An introduction to Financial Crime

Written by Dione Schick on Thursday May 2, 2013

Financial Crime has recently emerged as a hot topic of late and I feel it is something that should be brought to the general public’s attention. Here in Singapore we are launching, for the first time in the region, the ICA Financial Crime qualifications, giving us a great platform to start looking at this area in a little more detail.

What exactly is financial crime?

There is no single universal definition of financial crime, and the term is sometimes used interchangeably with:

1. White-collar crime (i.e. crime committed by a person of respectability and high social status, in the course of his occupation)
2. Corporate crime (i.e. crime committed by a corporation or individuals associated with a corporation)
3. Occupational crime (i.e. crime committed through opportunity that arises in the course of employment)
4. Economic crime (i.e. crime related to financial fraud, money laundering and corruption).

In addition, financial crime is a wide and complex term that involves a range of criminal offences that have their origins in different pieces of legislation.

What topics typically fall under financial crime?

Financial crime can include any offence involving:

• money laundering
• insider dealing or market abuse
• corruption
• terrorist financing
• fraud or dishonesty crimes

The definition of financial crime is wide, not clearly defined and is an expanding concept.
Different types of fraud can include:

• Corporate fraud
• Banking fraud
• Securities and investment fraud
• Insurance fraud
• Intellectual property fraud.

Some of the hottest financial crime topics right now are:

• Computer fraud and Internet fraud
• Identity theft
• Corruption and bribery.

When and how did financial crime become a separate area of study?

Just as anti-money laundering (AML) emerged out of the shadows in recent years to become a significant new area, Financial Crime is increasingly becoming a separate area of study due to the sharp increase in regulation and laws that specifically relate to the financial services industry as well as numerous high profile cases of corporate collapses and damning parliamentary reports.

Here in Asia, there has been increased regulatory efforts against prosecuting financial crimes such as insider trading and with the passing of the UK Bribery Act in 2010 these types of financial crimes are of increasing interest to the regulatory bodies, which has financial services businesses taking notice of the regulatory intensity, training their staff and looking for increased skills in these areas.

In a recent example in April 2013 the Monetary Authority of Singapore (MAS) has taken civil penalty enforcement action against Mr Ang Kok Min for insider trading under Section 219(2)(a) of the Securities and Futures Act (SFA). He was fined SGD50,000 for trading on inside information that Wilmar International Limited, where he was employed as a senior trading manager, intented to purchase 20% of the share capital of Kencana Agri Limited (Kencana), a company listed on the Singapore Exchange Securities Trading Ltd (SGX-ST), at $0.35 per share. After the release of the announcement, Kencana’s share price closed at $0.385, a 10% increase over the preceding day’s closing price of $0.35.

Whilst in possession of the non-public price-sensitive information concerning Wilmar’s intention to invest in Kencana, Mr Ang bought 50,000 Kencana shares on 23 July 2010 and another 50,000 Kencana shares on 2 August 2010. As a result of his purchases, Mr Ang made a profit of approximately $6,200. He admitted to contravening Section 219(2)(a) of the SFA and has paid MAS a civil penalty of $50,000, without any court action.

This is the third civil penalty enforcement action taken by MAS this year, two for insider trading and one for use of deceptive and manipulative practices.

In Hong Kong, the banking regulator has just announced a plan to double its anti-money laundering staff head count following several recent high-profile money laundering cases involving banks in the territory. This year alone, an unemployed woman from a public housing estate and a 22-year-old have both been sentenced to lengthy jail sentences for laundering large sums of money over several years, raising concerns about the state of AML processes at some banks in the territory. No doubt, the heavy fines imposed upon HSBC and Standard Chartered in the United States for money laundering and sanctions offences last year will also have peaked the interest in Hong Kong, where both banks have a strong presence.

Banks and other financial services businesses need to mitigate the risks from this increased regulatory and public scrutiny.