Financial Crime and Market Abuse: Offences, Controls and Reporting
What this domain tests
The criminal and regulatory perimeter around dirty money and abusive trading: POCA, the Money Laundering Regulations, bribery and corporate tax-evasion offences, the UK Market Abuse Regulation, and the disclosure duties that sit on firms and issuers.
Anti-money laundering
POCA 2002 creates three principal offences: concealing, transferring or disposing of criminal property (s327); arranging such a transfer (s328); and acquisition, use or possession (s329). Defences include authorised disclosure to the NCA. Section 330 makes it an offence for a person in the regulated sector to fail to disclose knowledge or suspicion to the nominated officer; s331 covers the nominated officer's own failure; s333 is tipping off.
MLR 2017 require a risk-based approach, customer due diligence (identify, verify, ongoing monitoring), enhanced due diligence for high-risk cases and PEPs (source of funds and wealth), a nominated officer/MLRO, and five-year record retention. SARs go to the National Crime Agency.
Bribery and tax evasion
Bribery Act 2010: s1 bribing, s2 being bribed, s6 bribery of a foreign public official, and s7 the corporate offence of failing to prevent bribery, with a defence of "adequate procedures". Criminal Finances Act 2017: s45 and s46 create corporate offences of failing to prevent the facilitation of UK and foreign tax evasion, with a reasonable prevention procedures defence.
Market abuse
Inside information is precise, not generally available, relates to an issuer or instrument, and would, if public, significantly affect price. UK MAR prohibits insider dealing, unlawful disclosure and market manipulation, and catches attempts. Benchmark manipulation and commodity-related manipulation are also covered.
DTR obligations: announce inside information as soon as possible (DTR 2.2), maintain insider lists, notify PDMR dealings within three business days, and observe the 30-day closed period before results. Firms must submit STORs to the FCA without delay.
Worked example
An analyst learns of an unannounced takeover from a colleague and tells a friend, who buys shares. The analyst commits unlawful disclosure (tipping) and the friend commits insider dealing; the firm may also breach its systems and controls obligations. Both face criminal liability under the Criminal Justice Act 1993 and FCA civil sanctions under FSMA s123.
Traps that cost marks
- Forgetting attempted manipulation, which is caught even without a completed trade.
- Confusing s330 (any regulated-sector employee) with s331 (the nominated officer).
- Believing CDD must always be completed before the relationship - limited deferral is allowed with safeguards.
- Treating STORs as SARs; they go to the FCA, not the NCA.