1. Lecturer: Rowin Gurusami Saturday 18 th August 2012

2. Lecturer: Rowin Gurusami  Crime is conduct prohibited by law  Law tends to be organised on a national basis but financial crime, such as money laundering, can be international in nature, i.e. perpetrated across national borders  International bodies have to cooperate with one another in order to control financial crimes which spread across borders

3. Lecturer: Rowin Gurusami  Protection provided to people at work when raising proper concerns about civil or criminal offences  Elements: 1. Qualifying disclosure 2. Made in good faith 3. Made to the appropriate person  A worker has the right not to be subjected to ‘any detriment by any act, or any deliberate failure to act’ by his employer as a result of having made a protected disclosure  As such dismissals for having made protected disclosure is automatically unfair dismissal

4. Lecturer: Rowin Gurusami  Worker must reasonably believe that the information disclosed relates to one or more of the following elements (thus opinions or rumours do NOT qualify) : - A criminal offence has been committed (or is being committed or is likely to be committed) - Someone has failed (or is failing or is likely to fail) a legal obligation placed upon him - A miscarriage of justice has occurred (or is occurring or is likely to occur) - Health & safety of someone has been (or is being or is likely to be) damaged - The work environment has been (or is being or is likely to be) damaged - Information relating to the above has been (or is being or is likely to be) deliberately concealed

5. Lecturer: Rowin Gurusami  Intention of the worker must be honest and not as a result of anger, retaliation, payback or some other personal motive  Disclosure must be made to one of the following persons: - Internally to the employer or responsible person - To a legal adviser - To a Minister (for public servants) - To the prescribed person/regulator (e.g. Financial Services Authority, etc.) - To any other persons if it is reasonable given the circumstances & if disclosure is made in good faith (e.g. to the media or police)

6. Lecturer: Rowin Gurusami  Established under the Fraud Act 2006: 1. Fraud by false representation - Dishonesty - False representation of fact/law - Intention to make a gain or to cause loss (or risk thereof) 2. Fraud by failing to disclose information - Dishonestly failing to disclose information - Legal duty to disclose such information - Intention to make a gain or to cause loss (or risk thereof)

7. Lecturer: Rowin Gurusami 3. Fraud by abuse of position - Occupying position whereby safeguarding financial interests of someone else - Dishonestly abusing of that position - Intention to make a gain or cause loss (or risk thereof)  Maximum penalty is 10 years’ imprisonment and an unlimited fine

8. Lecturer: Rowin Gurusami  Insider Dealing is the statutory offence of dealing in securities (e.g. shares) while in possession of inside information as an insider, the securities being price-affected by the information if made public  The Criminal Justice Act 1993 contains the rules on insider dealing which is a crime because of its potential to destroy public confidence in the stock exchange  To prove insider dealing, s52 CJA 1993 provides that prosecution must prove that possessor of insider information: 1. Dealt in price-affected securities on a regulated market, or 2. Encouraged another to deal in them on regulated market, or 3. Disclosed the information other than in the proper performance of their employment, office or profession

9. Lecturer: Rowin Gurusami  Dealing is acquiring or disposing of (or agreeing to acquire or dispose of) relevant securities whether directly or through an agent or nominee or a person acting according to direction (s55 CJA 1993)  Offence if individual having information as insider encourages another person to deal in price-affected securities in relation to that information  They must know or have reasonable cause to believe that dealing would take place  Irrelevant whether: - The person encouraged realises securities are price-affected - The inside information given to that person - Any dealing takes place; offence is for the act of encouragement

10. Lecturer: Rowin Gurusami  Inside information is ‘price sensitive’ information relating to a particular issuer of securities that are price-affected (s56 CJA)  Inside information must, if made public, be likely to have a significant effect on the price and must be specific or precise  Example of specific information: - Information that a takeover bid would be made by a specific company  Example of precise information: - Details of how much would be offered for shares

11. Lecturer: Rowin Gurusami  Under s57 CJA 93, a person has information as a primary insider if (a) it is (and they know it is) inside information, and (b) If they have it (and know they have it) from an inside source  The information may have been obtained from an inside source: (i) Through being a director, employee or shareholder of an issuer of securities (ii) Through access because of employment, office or profession  If obtained through any one of those two categories, individual with information is a secondary insider

12. Lecturer: Rowin Gurusami  This term is not exhaustively defined by statute, leaving final determination to the Court  Information is made public if: - Published under rules of regulated market - In public records (e.g. Notices in London Gazette) - Can readily be acquired by those likely to deal - Derived from public information  Information may be treated as made public even though: - Can only be acquired by exercising diligence or expertise - Communicated only to a section of public - Acquired only by observation - Communicated only on payment of a fee or published outside UK

