Corporate and Business Law (Global) · Fraudulent and criminal behaviour

Fraudulent and Criminal Behaviour Overview for ACCA LW

Updated 11 October 2026 · Fact-checked

Fraudulent and criminal behaviour covers dishonest or unlawful acts linked to a business, such as fraud, insider dealing, money laundering and bribery. You solve questions by naming the offence, checking its elements, then deciding who is liable: the individual, the company, or both.

Understand Fraudulent and Criminal Behaviour Overview

Business law treats some conduct as more than a private wrong. Civil law lets a person sue to get compensation. Criminal law lets the state prosecute, and the aim is punishment such as a fine or imprisonment. One act can be both. A director who lies to investors may face a civil claim and a criminal charge.

Fraud means dishonestly deceiving someone to gain for yourself or cause loss to another. Common forms in business are false statements to investors, falsifying accounts, misappropriating company assets and trading while hiding the company's true state. The key word is dishonesty. A genuine mistake is not fraud.

Other corporate offences in this chapter are insider dealing (trading on unpublished price-sensitive information), money laundering (hiding the origin of criminal proceeds) and bribery and corruption (giving or taking improper payments to influence conduct). Each has its own elements, so learn them separately.

The chapter also covers two insolvency rules that you must not confuse. Fraudulent trading means carrying on the business with intent to defraud creditors. It requires dishonesty, and it can be both civil and criminal. Wrongful trading is civil only and is not a criminal offence. No dishonesty is needed. It applies where a director knew, or ought to have concluded, that there was no reasonable prospect of avoiding insolvent liquidation, and did not take every step to minimise loss to creditors. The usual result is an order that the director makes a personal contribution to the company's assets.

A company has separate legal personality, but it can only act through people. So the law can hold the company liable, usually where the people who control it, such as directors and senior managers, commit the offence in the course of the business. Individuals can also be liable personally. Many bribery and anti-money-laundering regimes also punish a company that fails to have adequate prevention procedures.

These rules exist to protect investors, creditors and the public, and to keep markets trusted. Exam questions give a short scenario and ask you to spot the offence, name the likely consequence, or choose who is liable.

Key formulas to remember

Civil v criminal: Civil = claimant sues for a remedy; Criminal = state prosecutes for punishment; Standard of proof is higher in criminal cases (beyond reasonable doubt) than civil (balance of probabilities).
Fraud test: Fraud = dishonest act or false representation + intent to gain or cause loss; No dishonesty means no fraud. Honest error is not fraud.
Company liability: Company liable = offence by directing mind or senior person + in the course of business; Applies to many offences. Some statutes also create offences for failing to prevent wrongdoing.
Individual liability: Officer is personally liable for own offence, even if the company is also liable; Acting for the company is not a defence.
Insider dealing: Inside information + dealing, encouraging or disclosing; Information must be specific, unpublished and price-sensitive.

How to solve Fraudulent and Criminal Behaviour Overview questions

Use this order for any scenario question on fraudulent or criminal behaviour.

1Read the facts and underline what each person did and what they knew.
2Name the likely wrong: fraud, insider dealing, money laundering, bribery, fraudulent trading (civil and criminal) or wrongful trading (civil only).
3Check the elements of that wrong against the facts, especially dishonesty or intent and knowledge. Wrongful trading needs no dishonesty.
4Decide who acted: a director, an employee, or the company itself.
5Decide liability: the individual, the company, or both, and whether the act was in the course of business.
6State the consequence: fine, imprisonment, disqualification, personal contribution to the company's assets, or compensation.
7Match your conclusion to one option in an objective question, or write it as a short conclusion in a written answer.

Quickest way: Spot the offence in 30 seconds

When to use it: Section A or B objective questions where time is short.

Look for the trigger words: false statement, secret information, hiding money, payment to win business, intent to defraud creditors, continuing to trade with no reasonable prospect of avoiding insolvent liquidation.
Link the trigger to the wrong: deception is fraud, secret information is insider dealing, hiding money is laundering, improper payment is bribery, intent to defraud creditors is fraudulent trading (civil and criminal), and trading on while insolvent with no reasonable prospect of recovery is wrongful trading (civil only, leading to a personal contribution, not a criminal offence).
Ask: was there dishonesty or knowledge? If not, remove options that say fraud, fraudulent trading, insider dealing, laundering or bribery occurred. Wrongful trading does not need dishonesty.
Remove options that say the company cannot be liable or that only the employee is liable, unless the facts show no link to the business.

