally smuggles across the borders by smugglers (Pratt and Peters
2017)
Answer 2
Corporate governance is regarded as one of the primary element of enhancing economic
growth and efficiency along with the growth in the confidence of the investors. Where an
effective corporate governance system is present in relation to a sole organization or as a
whole across the economy it provides an extent of confidence to the market which is a
necessary component for the building of a proper economy. This leads to a lower cost of
capital which makes the firm to effectively use their funds in order to trigger proper growth.
The primary focus of corporate governance is on the governance problems which results out
of division between control and ownership. In certain jurisdictions powers of certain
shareholders over the minority give rise to governance issues. There are important legal risks
which employees have in the other countries irrespective of having ownership rights
individually. These principles are therefore complementary in relation to the wider approach
to functions of balances and checks. A few other issues in relation to the decision making
process of the company like ethical concerns and environmental anti-corruption are also
considered. No single mode of corporate governance is present. The principles rely upon a

3FINANCIAL CRIME
few common elements which embrace different existing models. The implementation of good
corporate governance principles also help to address prevention of financial crimes. The
principles ensure effective and efficient governance which include identification of any risk
relation to financial crimes such as frauds and money laundering. It also incorporates within
the business structure various ethical principles which make the employees and the managers
to operate in an honest and ethical manner upholding the principles of integrity. Through the
application of good corporate governance principles within the organizations financial risks
can be managed well. In addition as the principles focus of employee needs and
developments as well thus the implementation makes the employees loyal to the organization
and restraining form any kind of financial crimes. Structuring the board as per the principles
of corporate governance by having a mix of independent and non independent directors will
also ensure that there is no fraud and financial crime committed by those in charge (Tillman,
Pontell and Black 2018).
Answer 3
There are various aspects which the regulators are willing to see within a regulated
organization which would operate towards assisting them to establish an proper fraud
identification and prevention framework as a wing of the total framework of financial crime
prevention. There are two aspects which have been identified and discussed for the purpose
of this segment of the paper.
Nowadays the IT companies and firms have become very smart in dealing with fraud
and therefore they have devised various methods to reduce and minimize crime and fraud.

4FINANCIAL CRIME
The fraud committed has a negative impact on the company and their profits and therefore
stringent regulations and regimes are required (Abe et al 2015). The method of fraud
detection is identifying the fraud that is taking place within the organization and therefore
there is also a need to detect the fraud at a very stage to stop it at its inception so that the
fraud does not impact the firm gravely.
The two methods are:
1. Proactive and Reactive
2. Manual and Automated
The detection technique has to work in full swing throughout the year because apart from
traditional frauds, new types of frauds also take place due to the new and skilled
fraudster. The fraudsters are devising new methods every day to commit both external
and internal fraud and the data analytics undertaken by the companies are essential in
monitoring the fraud. The data analytics method will not only save the immediate fraud
but will also help the company from getting cheating in the future (Van Vlasselaeret al
2015). Therefore, adding the fraud analytics method, the traditional methods of fraud
detection along with new methods are also detected. Through the above mentioned
methods, the data can be protected and new techniques can be implemented that will
safeguard the privacy of the firms from the hands of the fraudsters. This shall fall very
well within the crime detection and prevention framework.

5FINANCIAL CRIME
Answer 4
Mortgage fraud can happen once individuals can mulct a foundation or an individual loaner
through the home loan technique.
The criminal offense of extortion is accommodated inside the Misrepresentation
Demonstration 2006 that spreads extortion by false representation and by inability to uncover
information wherever they'll be a commitment to reveal the information (Blair, Brent and
Grant 2017).
False representation might be made explicitly by expressing false actualities or certainly by
not amending false realities.
The estimation of a home loan acquired through misrepresentation are dealt with as issue of
wrongdoing underneath the issue of Wrongdoing Act 2002. As a result of this if a private
claims this money or goes into an understanding in reference to the exchanging of the money
are believed to have submitted a hiding offense.
Home loan extortion will ab initio be part into 2 particular classes:
1. Large scale mortgage fraud
2. Opportunistic mortgage fraud
There are various risks which are associated with Mortgage in UK for firms. Record low loan
fees, rivalry from challenger banks, and expanding digitisation are driving noteworthy

