Law-and Financial Crimes

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Law-and Financial Crimes

Contents
TASK 1............................................................................................................................................1
Explaining civil offence according to FSMA 2000 and identifying sources of law on insider
dealing..........................................................................................................................................1
Comparing statutory frameworks and EC context on dealing with insider dealing and market
abuse............................................................................................................................................1
Analysing the general offences of financial crimes under FSMA 2000, Fraud Act 2006 and
Theft Act 1968.............................................................................................................................2
Justifying ways in which the market abuse regulation sand powers of regulators act decisively
against insider dealing and related financial frauds.....................................................................2
TASK 2............................................................................................................................................3
2.1. Explain the purpose of money laundering regulations.........................................................3
2.2. Evaluate the international dimensions of money laundering regulations.............................4
2.3. Outline the background of proceeds of Crime Act 2002 and explain offences under its
provisions.....................................................................................................................................4
2.4. Assess the consequences of money laundering on the society.............................................4
TASK 3............................................................................................................................................5
3.1. Explaining historic and economic context of general provisions of law on money
laundering, terrorist financing, corruption...................................................................................5
3.2. Identifying the EC Market Abuse Directive to control market manipulation and abusive
practices.......................................................................................................................................7
REFERENCES................................................................................................................................9

TASK 1
1.1 Explaining civil offence according to FSMA 2000 and identifying sources of law on insider
dealing
According to Section 118 of Financial Services and Markets Act 2000, a civil offence is an
act conducted by an individual or organisation due to which the liability to pay Financial services
authority arises. Civil offence is different from criminal offence and the subject matter of guilt is
investigated by FSA.
Besides FSMA 2000, there are few other sources of law for insider trading. These sources
of laws include Companies Securities (Insider Dealing) Act 1985, Criminal Justice Act 1993’s
Section 52, 53 and 54, Part V of Criminal Justice Act 1993 (Sources of law for insider trading.
2020).
1.2 Comparing statutory frameworks and EC context on dealing with insider dealing and market
abuse
Statutory frameworks EC context
Meaning This framework is provided by
Financial Services and Markets Act
2000 in which new regulations to limit
insider trading and market abuse are
developed in the region of United
Kingdom.
These are the regulations given by
European Union Directive to regulate
obligations and disclosures of market
abuse and insider trading.
Dealing with
Insider
trading
According to statutory framework, the
insider trading is dealt as criminal
liability and both penalty and
imprisonment is charged to the guilty
(Ojo, 2016).
EC context deals with insider trading
as considering it as an offence under
MAR (Singh, 2016).
Dealing with
Market abuse
The statutory framework considers the
misuse of information, misleading
impressions and distorting the market
as prohibition of regulations of market
abuse.
The EC context considers insider
dealings, unlawful disclosures and
market manipulation as prohibition of
regulations of market abuse (Market
abuse regulations. 2020).
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1.3 Analysing the general offences of financial crimes under FSMA 2000, Fraud Act 2006 and
Theft Act 1968
According to Section 131 L of FSMA 2000, the general offences is the situation when an
individual fail to obey the regulations provided by this law. A general offence levies liability
when a person provides information which is false and misleading and due to which loss has
been occurred to fair traders. If a person is found to be guilty under this law, then it will be liable
for imprisonment for not exceeding three months and a fine not exceeding statutory maximum or
both.
Financial crimes are different from offences as according to the Section 1B (2) of FSMA
2000, financial crimes are the criminal activity which is conducted in relation to the money or
money market. These activities include frauds, misuse of financial market information and
misconduct.
FSMA 2000 is not the only act applicable in United Kingdom which look over the affairs
of financial market. There are few other laws as well Fraud Act and Theft Act. According to
Fraud Act, 2006 a general offence has three ways by which an individual can commit it. These
three ways are stated in Section 2, 3 and 4 of this law. These ways include fraud and false
representation, abuse of the position and failure of conducting legal duty.
On the other hand, financial crime in this act is defined as a punishable activity on which
appropriate penalty and imprisonment is levied.
In the case of Theft Act 1968, the term general offence is wide as it includes various
activates such as Burglary, Robbery and many more. The punishment under this act varies from
vase to case depending on the damage which has been done by the guilty. There is no specific
definition of financial crime under this act but it can be interpreted that any act which has caused
the damage of monetary sources is a financial crime for which liable person must be punished.
1.4 Justifying ways in which the market abuse regulation sand powers of regulators act
decisively against insider dealing and related financial frauds
Market abuse regulations are the combination of standards and rules which every financial
market party has to follow so that the activity of market abuse can be restricted. There are
various ways by which market abuse regulations can act decisively against insider dealing and
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related financial frauds. These ways are a list of individuals is prepared who has the insider
information about a stock so that their activities can be tracked and checked whether those
individuals are involved in the act of market abuse (insider trading) or not. Another way is to
provide the clear definition of each offence such as insider trading, insider information, market
manipulation etc. Another way is the clear presentation of accepted market practices which
market abuse regulations has been provided so that the element of confusion can be eliminated
(Johnstone, 2019).
