ExpertRegulation and Financial Crime
Learning outcomes
- Identify the stages of Money Laundering.
- Understand statutory accounting duties and fraud mitigation.
Fraud
Fraud involves deception to secure unfair or unlawful gain. For fraud to occur, three elements usually exist (The Fraud Triangle):
- Motive/Pressure: The employee has personal debts.
- Opportunity: Weak internal controls (e.g., the same person approves and pays invoices).
- Rationalisation: 'I'm just borrowing it' or 'The company owes me'.
According to the Fraud Triangle, an employee stealing cash because they feel underpaid is an example of:
Money Laundering is not just Cash
Students think money laundering only involves suitcases of cash. It also involves digital transfers, buying luxury assets, or using crypto to hide the origins of illegal funds.
Money Laundering
Money laundering is the process of concealing the origins of illegally obtained money. It has three stages:
- Placement: Introducing dirty cash into the financial system (e.g., depositing cash into a bank).
- Layering: Moving the money around to create confusion and hide the trail (e.g., wiring it through offshore shell companies).
- Integration: Extracting the money as 'clean' funds (e.g., buying real estate or luxury art).
A criminal wires funds between 15 different international bank accounts in one day to confuse investigators. Which stage of money laundering is this?
Exam Focus
Accountants have a strict legal duty to report suspicion of money laundering to the authorities (e.g., the NCA in the UK). Tipping off the client that you have reported them is a criminal offence.
What is 'tipping off' in the context of money laundering?
Which of the following is the BEST way for a company to reduce the 'Opportunity' for fraud?
A drug dealer buys a legitimate restaurant and mixes illicit cash with the restaurant's daily cash takings before depositing it at the bank. This is an example of:
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