6FINANCIAL CRIME
changes in the home loan industry. With application expenses being lessened or abrogated by
and large and clients requesting a quicker administration (almost 50% of respondents to an
ongoing Bluezest study believed that home loans took too long to process), moneylenders are
focussing on efficiencies at the application arrange. A few banks are notwithstanding
encouraging understandings on a fundamental level as fast as 15 minutes.
Frameworks joining can affect how compelling and convenient dangers can be recognized
and examined. The quantity of information feeds and frameworks to interface to, the fact that
it is so natural to separate and change information, and how very much associated
frameworks are, all have an influence in compelling danger administration; it doesn't make a
difference how quick your investigation motor can process information in the event that you
are dependent on cluster fares and manual refreshing of spreadsheets. The same applies to the
conclusion to-end forms amongst bank and surveyor for instance, where an unpredictability
of frameworks and coordination between them can restrict the efficiencies that can be
accomplished. An incorporated frameworks approach, implies for instance, that any natural
dangers recognized in advance, can be passed on to surveyor's versatile review applications
for them to research while on location. This brings expanded profitability and hazard
administration, and decreases post valuation questions and the time it takes to process an
application (Passas 2017).
Therefore the journey for ever speedier home loan consummations turns into a reasonable
objective when utilizing a solitary stage that backings the conclusion to-end forms as well as
gives continuous extortion and hazard administration over those same procedures and
frameworks; Snappier application preparing, more joyful clients and successful hazard
administration would all be able to be accomplished without falling back on the move of a
dice (Passas 2017).

7FINANCIAL CRIME
Answer 5
In the modern age, financial crime becomes a phenomenon and various institutions in UK are
affected by this. In most of the times, financial crime is relating to the property dispute. Most
of the financial crimes are money laundering, terrorist financing, tax evasion, embezzlement,
forgery and identity theft. The interest of a large part of the society has been affected by this
and therefore, it is required to be curbed. There are certain benefits to prevent all these
crimes. It can be seen that the criminals who are engaging them in financial crime invest their
money in order to funding the terrorists and there is a possibility of global crime all the
world. Proper application of the anti-money laundering Act will help to mitigate all the risks.
Further, crimes like tax evasion affect the government of any country (Harrison and Ryder
2016).
In recent days, the financial regulators of UK are facing serious dilemma due to financial
crime. There are certain fraud prevention criteria that strengthen the internal controls of the
states. The process of money laundering takes place in the absence of strict rules and controls
over the financial matters (Masciandaro 2017). The financial officials are taking the help of
advance technology to prevent this crime. Further, the process of audit interaction is very
helpful in this case. The strict maintenance of government regulations are also quite effective
in this matter. Segregation of duties will be an effective steps to prevent these financial
crimes and a risk assessment is required to reduce the chances of crime.
Answer 6
The Financial Action Task Force (FATF) is a between administrative body whose intention is
to build up universal norms, and create and advance approaches, both at national and

8FINANCIAL CRIME
worldwide levels, to battle tax evasion and the financing of fear based oppression. The FATF
is an 'arrangement making body' which attempts to produce the fundamental political will to
achieve national authoritative and administrative changes in these territories. The FATF
additionally frequently looks at strategies and systems of tax evasion and fear based
oppressor financing to guarantee the proceeded with importance of its approaches and norms.
The order of the FATF was at first reestablished in 2004 for an eight-year time span.
The FATF was set up by the G7 Summit in July 1989 in light of mounting worry over tax
evasion. Initially including the G7 part expresses, the European Commission and eight
different nations, the FATF was ordered to inspect illegal tax avoidance methods and
patterns, survey existing national and worldwide enactment and requirement and characterize
additionally measures expected to battle tax evasion.
In April 1990, the FATF issued 40 Suggestions that gave an extensive arrangement of
activity for battling illegal tax avoidance. In 1996, the 40 Proposals were changed to fortify
the counter tax evasion (AML) measures set up. In October 2001, in light of the 11
September assaults in the US, the FATF's order was extended to incorporate measures to
battle psychological militant financing, and the FATF instantly issued 'Eight Uncommon
Proposals' on Fear based oppressor Financing, which were in this way reached out to nine
The proceeded with development of illegal tax avoidance strategies, alongside the expanding
background of its part nations, drove the FATF to attempt an audit of the 40 Suggestions, and
in June 2003, it distributed an altogether amended arrangement of 40 Proposals. These set out
stretched out essential standards to anticipate tax evasion and drew intensely on the Basel
Advisory group on Keeping money Supervision's Client Due Steadiness Standards (Tricker
and Tricker 2015).