Besides the regulations, the power of regulators can also act in a way that it can be used
against insider trading and financial frauds. The regulators of FCA has the authority to
investigate the financial accounts of investors in the case of suspension by which insider trading
and frauds can be detected. These regulators can use their power in such a way so that activities
of suspicious investors and insiders can be tracked.
TASK 2
2.1. Explain the purpose of money laundering regulations.
The concept of money laundering is related with the process of generating high amount of
money through a criminal activity. These activities can include the drug trafficking and other
illegal activities. In order to protect fair investors from money laundering, there are various
regulations which a country develops.
In context of United Kingdom, various standards and regulations are developed which are
combined in the form of Money Laundering Regulations 2017. These regulations have set out
obligations by which fraudulent activities are monitored and evaluated (Campbell, 2018). There
are specific aims and objectives due to which these regulations are developed. These objectives
and purposes are mentioned below:
The regulations of money laundering are developed for the purpose of protecting the
financial system of United Kingdom as it is directly related with the general investors which
invest their money in financial market of the country.
Another aim of these regulations is the restriction of certain activities which are conducted
which the means of money laundering terrorist activity, theft and fraud, blackmail and
counterfeiting, tax evasion and forgery.
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These regulations which are set for Monet Laundering requires credit institutions to be
registered with the HM Revenue and Customs department of United Kingdom. By this way these
regulations aim to control and monitor the activities of these institutions so that fair trading can
be ensured.
Another purpose of these regulations is to prevent a country from the illegal activities of
criminals and terrorists. These regulations have the process of keeping a check upon customers
and analysing their records and all the transactions so that any fraudulent activity can be pre
tracked (Mugarura, 2018).
The measure of justice behind money laundering is that to place the funds in financial
system without erasing suspension or to move them around so that serious of complex
transaction processing multiple judicious can be accomplished. This makes it difficult for the
government and other little institute to identify the original source of the money and finally to
move the fund back into the financial and business system so that it will appear legitimate.
One more objective of money laundering is to perform systematically and clandestinely, so
that it will be difficult for legal institute to identify the exactly how much money is involved and
what is the method used in this function and what is the magnitude of the problem.
Hiding is one of that purpose of money laundering regulation which directly related to
performing and saving the interest of individuals within the society from the money laundering
systems this is because the system are directly related to the corruption within the economy and
function of the organisation and can be related to demotivation within the people of the nation.
One more purpose of formation of money laundering regulation is to stop the drug dealing
with in the nation this is because money laundering directly give rise to drug dealing as it support
them to easily sell their products which can harm the individuals were living within the society.
according to findings made by a different government institute as well as other agencies it can be
seen that money laundering is directly related to the drug dealing with in the nation because drug
dealers use money laundering as their finance system which help them to finance their illegal
business and increase their business by making some paper trials. This also at negatively because
brandling require high amount of cash which can easily e use while performing money
laundering system.
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2.2. Evaluate the international dimensions of money laundering regulations.
International dimension of money laundering regulations are the standards which are
followed by internally or a group of nations. There are various dimensions which are developed
with the aim of protecting the financial markets. Some of these international dimensions are
evaluated below:
European Union:
This dimension was developed in May 2005 with the purpose of preventing the use of
financial markets for the criminal acts and money laundering. If is a common concept that the
money which is invested in financial market is usually tax free due to which financial market
faces the issue of money laundering. EU developed Money Laundering Directive to tackle this
issue along with terrorist financing. There are various other issues which aimed to be addressed
by this which includes broadening of scope, monitoring clients, third party reliance and many
others (Kang, 2018).
Financial Action Task force:
It is another international dimension which was established from the initiative of 7
countries in 1989. This task force has set the international standards which promotes the
implementation of regulatory measures. The major aim of this dimension is to bring integrity in
international financial system.
2.3. Outline the background of proceeds of Crime Act 2002 and explain offences under its
provisions.
Crime Act 2002 was set as a new government policy in which wide range of matters were
included. This act was enacted in the year 2002 but was amended in 2002 in order to make
changes regarding the money laundering activities. For the purpose of implementation of this act
a bill was passed to the House of Commons and later it was given the Royal Assent.
There are two offences under this act which are stated below:
Under this act, money laundering activities are considered as an offence for which various
regulations are provided to bring the clarity between the integrity of regulated sector.
Another offence is the failing of appropriate report of money laundering.
2.4. Assess the consequences of money laundering on the society.
Money laundering is a threat to society and financial sector of a nation due to which
government of a nation develops strict regulations against the practice of money laundering.
