Financial crime in the UK (England and Wales): overview | Practical Law
This report is part of ICAEW's Market Foundations initiative. ICAEW . The relationships between crime and different types of legal and ethical obligation can be. After a brief note on the history of critique both within and outside marketing relationship marketing; consumer identity and branding; marketing practice and. Comparison of legal and illegal Markets - in Relation to the Organized Crime Therefore a market offer and request different goods and services and define a.
This paper wants to show the different terms and methods of legal and illegal markets and their entrepreneurs especially the organized crime. It also shows that legal and illegal activities particularly overlap. For example illegal capital can be reinvested into legal business but also legal business can cooperate with illegal activities. I think about tax dodging, corruption, monopolizing and also the use of violence, money laundering and multi-million bribes to take the economical lead.
The purpose is to consider facts, empirical findings and coherences from relevant literature to give a problematic overview and to affirm that illegal markets are a part of the every economy.
Moreover we will ask how different these actors of both markets are and what different methods they use. Primary the paper analyzes the structure of legal and illegal markets. The focus is set to the organization, the participators and influencing factors of these markets.
After that I will work out differences and similarities to compare them. The results will be outlined and afterwards discussed by focusing the modern organized crime. The paper closes with an example of the Camorra Syndicate and gives a perspective of modern illegal business in a critical out view. Therefore a market offer and request different goods and services and define a price.
The suppliers wanted to sell their goods and services with a high profit as possible. But they have to accept basic economy rules. The quantity of a good grows if also the price is growing.
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If the suppliers expect a lower price for their goods they will also reduce its quantity. Here every supplier wanted the highest profit and so they have a strong competition on the markets. They have the option to produce more efficient and with lower costs as their competition. On the other side there are the customers. Co-operating fully with the SFO. Preparing a report on the effectiveness of its existing anti-bribery and corruption controls, policies and procedures within 12 months of the DPA and every 12 months during its duration, to include details of all third-party intermediary transactions.
The indictment, which was suspended for the term of the DPA, covered 12 counts of conspiracy to corrupt, false accounting and failure to prevent bribery. This included voluntary disclosure of all investigation findings, waiver of privilege, provision of digital evidence to the SFO, consulting with the SFO in relation to media coverage and not winding up companies of interest.
In addition, the terms of the DPA required Rolls-Royce to continue giving full co-operation to the SFO and complete, at its own expense an anti-bribery and corruption compliance programme following recommendations from an external expert, Lord Gold. In Decemberthe SFO secured its first corporate plea to the section 7 offence. Sweett Group plc pleaded guilty to failing to prevent the payment of bribes in Dubai, in relation to a building contract.
Finally, in Februarythe CPS secured its first conviction after a contested trial over a section 7 Bribery Act offence. Skansen was dormant at the time of its conviction. Accordingly, the only disposal available to the court was an absolute discharge for the company. What international anti-corruption conventions apply in your jurisdiction? There are a number of international anti-corruption conventions that apply in England and Wales: European Union Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union ratified What are the specific bribery and corruption offences in your jurisdiction?
Foreign public officials Section 6 of the Bribery Act is a standalone offence of bribery of a foreign public official. The offence is committed where a person offers, promises or gives a financial or other advantage to a foreign public official with the intention of influencing the official in the performance of his or her official functions.
The person offering, promising or giving the advantage must also intend to obtain or retain business, or an advantage in the conduct of business, by doing so. However, the offence is not committed where the official is permitted or required by the applicable written law to be influenced by the advantage.
A "foreign public official" includes all elected and appointed officials holding a legislative, administrative or judicial position of any kind in a country or territory outside the UK.
It also includes any person performing public functions in any branch of the national, local or municipal government or exercising a public function for any public agency or public enterprise of such a country or territory, such as professionals working for public health agencies and officers exercising public functions in state owned enterprises.
Foreign public officials can also be officials or agents of a public international organisation, such as the UN or the World Bank. Under UK law, facilitation payments are illegal. Domestic public officials The Bribery Act does not contain a specific offence in relation to domestic public officials.
