Fraudulent and Criminal Behaviour for ACCA LW (Global)

What this chapter covers

Fraudulent and criminal behaviour: topics in the order to study them

1. 1Fraudulent and Criminal Behaviour OverviewStart here to see the five areas and the key terms before going into detail.
2. 2Fraudulent and Wrongful TradingIt builds on directors' duties and insolvency, and the contrast between the two types is a favourite test point.
3. 3Insider DealingIt is self-contained, with clear elements: inside information, an insider and the dealing or disclosure.
4. 4Money LaunderingIt has several stages and offences, so give it time once the simpler offences are secure.
5. 5Bribery and CorruptionIt shares ideas with money laundering, such as reporting duties and ethics, so it is easier after that topic.
6. 6Fraud Prevention and Corporate Criminal LiabilityIt pulls the chapter together by asking how organisations prevent these offences and when they can be liable.

How to prepare Fraudulent and criminal behaviour

1. Read the overview and write one line defining each of the five areas in your own words.
2. For each offence, list the elements that must be present. Test yourself by covering the list and rewriting it.
3. Make a comparison note for similar ideas, such as fraudulent versus wrongful trading, and the stages of money laundering.
4. Learn who can be liable and the type of consequence, such as personal liability, fines, imprisonment or disqualification. Stay at the level of detail your syllabus notes give.
5. Do Section A style questions topic by topic, then check why each wrong option is wrong.
6. Practise Section B scenarios. For each of the five questions, spot the offence first, then match the facts to its elements.
7. Revise with a one-page sheet of elements and contrasts in the last days.

Common mistakes in Fraudulent and criminal behaviour

• Treating fraudulent and wrongful trading as the same thing.

  Fix: Ask one question: is dishonest intent needed? Fraudulent trading needs it. Wrongful trading is about what a director should have realised.

• Calling any confidential information inside information.

  Fix: Check that the information is specific, not public and price-sensitive, and that the person holds it as an insider.

• Thinking money laundering only means moving cash through banks.

  Fix: Remember it covers handling or hiding the proceeds of crime in many forms, and learn the placement, layering and integration stages.

• Ignoring the reporting and ethics angle for accountants.

  Fix: For laundering and bribery scenarios, ask what the professional must do and what they must not do, such as tipping off.

• Missing that a payment can be bribery even if it is small or made through a third party.

  Fix: Look at the purpose: is an advantage offered or received to induce improper performance, whatever the size or route?

• Skipping Section B practice because definitions feel secure.

  Fix: Practise reading a scenario, naming the offence and mapping each fact to an element before choosing an answer.

Last-day revision: Fraudulent and criminal behaviour

• ✓Fraudulent trading requires intent to defraud creditors or another fraudulent purpose.
• ✓Wrongful trading does not need dishonesty. It looks at whether a director should have concluded there was no reasonable prospect of avoiding insolvent liquidation.
• ✓Both types of trading link to insolvency, so they matter when a company is being wound up.
• ✓Insider dealing involves inside information: specific, not public and likely to affect the price if made public.
• ✓Insider dealing can be dealing, encouraging others to deal, or disclosing the information improperly.
• ✓Money laundering is making the proceeds of crime appear legitimate.
• ✓Learn the three classic stages of laundering: placement, layering and integration.
• ✓Tipping off and failing to report suspicion are separate concerns for professionals.
• ✓Bribery involves offering, promising, giving, requesting or accepting an advantage to induce improper performance.
• ✓Organisations reduce risk through controls, ethical culture, training and reporting channels.
• ✓A company can be criminally liable through the acts of those who represent its controlling mind, as your syllabus notes explain.
• ✓In objective questions, identify the offence first, then test each option against its elements.

Fraudulent and criminal behaviour practice questions

• Hasan, a director of Vega plc, sells shares in Vega shortly before the company publishes a profit warning that he knew about. Which of the f…
• Lars, a junior analyst at a bank, overhears that a client company will shortly report a large unexpected loss. He tells his brother Nils, wh…
• Zeta Ltd is in insolvent liquidation. The liquidator alleges that Maria, a director, continued to trade after she knew there was no reasonab…
• Under the OECD Anti-Bribery Convention approach, which of the following is the central conduct that participating states agree to make a cri…
• Marlow plc has a written policy, staff training and due diligence on agents. Despite this, an overseas sales agent, acting for Marlow, bribe…
• Bolt Trading Co, a company, is prosecuted for a criminal offence requiring intent. Its managing director, acting within her authority and as…
• Aldan Ltd's sales manager gives a procurement officer at a state-owned hospital a cash payment so that the hospital will award Aldan a suppl…
• Brava Co's sales manager, a junior employee with no role in company policy, bribes a foreign official without the knowledge of the board. Br…

Fraudulent and criminal behaviour 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 KnowledgeRegulation and financial crime
• CS ProfessionalBusiness Ethics, Code of Conduct and Anti-Bribery
• CMA FinalLaws and Regulations related to Anti-Money Laundering
• CS ExecutivePrevention of Money Laundering