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There are various consequences which society has to face due to money laundering. Some of
these effects or consequences are mentioned below:
 Due to money laundering, the taxation value of a nation will be reduced. In this
procedure fraudulent investors invest their money acquired from illegal activities in
financial market of the country by which they save tax. These tax savings result in low
taxation revenue of the government which directly impacts on public spending of a
country.
 Another consequence of money laundering is increase of corruption, terrorist activities
and crimes. When an investor invests their money acquired from illegal activities in
financial market, their investment multiplies and with that money, those investors re
invest the value in terrorist activities and corruption by which social peace of a country
gets impacted (Riccardi, Milani and Camerini, 2019).
TASK 3
3.1. Explaining historic and economic context of general provisions of law on money laundering,
terrorist financing, corruption.
General Provisions of law of money laundering
Historic context
Money laundering in United Kingdom(U.K.) is governed by various legal rules and
regulations which seek to prevent it. U.K. has some of the strictest and highly developed set of
laws on money laundering. Some of the laws which govern it are Proceeds of Crime Act, 2002,
Fraud Act, 2006. These provisions apply to individuals as well as organisations however
corporates are not liable unless guilt can be ascribed to an individual source. These rules are
designed to protect the financial system of country and to prevent illegal transfer of funds to
other countries for concealment purposes.
Economic Context
Illegal money laundering significantly hurts the overall financial system of U.K. and also
hurts its international reputation. The laws of country which govern setting up of a company are
quite simple and are therefore exploited by criminals. They set up domestic and offshore
companies and use them to illegally transfer the funds to other countries. They also use the
property market for their advantage. Thus, it can be concluded that virtually practices of money
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laundering take place through legitimate processes and services. This has a severe impact on the
economy of U.K (Schwartz, 2018).
General Provisions of law of terrorist financing
Historic context
For prevention of financing of terrorism, the parliament of U.K. passed the Terrorism
Act, 2000. The provisions of the act make it a punishable offence to raise, receive or provide
funds for terrorist activities. Also holding or using funds for the purpose of terrorism, becoming
involved in arrangements to facilitate money for terrorism and facilitating the laundering of
terrorist money is illegal under the act. Thus, measures have been taken in the past to introduce
strict laws in order to stop funding of terrorist activities.
Economic context
Terrorist activities create an impact on the economy of U.K. as it is severely affected due
to these activities. It impacts the marketing strategies, buyer's demand and market supply
adversely. The anti-terrorism law has made it very difficult for the organisations in the country to
conduct their business activities across international borders. As a result, many firms have
restructured themselves to meet the requirements of the anti-terrorism financing law. Another
aspect which impacts companies is security and they have to invest huge amount of money to
improve both internal as well as external security.
General provisions of law on corruption
Historical context
The main law which governs corruption in U.K. is the Bribery Act, 2010 which came into
force on 1st July 2011. It defines the practices related to corruption very widely and includes
principal offences like bribing another person, being bribed and bribing a foreign public official.
The penalties under this act are an imprisonment of maximum 10 years, potential of unlimited
fine and confiscation of property. Some concerns have also been raised against some provisions
of the act as it criminalises behaviour which is accepted globally and therefore puts British
businesses at competitive disadvantage.
Economic context
Corruption creates a significant impact on the economy of country as it destabilises it. It
has severe economic costs associated with it. The provisions of law of corruption in U.K. affects
its companies. Due to some strict provisions of the law which criminalises certain type of
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behaviour which is accepted in the global arena the firms are having some problems in trading
internationally. However, due to the act there has been a control on movement of illegal black
money in the market. This provides a boost to economy of the country. Foreign Direct
Investment which was affected due to corruption has increased substantially after the passage of
act (Benson, King and Walker, 2020).
3.2. Identifying the EC Market Abuse Directive to control market manipulation and abusive
practices.
MAD will ensure the integrity of financial markets all over Europe and will increase
investor confidence. It aims to protect the investors from wrong practices prevalent in the
market. It makes insider dealing, unlawful disclosure, market manipulation and attempted civil
manipulation offences. Its scope has also been extended and it now covers a wide criterion. Its
implementation requires member states to encourage whistleblowing and provide protection for
it.
It would be applicable to the U.K. even after Brexit as the obligation exists even under
U.K.'s own legislation. It includes the Accepted Market Practices in which certain practices
might be legal in some countries but are illegal in other countries. Therefore, the participants of
market must pay close attention to the type of activities they wish to carry out. It also allows
disclosure of certain information known as market soundings to exist. However, the parties
involved in disclosing such information should take care to include the identity of potential
investor and the individuals representing the investor (Baker, 2017).