9FINANCIAL CRIME
The FATF has extended the meaning of the hazard based approach, which will empower
nations and money related middle people to focus on their assets all the more adequately by
applying upgraded measures where the dangers are higher with the choice of rearranged
measures where the dangers are lower. This is intended to urge extra wards to perceive the
hazard based way to deal with AML/CTF prerequisites with the expressed point of expanding
budgetary consideration (Armstrong et al. 2015).
Answer 7
The UK Bribery Act (the Bribery Act) was passed on 8 April 2010 and comes into drive on 1
July 2011. As of not long ago, worldwide hostile to debasement authorization has been to a
great extent ruled by the US Foreign Corrupt Practices Act 1977 (the FCPA).
The Bribery Act, be that as it may, speaks to some portion of a more extensive universal
pattern and has an even more extensive application than the FCPA. While associations may
consider that their against defilement strategies are adequately hearty for the motivations
behind the FCPA, this may not be where the Bribery Act is concerned. It is in this way
critical for associations working on a worldwide premise to know about the contrasts between
the FCPA and the Bribery Act and to be set up for the ramifications of the Bribery Act
coming into constrain.
Active and passive bribery
The FCPA just covers dynamic pay off, in other words the giving of an influence.
Interestingly, the Bribery Act denies both dynamic and detached gift i.e. the taking of an
influence.
Private-to-private bribery

10FINANCIAL CRIME
The FCPA does not cover gift on a private level, not at all like the Bribery Act, albeit such
direct can be gotten under different US enactment.
Bribery of foreign (public) officials
Both the Bribery Act and the FCPA make it an offense to pay off remote (open) authorities.
Under the Bribery Act an "outside open authority" is characterized more barely than under
the FCPA yet at the same time incorporates (I) any individual who holds a remote
authoritative or legal position; (ii) people who practice an open capacity for a remote nation,
domain, open office or open undertaking; or (iii) any official or specialist of an open
association.
Intent
Under the FCPA it must be demonstrated that the individual offering the pay off did as such
with a "degenerate" plan. The Bribery Act makes no necessity for a "degenerate" or "uncalled
for" plan in connection to the gift of an outside open authority, in spite of the fact that the
prerequisite stays for the general renumeration offense (Admati 2017).
Failure to prevent bribery
The Bribery Act makes a strict obligation corporate offense for inability to forestall pay off
(rather than vicarious risk) subject to having the capacity to set up that an organization has
"sufficient methods". Under the FCPA, in any case, an organization subject to US purview
can be held vicariously obligated for demonstrations of its workers and specialists. The UK
offense stretches out to demonstrations of "related people" which implies any individual who
performs administrations for or for the benefit of the business association.

11FINANCIAL CRIME
Answer 8
(a)
The firm which has been selected for the purpose of this answer is that of Lloyds Banking
Group. Insider dealing and market abuse are governed through the provisions of the Criminal
Justice Act 1993 and presently under the provisions of Financial Services and Markets Act
2000. The situation of market abuse comes into the context in circumstances where financial
market regulators have been disadvantaged unreasonably, indirectly or directly by others by
whom information available publically have manipulated the mechanism of setting price of
financial instruments.
There are two aspects which are covered through the Market abuse under the definition of
European Union.
Market Manipulation- This is the situation where a person is setting out or providing
misleading or false information, such as the financial circumstances of a company for the
propose of influencing the price of the company share for personal interest and gains.
Insider Dealing- this is the situation where a person having information which are not
available to the investors such as a director who has information relating to a takeover bid
uses the information to make personal interest and gains.
There are many risk which the firm us subjected to because of market abuse and insider
trading. This is because the officers who have access to information may use it for the
propose of making personal gain which will hamper the position of the firm in the market and
also subject such officers as well as the firm to legal sanctions (McIlhatton 2016).
(b)

12FINANCIAL CRIME
There are various risk management structures which the firm may have in place in order to
address the risks arising out of insider trading and market abuse. These are as follows.
 Having a market abuse monitoring, reporting and alerting functions
 Providing support in relation to increased transactions values
 Providing support for reporting transactions located through the use o a different
instrument identifier
 Having in place a code of conduct which outlines the ethical obligations of the
employees and monitoring its compliance through a effective management committee
and taking prompt actions in case of any breach
 Incorporating the principles of integrity and morality within the organization culture
Answer 9
(a)
The pressure of doing Fraud
The weight that emerges from a money related need is both the most well-known helper
and the simplest for the vast majority to feel for and get it. While dissecting this subject in
Corporate,Consistence Insights, John Hanson stated, "inspiration by and large identifies
with an 'unshareable need' that emerges inside a man's life (Hanson, 2012)." Hanson
additionally clarifies that as the specific "unshareable need" increments in the individual's
life, their danger of submitting misrepresentation increments as well.
Most budgetary needs are very simple to identify with. Regular money related
requirements emerge from budgetary hardships, for example, joblessness, separate,
restorative costs, and business or venture misfortunes. In his investigation of what rouses

