Fraud, Bribery and Corruption, Tax Evasion, and Other Financial Crimes Typologies
What the exam tests
This domain tests typologies beyond classic money laundering: fraud, bribery and corruption, tax evasion, and related crimes such as trade-based money laundering. Questions ask you to recognise red flags and the legal framework.
Core rules and concepts
- Fraud typologies include card fraud, cheque fraud, phishing, business email compromise (BEC), authorised push payment (APP) fraud and investment fraud. Red flags include unusual urgency, changed payment instructions, mismatched email domains and new beneficiaries.
- Bribery and corruption: the US Foreign Corrupt Practices Act (FCPA) prohibits bribery of foreign officials and requires accurate books and records. The UK Bribery Act covers domestic and foreign bribery, including commercial bribery, and creates a corporate offence of failing to prevent bribery. The OECD Anti-Bribery Convention requires criminalisation by signatories.
- Corruption red flags include PEP involvement, unexplained wealth, agents or consultants in high-risk countries, inflated invoices and payments to offshore intermediaries.
- Tax evasion: FATCA requires foreign financial institutions to report US account holders; the OECD Common Reporting Standard (CRS) supports automatic exchange. Red flags include offshore structures with no business purpose, false invoicing and round-tripping.
- Trade-based money laundering involves over- or under-invoicing, phantom shipments and multiple invoicing. It often overlaps with customs fraud and sanctions evasion.
Worked example
A corporate customer pays monthly consulting fees to a shell company in a secrecy jurisdiction. The shell's owner is a relative of a government official who approves the customer's licences. The invoices are vague and the fees are round amounts. Red flags: PEP link, high-risk jurisdiction, no evidence of services, and unusual payment pattern. The bank should conduct EDD, consider whether the payments are bribes, file a SAR and assess FCPA/UK Bribery Act exposure. Reasoning: the combination of a foreign official, offshore intermediary and unsupported services is a classic corruption typology.
Traps that cost marks
Do not assume the FCPA covers private commercial bribery; it focuses on foreign officials. Do not treat tax evasion as a victimless crime; it is a predicate offence in many AML regimes. Do not overlook trade-based money laundering when reviewing wire transfers. Do not ignore the books-and-records provisions of the FCPA.