Common mistakes in Fraudulent and Criminal Behaviour Overview

Treating every wrong act as fraud.
Students see loss and assume dishonesty.
Fix: Check for dishonest intent. A careless or honest mistake is not fraud, though it may be negligence.
Saying the company is not liable because it is a separate person.
Separate personality is mixed up with immunity.
Fix: The company acts through people. If senior people commit the offence in the course of business, the company can be liable too.
Confusing civil and criminal consequences.
Both can arise from the same facts.
Fix: Say which route applies: damages or other remedy in civil law, fine or imprisonment in criminal law. Say both if both apply.
Mixing up insider dealing and money laundering.
Both involve secret or improper financial dealings.
Fix: Insider dealing is about trading on inside information. Money laundering is about hiding the source of criminal money.
Assuming an employee who obeyed instructions has no liability.
Students think responsibility lies only with the boss.
Fix: Each person is liable for their own offence. Following orders is not a general defence.
Calling wrongful trading a criminal offence.
It sounds like fraudulent trading, and both arise when a company is failing.
Fix: Wrongful trading is civil only and needs no dishonesty. The remedy is a personal contribution to the company's assets. Only fraudulent trading, which needs intent to defraud creditors, has a criminal form.

Worked examples

Example 1

A director signs accounts she knows overstate profit, to persuade a bank to lend to the company. The bank lends and later loses money. Identify the likely wrong and who may be liable.

Show the solution

Facts: the director knowingly signed false accounts to obtain a loan.
Offence: fraud by false representation, because she was dishonest and intended to gain a loan.
Actor: the director, acting for the company in the course of business.
Liability: the director is personally liable. The company may also be liable, since a senior person acted for it.
Consequences: possible prosecution with fine or imprisonment, and the bank may sue civilly for its loss.

Answer: The director has likely committed fraud. She is personally liable and the company may also be liable, with both criminal and civil consequences.

Example 2

An accountant sees an unpublished draft announcing a takeover that will lift a listed company's share price. She buys shares before the announcement. Which offence is most likely, and what is the key element?

Show the solution

Facts: she used unpublished information to buy shares.
Offence: insider dealing, not fraud on a named victim or laundering.
Check elements: the information is specific, unpublished and likely to affect the price if made public.
Dealing: she bought securities using it.
Result: she is personally liable to prosecution. Her employer is not automatically liable.

Answer: Insider dealing. The key element is dealing on specific, unpublished, price-sensitive information, and the accountant is personally liable.

Exam tips

In objective questions, find the one fact that shows dishonesty or knowledge. It often decides the answer.
Learn the one-line trigger for each offence in the chapter so you can label it quickly.
In written answers, use a clear order: offence, elements applied to facts, who is liable, consequence.
Do not claim the company is liable unless the facts link the act to the business.
No marks are lost for a wrong answer beyond zero, so always choose an option.

Practice questions from Fraudulent and criminal behaviour

Fraudulent and Criminal Behaviour Overview: frequently asked questions

What is corporate fraud in business law?

It is dishonest deception by or within a company to gain or cause loss, such as false accounts or misappropriating assets. Individuals, and sometimes the company itself, can be liable.

Can a company be guilty of a crime?

Yes. A company has separate legal personality and can be liable, usually where senior people commit an offence in the course of its business. Some laws also punish a failure to prevent wrongdoing.

What is the difference between civil and criminal liability?

Civil liability leads to a remedy for the claimant, such as damages. Criminal liability leads to punishment by the state, such as a fine or imprisonment. One act can lead to both.

Which topics should I learn for ACCA LW in this chapter?

Learn fraudulent and wrongful trading, insider dealing, money laundering, bribery and corruption, and fraud prevention with corporate criminal liability. Remember that fraudulent trading can be civil and criminal, while wrongful trading is civil only. This overview helps you recognise each one.