Financial crime over the last 30 years has increasingly become of concern to governments throughout the world. This concern arises from a variety of issues because the impact of financial crime varies in different contexts. It is today widely recognised that the prevalence of economically motivated crime in many societies is a substantial threat to the development of economies and their stability.
It is possible to divide financial crime into two essentially different, although closely related, types of conduct.
First, there are those activities that dishonestly generate wealth for those engaged in the conduct in question. For example, the exploitation of insider information or the acquisition of another person’s property by deceit will invariably be done with the intention of securing a material benefit. Alternatively, a person may engage in deceit to secure material benefit for another.
Second, there are also financial crimes that do not involve the dishonest taking of a benefit, but that protect a benefit that has already been obtained or to facilitate the taking of such benefit. An example of such conduct is where someone attempts to launder criminal proceeds of another offence in order to place the proceeds beyond the reach of the law.
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There are essentially seven groups of people who commit the various types of financial crime:
Financial crime is commonly considered as covering the following offences:
A financial institution should take appropriate action where a corporate customer, a member of its senior management or a senior representative of the customer is the subject of an investigation by a law enforcement agency or regulatory body.
Financial Institutions must also consider any obligations they might have to report suspicions of money laundering (including any successful fraud).
Consideration should also be afforded to obtaining appropriate legal advice to reduce the risk, that:
The foundation of any successful fight against fraud is the culture within the institution. When correctly motivated, employees remain honest and become the most effective front-line defence against the fraudster.
Employees become motivated when they believe:
An awareness of what constitutes insider dealing activity is imperative for financial crime and compliance professionals in the detection and prevention of exposure to the activity as a serious ﬁnancial crime. Regulatory data shows unusual share price movements – a potential indicator of market abuse – in around 29% of takeover announcements.
Additionally, it is possible in the case of ﬁnancial services businesses that are themselves listed, for directors to commit the offence. To this extent, financial crime and compliance professionals should ensure that businesses and their employees comply fully with all relevant disclosure rules.
More commonly, ﬁnancial services businesses are exposed to insider dealing through customers who are engaged in the activity. Any money, goods or property derived from insider dealing activity is capable of predicating money laundering offences in most common law jurisdictions.
Due to the often complex nature of financial services, detecting and preventing fraud within the financial sector poses an almost insurmountable challenge. The threats are both domestic and international. They may come from within the organisation or outside it. Increasingly, internal and external fraudsters combine to commit significant fraudulent acts.
The victims may be the financial sector firms themselves or the customers of those firms. The proceeds of fraud are rarely generated in cash. The funds that are the target of the fraud are generally already within the financial system but will undoubtedly need to be moved in order to confuse the audit trail.
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