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Law and Financial Crimes

University: LONDON COLLEGE OF PROFFESION STUDIES

  • Unit No: 16
  • Level: High school
  • Pages: 14 / Words 3596
  • Paper Type: Assignment
  • Course Code: A/617/4825
  • Downloads: 281
Question :

This assessment will cover the following questions:

  • What is the Market Abuse Directive (MAD) ?
  • What are the purposes of money laundering regulations to prevent illegal activities?
  • What are the general offenses of financial crimes under the FSMA 2000, Fraud Act 2006, and Theft Act 1968, and how do they differ from each other?
Answer :
Organization Selected : N/A

INTRODUCTION

The regulation and control of financial crimes and market abuse are critical aspects of maintaining the integrity and stability of financial markets. Various legislative frameworks have been established to address offenses such as insider dealing, money laundering, terrorist financing, corruption, and market manipulation. In this context, this report delves into the provisions of the Financial Services and Markets Act 2000 (FSMA), European Union Directives, and other relevant laws in the United Kingdom. It also explores the purpose and international dimensions of money laundering regulations, as well as the consequences of financial crimes on society. Additionally, the Market Abuse Directive (MAD) is analyzed as a crucial tool to combat market manipulation and abusive practices within the European context. Understanding these legal frameworks and regulations is essential for ensuring fair and transparent financial markets and safeguarding investor interests.

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).

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 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).We provide theOnline Assignment Help UKfor your exams with quality content.

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.

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.We are the bestLaw Homework Helpservice providers in the UK

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.

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.

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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. 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 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 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 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.

Conclusion

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.

Read Also :- International Trade Law
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