13. Lecturer: Rowin Gurusami  Under s53 CJA 93, an individual has defence regarding dealing and encouraging others to deal if it can be proved that: - They did not expect there to be a profit or avoidance of loss - They had reasonable grounds to believe that the information has been disclosed widely enough to ensure no one would be prejudiced. - They would have done what they did even if they did not have the information  An individual has defence regarding disclosure of information if they can prove that: - They did not expect any person to deal - Although dealing was expected, profit or avoidance of loss was not expected

14. Lecturer: Rowin Gurusami  Maximum penalties given by CJA 93 are seven years’ imprisonment and/or an unlimited fine  Transaction/contracts remain valid and enforceable  If insider dealing involves a director, he is in breach of his fiduciary duty and is liable to account to company for any secret profit made

15. Lecturer: Rowin Gurusami  Fraudulent Trading - Occurs where the business of a company in liquidation has been carried on with intent to defraud creditors or for any fraudulent purpose (instigated by any individual) - Civil penalty imposed by s213 Insolvency Act 1986: liable for the debts of the company in insolvency - Criminal aspect (s993 CA 06) is introduced when business was carried out for the purpose of any kind of fraud - Required to prove ‘actual dishonesty’ - Knowledge alone is not enough to make someone a party. They must have taken some active step in fraudulent trading

16. Lecturer: Rowin Gurusami  Money laundering is the term given to attempts to make the proceeds of crime appear legitimate (respectable)  Covers any activity by which the apparent source and ownership of money representing the proceeds of income are changed so that he money appears to have been obtained legitimately  The money laundering process involves three phases: - Placement - Layering - Integration

17. Lecturer: Rowin Gurusami  There are three categories of criminal offences in the Proceeds of Crime Act 2002: a) Laundering (s327) - Acquisition, possession or use of proceeds of criminal conduct, or assisting another to retain the proceeds of criminal conduct and concealing, disguising, converting, transferring or removing criminal property. - This relates to its nature, source, location, disposition, movement or ownership of property b) Failure to report by an individual (s330) - Failure to disclose knowledge or suspicion of money laundering (suspicion is more than mere speculation, but falls short of proof or knowledge)

18. Lecturer: Rowin Gurusami c) Tipping off (s333) - Disclosing information to any person if disclosure may prejudice an investigation into drug trafficking, drug money laundering, terrorist related activities, or laundering the proceeds of criminal conduct  ‘Criminal property’ defined by s3 as property which the alleged offender knows (or suspects) constitutes or represents being related to any criminal conduct  Criminal conduct is any conduct that constitutes or would constitute an offence in any part of the UK

19. Lecturer: Rowin Gurusami  In relation to laundering, an individual may have a defence if they make disclosure to the authorities: - As soon as possible after the transaction - Before the transaction takes place  Alternatively, if they can show there was reasonable excuse for not making a disclosure  In relation to failure to report, the person who suspects money laundering must disclose this to a nominated money laundering reporting officer within their organisation or directly to the National Criminal Intelligence Service  In relation to tipping off, it is also an offence if the person making disclosure to NCIS also tells person at the centre of their suspicion of the disclosure. It is a defence if that person did not know that tipping off would prejudice an investigation

20. Lecturer: Rowin Gurusami  The Proceeds of Crime Act 2002 sets out the following penalties in relation to money laundering: (a) 14 years’ imprisonment and/or unlimited fine, for knowingly assisting in the laundering of criminal funds (b) 5 years’ imprisonment and/or unlimited fine, for failure to report knowledge or the suspicion of money laundering (c) 2 years’ imprisonment and/or unlimited fine, for ‘tipping off’ a suspected launderer

21. Lecturer: Rowin Gurusami  Enacted in order to: - Enable suspicious transactions to be recognised and reported to law enforcement agencies; and - To ensure that if a client comes under investigation in the future, a relevant person can provide part of the audit trail  Mainly concerns customer due diligence, record-keeping procedures, training, supervision and enforcement

22. Lecturer: Rowin Gurusami - Control systems in place to monitor possible money laundering activities - A Money Laundering Reporting Officer (MLRO) responsible for oversight of anti-money laundering activities and reporting to Serious Organised Crime Agency (SOCA) - Internal reporting procedures for staff to voice suspicion - Anti-money laundering training given to all staff who handle transactions that may involve money laundering - Adequate record on clients (e.g. Copy of evidence of identity and evidence of applicant’s identity must be kept for five years)

23. Lecturer: Rowin Gurusami  There is legal requirement for organisations to take the following actions: - Set up procedures and establish accountabilities for senior individuals to take action to prevent money laundering - Educate staff & employees about potential money laundering - Obtain satisfactory evidence of identity where transaction is for more than £10,000 (KYC – checking the Office of Foreign Assets Control's Specially Designated Nationals list ) - Report suspicious circumstances - Not to alert persons who are or might be investigated for money laundering - Keep records of all transactions for five years