Financial crime in the UK (England and Wales): overview
Such conduct is covered by the primary offence of bribing another person see below, Private commercial bribery. Private commercial bribery It is an offence for a person to offer, promise or give a financial or other advantage to another person in one of two cases section 1, Bribery Act: The bribe payer intends the advantage to bring about the improper performance by another person of a relevant function or activity, or to reward such improper performance. The bribe payer knows or believes that the acceptance of the advantage offered, promised or given, in itself, constitutes the improper performance of a relevant function or activity.
Section 2 creates an equivalent offence relating to being bribed. The offence applies to bribery relating to any function of a public nature, connected with a business, performed in the course of a person's employment or performed on behalf of a company or another body of persons.
Therefore, bribery in both the public and private sectors is covered. For the purposes of deciding whether a function or activity has been performed improperly, the test is what a reasonable person in the UK would expect in relation to the performance of that function or activity. Where the performance of the function or activity is not subject to UK law for example, it takes place in a country outside the UKany local custom or practice must be disregarded unless it is permitted or required by the written law applicable to that particular country.
All of the above offences can be committed by corporate bodies subject to the "identification principle" see Question 35, Corporate liability.
This can be a challenging threshold for any prosecutor to meet, as evidence of acts by a company's "controlling mind" is often difficult to obtain. This is one of the reasons behind the introduction of the strict liability corporate offence section 7, Bribery Act.
What defences, safe harbours or exemptions are available and who can qualify? There are certain limited defences to sections 1 and 2 of the Bribery Act if the conduct was a necessary part of exercising a function on behalf of an intelligence service or the armed forces. An organisation will have a defence to the section 7 offence of failure to prevent bribery if it can show that it had adequate procedures in place to prevent bribery.
The Ministry of Justice guidance accepts in relation to facilitation payments that the common law defence of duress may be available if such payments are made to protect against loss of life, limb or liberty.
Can associated persons such as spouses and agents be liable for these offences and in what circumstances? A commercial organisation is liable if a person associated with it bribes another person intending to obtain or retain business or a business advantage for the organisation section 7, Bribery Act.
A person associated with a commercial organisation is a person who performs services for it or on its behalf. This person can be an individual or an incorporated or unincorporated body and could include agents, subsidiaries, distributors, suppliers and joint venture partners. According to the guidance, which has deliberately been drafted widely, whether a person is performing services for an organisation is to be determined by reference to all the relevant circumstances and not merely by reference to the nature of the relationship between that person and the organisation.
Which authorities have the powers of prosecution, investigation and enforcement in cases of bribery and corruption? Authorities According to the UK Government Anti-Corruption plan published in Decemberthere are a range of agencies involved in the law enforcement response to corruption. It works closely with law enforcement and criminal justice partners, including: Serious Fraud Office SFOwhich leads on serious or complex and overseas cases of bribery and corruption.
Regional Organised Crime Units and local police forces, both of which deal with domestic corruption cases except law enforcement corruption. Crown Prosecution Service, which advises on investigations and conducts all relevant prosecutions, other than those brought by the SFO. Investigations by the FCA focus on lapses of systems and controls by the regulated entity relating to bribery. Prosecution powers See Question 3, Prosecution powers.
Powers of interview See Question 3, Powers of interview. Where it appears that a Bribery Act offence may have been committed, the SFO's powers to compel disclosure of information and documents under section 2 of Criminal Justice Act CJA are exercisable even before the investigation, for the purposes of determining whether to start an investigation section 2A, CJA. Power of arrest See Question 3, Power of arrest.
Court orders or injunctions The Proceeds of Crime Act POCA provides the legislative framework for the granting of restraint and confiscation orders over assets in UK criminal proceedings. For further information on restraint proceedings, see Question 38, Cross-border co-operation: Also, under Part 5 of POCA, civil recovery proceedings can be instituted to recover assets and funds deemed to be the proceeds of crime.
Any benefit attributable to bribery and corruption could be recovered through the civil courts, with no upper limit. Before Deferred Prosecution Agreements became available as an enforcement tool in the UK see Question 37, Immunity and leniencycivil recovery orders were used by the SFO to settle a number of overseas bribery cases.
