Regulation and Financial Crime for ACCA Business and Technology

What this chapter covers

Regulation and financial crime: topics in the order to study them

1. 1Money Laundering Stages and OffencesStart here because it gives you the core vocabulary of financial crime, and the later procedures only make sense once you know the stages.
2. 2Anti-Money Laundering Procedures and ReportingThis follows directly, since it shows how firms detect and report the activity you have just learned.
3. 3Fraud, Bribery and CorruptionNext, widen from laundering to other crimes, so you can tell them apart and link them to internal controls.
4. 4Tax Evasion vs Tax AvoidanceThis is a classic contrast pair, and it is easier once you have the idea of legal versus illegal conduct clear.
5. 5Cybercrime and Data ProtectionIt moves to technology-based crime and the duty to protect personal data, which connects to the IT content in BT.
6. 6Regulation, Compliance and WhistleblowingFinish with the wider framework, because it ties all the crimes together with how firms comply and how people raise concerns.

How to prepare Regulation and financial crime

1. Read each topic once and write a one-line definition of every key term in your own words.
2. Build comparison lists for look-alike pairs, such as tax evasion and tax avoidance, and the stages of money laundering in order.
3. Link each crime to the control or procedure that prevents or detects it, so you can answer what-should-the-firm-do questions.
4. Do objective test questions after each topic and note why each wrong option is wrong, not only why the right one is right.
5. Practise multiple response questions by checking every option separately against the definition, and count how many you must select.
6. Practise scenarios by underlining the trigger words, such as who benefits, whether the act is legal, or whether personal data is involved.
7. Revise the whole chapter again a few days later using the quick revision points, and retest the topics you got wrong.

Common mistakes in Regulation and financial crime

• Mixing up tax evasion and tax avoidance.

  Fix: Remember that evasion is illegal, such as hiding income, while avoidance is legal use of the rules. Check whether the scenario involves dishonesty or concealment.

• Putting the money laundering stages in the wrong order or matching them to the wrong description.

  Fix: Tie each name to an action: placement is getting cash in, layering is moving it around to hide the trail, and integration is using it as if clean.

• Treating bribery and fraud as the same crime.

  Fix: Ask who is involved. Bribery needs an inducement offered or accepted to influence someone's action, while fraud is a deception to gain or cause loss.

• Choosing the wrong number of options in multiple response questions.

  Fix: Read the instruction for how many to select, test each option on its own, and stop only when you have exactly that number.

• Thinking the accountant should confront or warn a suspect.

  Fix: Follow the firm's reporting procedure and use the proper channel. Warning the person involved can itself be an offence in money laundering cases.

• Treating data protection as only an IT issue.

  Fix: Remember it is also about lawful use, purpose, access and security of personal data, and so involves people, policies and management as well as systems.

Last-day revision: Regulation and financial crime

• ✓Money laundering turns the proceeds of crime into apparently legitimate money.
• ✓The three stages in order are placement, layering and integration.
• ✓Placement puts illegal cash into the financial system; layering hides its trail; integration returns it as seemingly clean money.
• ✓Firms use customer due diligence and monitoring to detect laundering, and suspicious activity must be reported through the proper channel.
• ✓Tipping off, meaning warning a suspect about a report, is a serious problem and must be avoided.
• ✓Fraud is deception for gain; bribery is offering or accepting an inducement to influence a decision.
• ✓Tax evasion is illegal; tax avoidance uses the rules legally to reduce tax.
• ✓Cybercrime uses computers or networks to commit crime, such as hacking, phishing and malware.
• ✓Data protection rules require personal data to be handled lawfully, kept secure and used for stated purposes.
• ✓Whistleblowing means raising concerns about wrongdoing, and good policies protect the person who speaks up.
• ✓Compliance means following laws, regulations and internal policies, and it needs clear procedures and training.

Regulation and financial crime practice questions

• A bank's customer service employee, who has no business reason to do so, looks up the account details of a celebrity customer out of curiosi…
• Which of the following is a typical data protection principle, as found in laws such as the EU GDPR, that personal data should meet?
• Which of the following best describes the purpose of a whistleblowing policy within a company?
• Sanjay, an accountant at Orion Co, discovers that a director has been paying 'facilitation' amounts to a foreign official to speed up custom…
• Which of the following is an example of legitimate tax avoidance rather than tax evasion?
• Which of the following best describes ransomware?
• Which of the following best describes the 'fraud triangle', used to explain why fraud occurs?
• An employee of a bank handles a large cash deposit from a customer and suspects it represents the proceeds of crime. Which action is most co…

Regulation and financial crime in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

• ACCA Applied SkillsFraudulent and criminal behaviour
• ACCA Strategic ProfessionalMoney laundering
• CMA FinalAnti-Money Laundering
• CS ProfessionalTax Planning and Business Restructuring