The new directive also requires persons executing transactions to detect and report
occurrence of suspicious transactions. It also regulates those people who make investment
recommendations and provides guidelines on how such information must be disclosed in the
media. Therefore, financial advisors have to take care before providing any investment related
guidance. It also states that wherever necessary regulators can enter into agreements with the
authorities of third countries so as to exchange information and enforce it obligations.
The directive also gives expanded definition of insider dealing and wide range of
financial instruments and markets. The U.K. Government has announced its intention to bring
criminal regime in line with it. Also, abusive behaviour in regulated disclosure of inside
information by the issuers of securities has been prohibited in the new regime. It also imposes
minimum standards for investigation and enforcement powers. In it, every member state is
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required to designate a single administrative authority competent (Carreiro and Anderson, 2017).
There are also obligations on issuers to publish inside information, maintain insider lists and
notification and publications of transactions of managers of issuers. It also provides that ESMA
should compile a list of financial instruments that are admitted to trading. It also involves
keeping pace with market developments such as new trading platforms, new technology etc.
To conclude, it introduces various significant changes for investment managers, financial
advisors, buy-side firms and sell-side firms. The business organisations located anywhere in the
world have their obligations under the new regime as the new directive protects the investors
against the breach of directive. Furthermore, the new regime's scope has also been extended to
all financial instruments, abusive behaviours and transactions, prohibition on manipulation of
calculation of a benchmark rate, extended definition of insider dealing, market manipulation to
spot commodity contracts, attempted insider dealing and market manipulation and certain high-
frequency electronic trading activities. The participants of market who are outside U.K. And
E.U. have to be aware about the extraterritorial application of MAD. It introduces various
significant changes which are likely to impact the trade practices of U.K. And E.U. in the long-
run. It is necessary for the members of EU to implement the new directive with their own local
laws. Thus, the new regime has brought tough provisions to counter the market manipulation and
abusive practices which make it difficult to conduct such practices. Firms must also ensure that
their systems, controls and training programmes are regulated to follow the new regime. There
should be no breach of the directive.
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REFERENCES
Books and Journals
Baker, A.H., 2017. Market abuse and the risk to the financial markets. In The Financial Crisis
and White Collar Crime-Legislative and Policy Responses (pp. 112-128). Routledge.
Benson, K., King, C. and Walker, C., 2020. Assets, Crimes and the State: Innovation in 21st
Century Legal Responses. Routledge.
Campbell, L., 2018. Dirty cash (money talks): 4AMLD and the money laundering regulations
2017. Criminal law review., 2018(2). pp.102-122.
Carreiro, L. and Anderson, F., 2017. Trade surveillance in a global context. Journal of Securities
Operations & Custody. 9(1). pp.57-61.
Johnstone, N., 2019. Insider Trading and Market Manipulation-Investigating and Prosecuting
across Borders.
Kang, S., 2018. Rethinking the global anti-money laundering regulations to deter corruption.
International & Comparative Law Quarterly. 67(3). pp.695-720.
Mugarura, N., 2018. The implications of Brexit for UK anti-money laundering regulations.
Journal of Money Laundering Control.
Ojo, M., 2016. The Financial Services Authority: A Model of Improved Accountability?.
Riccardi, M., Milani, R. and Camerini, D., 2019. Assessing money laundering risk across
regions. An application in Italy. European Journal on Criminal Policy and Research.
25(1). pp.21-43.
Schwartz, B.P., 2018. Law 3980-Oral History, Indigenous Peoples, and the Law: Selected
Bibliography by Subject Matter. Man. LJ. 41. p.397.
Singh, D., 2016. Banking regulation of UK and US financial markets. Routledge.
Online
Section 118 of Financial Services and Markets Act 2000. 2020. [Online]. Available through:
<https://www.mondaq.com/uk/Finance-and-Banking/14172/Financial-Services-and-
Markets-Act-2000-Market-Abuse>
Sources of law for insider trading. 2020. [Online]. Available through:
<https://www.lawteacher.net/free-law-essays/trading-law/regulation-of-insider-trading-
law-essays.php>
Market abuse regulations. 2020. [Online]. Available through:
<https://corpgov.law.harvard.edu/2016/06/17/the-new-eu-market-abuse-regulation/>
Section 131 L of FSMA 2000. 2020. [Online]. Available through:
<http://www.legislation.gov.uk/ukpga/2000/8/section/131L>
Section 1B (2) of FSMA 2000. 2020. [Online]. Available through:
<https://www.lexisnexis.com/uk/lexispsl/financialservices/document/393813/5KVT-
48J1-F18F-M55D-00000-00/
FCA_and_financial_crime_duties__powers__procedures__approach_overview>
Fraud Act, 2006. 2020. [Online]. Available through:
<https://www.cps.gov.uk/legal-guidance/fraud-act-2006>
Theft Act 1968. 2020. [Online]. Available through:
<http://www.legislation.gov.uk/ukpga/1968/60>
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