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Conviction and sanctions What are the sanctions for participating in bribery and corruption? Companies convicted of bribery can receive an unlimited fine. Under EU procurement rules, public authorities in the EU must exclude from the award of public contracts any organisation that is convicted of paying bribes. A public body may also exclude an organisation that has been convicted of receiving bribes or the corporate offence of failure to prevent bribery.
Right to bail Bail is available pre- and post-charge. For pre-charge bail see Question 3, Arrest. For post-charge bail see Question 5, Criminal proceedings.
See Question 6, Safeguards. Are there any circumstances under which payments such as bribes, ransoms or other payments arising from blackmail or extortion are tax-deductible as a business expense? There are no circumstances under which payments such as bribes, ransoms or other payments arising from blackmail or extortion are tax-deductible. Insider dealing and market abuse Regulatory provisions and authorities What are the main regulatory provisions and legislation relevant to insider dealing and market abuse?
The criminal insider dealing offence is contained in section 52 of the Criminal Justice Act The criminal market manipulation offences are contained in Part 7 of the Financial Services Act What are the specific offences that can be used to prosecute insider dealing and market abuse? Insider dealing Under section 52 of the Criminal Justice Act CJA there are three ways of committing an offence of insider dealing: A person in possession of inside information deals in price-affected securities, in relation to that information.
A person in possession of inside information encourages another to deal in price-affected securities, in relation to that information.
A person discloses inside information other than in the proper performance of the functions of his employment. The following conditions must also be satisfied section 62, CJA: In relation to the dealing offence: In relation to the encouraging and disclosing offences: Information is inside information if it meets the following conditions: It relates to particular securities, or to a particular issuer or issuers of securities.
It is specific or precise. It has not been made public. If made public, it would be likely to have a significant effect on the price of any securities.
The insider dealing offence can only be committed by individuals and does not apply to corporate entities. Make misleading statements section 89, FSA. Create misleading impressions section 90, FSA. Make misleading statements in relation to benchmarks section 91, FSA.
Misleading statements A person commits an offence if he makes a statement or conceals material facts with the intention of inducing, or is reckless as to whether his conduct may induce another person, either to section 89, FSA: Enter into or offer to enter into, or to refrain from entering or offering to enter into, a relevant agreement.
Exercise, or refrain from exercising, any rights conferred by a relevant investment. The person must know that, or be reckless as to whether, the statement is false or misleading, or have dishonestly concealed the material facts. Misleading impressions A person commits an offence if he does an act or engages in a course of conduct which creates a false or misleading impression as to the market in, or the price or value of, any relevant investments.
The person must both: Intend to make the impression; and either Intend, by creating the impression, to induce another person by making the impression to acquire, dispose of, subscribe for or underwrite the investments, or to refrain from doing so; or to exercise, or refrain from exercising, any rights conferred by the investments; or make a gain for himself or another or cause loss to anotheror be aware that it is likely to have that result, knowing that the impression is false or misleading or be reckless as to whether it is.
Misleading statements in relation to benchmarks There are two separate offences in relation to manipulating benchmarks, one capturing direct manipulation and the other capturing indirect manipulation. Under section 91 1 FSA, a person who makes a false or misleading statement to another person commits an offence if all of the following criteria are met: He makes the statement in the course of arrangements for the setting of a relevant benchmark.
He intends that the statement should be used by the recipient for the purpose of the setting of a relevant benchmark. He knows that the statement is false or misleading, or is reckless as to whether it is.Understand Criminal Law in 18 Minutes (Part I)
Under section 91 2 FSA, a person who does any act or engages in any course of conduct which creates a false or misleading impression as to the price or value of any investment, or as to the interest rate appropriate to any transaction, commits an offence if all of the following criteria are met: He intends to create the impression. The impression may affect the setting of a relevant benchmark. He knows that the impression is false or misleading, or is reckless as to whether it is.
He knows that the impression may affect the setting of a relevant benchmark. Unlike the insider dealing offence, the market manipulation offences are capable of being committed by individuals and corporates. Civil market abuse In addition to the criminal offences outlined above, sections A to C of the Financial Services and Markets Act empower the FCA to impose sanctions in cases of market abuse.
Market abuse in this context is a contravention of Articles 14 or 15 of the Market Abuse Regulation, which together prohibit insider dealing, unlawful disclosure of inside information and market manipulation.