13FINANCIAL CRIME
people to submit extortion, Ben Hunter watched that sane investigation of cost versus
advantage to the culprit of misrepresentation "neglects to distinguish the perplexing
exchange of needs, needs, and discernments that possibly go into a solitary choice
(Hunter, 2010)." Strangely, the greater part of the exploration surveyed regarding the
matter of collection or "profiling" extortion guilty parties was in accord that all culprits of
worker extortion have no criminal record and don't originate from a specific racial or
financial statistic. Seeker additionally attests, "One of the all the more fascinating
thoughts in connection to extortion is that, as opposed to misrepresentation serving the
finish of securing assets, the individuals who confer extortion do as such to abstain from
losing what they as of now have and have normally gained authentically (Hunter, 2010)."
In truth for some people, the potential "immaterial" misfortunes of their esteemed
notoriety or status and the apparent shame from disappointment can be more persuading
helpers to submit extortion than the genuine "substantial" money related weights.
(b)
The main characteristics of a fraudster are that they are living a life which is beyond their
apparent orders. Any person who has does not have the means of fulfilling their life style
will do something fraudulent to get those means. Thus such person can be a potential
fraudster.
Answer 10
A Ponzi scheme is a form of a fraudulent scheme related to investment. They are also
known as high yield investment schemes or a roll programme. Under these schemes the
perpetrators of a scheme make a claim of having special access to the secret markets. The
prime bank prominently trades in particular kind of bank security like a bank guarantee,

14FINANCIAL CRIME
debentures and notes. These form of instruments can be brought supposedly at discounted
rates sold at higher rates providing greater returns than the market. Through these
schemes money which is collected from the new victim instead of profits arising out of
existing investments for paying increased rates of returns promised to previous investors.
An impression is provided to the investors that this kind of investment is a legal way in
which money can be made. However practically the only source of funding in this case
are the unwitting investors.
There are various risks and vulnerabilities which may have an impact on customers due to
the operations of these schemes. One of the most significant risks is that the money of the
investors may get misappropriated by the fraudsters. They also are subjected to legal risks
(McIlhatton 2016).

15FINANCIAL CRIME
References
Abe, N., Abrams, C.E., Apte, C.V., Bhattacharjee, B., Goldman, K.A., Gruetzner, M.,
Hilbert, M.A., Langford, J., Padmanabhan, S.K., Tresser, C.P. and Troidle, K.M.,
2015. Confidential fraud detection system and method. U.S. Patent 9,064,364.
Admati, A.R., 2017. A skeptical view of financialized corporate governance. Journal of
Economic Perspectives, 31(3), pp.131-50.
Armstrong, C., Guay, W.R., Mehran, H. and Weber, J., 2015. The role of information and
financial reporting in corporate governance: A review of the evidence and the implications
for banking firms and the financial services industry.
Blair, W., Brent, R. and Grant, T.D. eds., 2017. Banks and financial crime: the international
law of tainted money. Oxford University Press.
Harrison, K. and Ryder, N., 2016. The law relating to financial crime in the United Kingdom.
Routledge.
Masciandaro, D. ed., 2017. Global financial crime: terrorism, money laundering and offshore
centres. Taylor & Francis.
Masciandaro, D. ed., 2017. Global financial crime: terrorism, money laundering and offshore
centres. Taylor & Francis.
McIlhatton, D., McGreal, W., Taltavul de la Paz, P. and Adair, A., 2016. Impact of crime on
spatial analysis of house prices: evidence from a UK city. International Journal of Housing
Markets and Analysis, 9(4), pp.627-647.

16FINANCIAL CRIME
Passas, N., 2017. Trade-Based Financial Crime and Illicit Flows.
Passas, N., 2017. Transnational financial crime. Routledge.
Pratt, S. and Peters, E., 2017. Internal audit: Raising the bar in auditing financial crime
risk. Journal of Financial Compliance, 1(3), pp.237-244.
Tillman, R., Pontell, H.N. and Black, W.K., 2018. Financial Crime and Crises in the Era of
False Profits. Oxford University Press.
Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and
practices. Oxford University Press, USA.
Van Vlasselaer, V., Bravo, C., Caelen, O., Eliassi-Rad, T., Akoglu, L., Snoeck, M. and
Baesens, B., 2015. APATE: A novel approach for automated credit card transaction fraud
detection using network-based extensions. Decision Support Systems, 75, pp.38-48.