As was the case before the Market Abuse Regulation came into force, the types of behaviour that constitute insider dealing and market manipulation in the regulatory sphere are framed slightly differently from the criminal market abuse offences and operate according to a lower standard of proof.
The Market Abuse Regulation applies to a wider range of markets and trading venues than the previous regime. Insider dealing It is a defence to the criminal "dealing" or "encouraging" offences if the accused can show that the: Person did not at the time expect the dealing to result in a profit attributable to the fact that the information was market-sensitive.
Person believed at the time, on reasonable grounds, that the information had been or would be disclosed widely enough to ensure that none of those taking part in the dealing would be prejudiced by not having it.
Person would have done what he did even if he had not had the information. Person acted in good faith in the course of his business as a market maker, or his employment in the business of a market maker.
Information which the person had as an insider was market information, and it was reasonable for an individual in his position to have acted as he did despite having that information as an insider at the time. Person acted in conformity with Article 5 exemption for buy-back programmes and stabilisation of the Market Abuse Regulation and any directly applicable EU regulation made under that article.
It is a defence to the criminal "disclosing" offence if the accused can show that either: The insider did not expect the other to deal in securities because of the disclosure.
If he did have such an expectation, he did not expect a profit attributable to the fact that the information was price-sensitive. Market manipulation Misleading statements. It is a defence if the accused can show that the statement was made in conformity with either: Control of information rules.
The relevant provisions of Article 5 exemption for buy-back programmes and stabilisation of the Market Abuse Regulation. It is a defence if the accused can show that either: He reasonably believed that his conduct would not create an impression that was false or misleading as to the market in, or the price or value of, any relevant investments.
He acted or engaged in the conduct for the purpose of stabilising the price of investments, and in conformity with price stabilising rules.
He acted or engaged in the conduct in conformity with control of information rules. He acted or engaged in the conduct in conformity with the relevant provisions of Article 5 exemption for buy-back programmes and stabilisation of the Market Abuse Regulation. Misleading statements in relation to benchmarks. In proceedings under section 91 1 of the Financial Services Act direct manipulationit is a defence if the accused can show that the statement was made in conformity with either: In proceedings under section 91 2 of the Financial Services Act indirect manipulationit is a defence for a person to show that either: He acted or engaged in the conduct for the purpose of stabilising the price of investments and in conformity with price stabilising rules.
Civil market abuse The Market Abuse Regulation contains a number of provisions setting out conduct that does not amount to market abuse. These include, amongst others: Article 5 exemption for buy-back programmes and stabilisation. Article 6 Exemption for monetary and public debt management activities on behalf of Member States. Article 13 accepted market practices, as established by the relevant regulator.
Which authorities have the powers of prosecution, investigation and enforcement in cases of insider dealing and market abuse? Authorities The leading enforcement authority in relation to market abuse, both in the criminal and regulatory areas, is the Financial Conduct Authority FCA.
Prosecution powers In addition to its regulatory functions, the FCA has the power to investigate and prosecute the criminal offences of insider dealing and market manipulation. These are broadly equivalent to the SFO's "section 2" powers and afford similar protections for those who are interviewed under compulsion. Failure to comply with a requirement to provide information, including by way of interview, is treated as a contempt of court.
The FCA also has a number of criminal powers equivalent to those of the police and other criminal bodies, including the power to interview suspects under caution and to apply for a warrant to enter premises for the purposes of search and seizure. Failure to comply with such a requirement is treated as a contempt of court.
The FCA cannot, however, compel the disclosure of legally privileged communications. Power of arrest FCA investigators do not have a power of arrest. Also under POCA, civil recovery proceedings can be instituted to recover assets and funds deemed to be the proceeds of crime. Any benefit attributable to market abuse could be recovered through the civil courts, with no upper limit. What are the sanctions for participating in insider dealing and market abuse? Required to pay a financial penalty.
Prohibited, temporarily or permanently, from managing or dealing. Prevented from undertaking specific regulated activities.
Censured through public statements. Be required to pay a financial penalty. Have their authorisation withdrawn. Be suspended for up to 12 months from undertaking specific regulated activities.