I85PREP
⌘ K
IAI SP6 study materials
IAI SP6 study resources

IAI SP6 practice questions

One question at a time. Build your IAI SP6 understanding.

First 50 of 200 questions. Each one lists the choices, the correct answer, and an explanation. The checker at the top of this page saves progress in this browser when it is available.

Continue in the practice tool above to load more questions, 50 at a time.

Question 1Insurance fraud: terminology, typologies and scale

In insurance fraud terminology, what does the term 'claims leakage' most precisely describe?

  1. Payments made on claims that should not have been paid in full or at all, including inflated, duplicated or fictitious elements Correct answer.
  2. The delay between a claim being notified and the insurer making a settlement offer
  3. The total premium income lost when policyholders cancel their cover mid-term
  4. The administrative cost of running a claims department relative to premium volume

Explanation

Claims leakage is the umbrella term for money leaving an insurer through claims that should not have been paid, either wholly or in part. It captures exaggeration, duplication, fictitious claims and misrepresentation of cover, not premium loss or processing delay.

Question 2Insurance fraud: terminology, typologies and scale

Which description best matches 'opportunistic fraud' as opposed to 'organised fraud'?

  1. Fraud committed by an insurer's own staff against their employer
  2. Fraud carried out by a group that recruits complicit policyholders and stages accidents for profit
  3. Fraud committed by an individual who exaggerates or invents a claim when the chance arises, without pre-planning or a criminal network Correct answer.
  4. Fraud involving the sale of fraudulent policies to the public

Explanation

Opportunistic fraud is unplanned and driven by circumstance, typically a genuine event that the claimant then inflates or exploits. Organised fraud, by contrast, involves planning, multiple participants and often repeated activity for profit.

Question 3Insurance fraud: terminology, typologies and scale

An insurer receives a motor claim in which the vehicle damage clearly predates the reported incident and the policy was taken out only four days earlier. Which fraud indicator category do these facts primarily represent?

  1. Documentation indicators, such as a forged invoice
  2. Third-party indicators, such as an unknown witness
  3. Timing indicators, such as very recent inception or a claim shortly after cover starts Correct answer.
  4. Quantum indicators, such as an unusually high repair estimate

Explanation

The short interval between policy inception and claim, combined with damage inconsistent with the reported event, points to timing and pre-existing-damage indicators. Fraud indicators are grouped by theme so investigators can weigh them consistently.

Question 4Insurance fraud: terminology, typologies and scale

What is the defining characteristic of 'staged' fraud in a motor context?

  1. The loss event is deliberately manufactured or choreographed in advance so a claim can be made Correct answer.
  2. The claimant reports a genuine accident to two insurers
  3. The claimant exaggerates the cost of a genuine repair
  4. The claimant delays notification of a genuine accident

Explanation

Staged fraud means the incident itself is created or choreographed, for example by inducing a collision or arranging a theft. This distinguishes it from exaggeration of a real event, which is opportunistic inflation.

Question 5Insurance fraud: terminology, typologies and scale

Which of the following best describes 'fronting' in the context of insurance fraud?

  1. A repairer inflates the parts cost on a genuine estimate
  2. A claimant obtains cover after a loss and backdates the inception
  3. A higher-risk driver is recorded as the main driver on a policy when a lower-risk person is in fact the principal user Correct answer.
  4. A broker collects premium but fails to pass it to the insurer

Explanation

Fronting is a misrepresentation of who the main driver is, usually to obtain a cheaper premium by naming a lower-risk person. It is a form of application or policy fraud that can later distort claims handling.

Question 6Insurance fraud: terminology, typologies and scale

A life insurer's fraud team is profiling a suspected non-disclosure at underwriting. Which scenario is the clearest example of anti-selection through deliberate concealment?

  1. An applicant pays the first premium by instalment rather than annually
  2. An applicant chooses a higher excess to reduce premium
  3. An applicant forgets to update a change of address
  4. An applicant omits a diagnosed terminal illness when asked directly about medical conditions Correct answer.

Explanation

Deliberate concealment of a known material medical fact in response to a direct question is classic non-disclosure enabling anti-selection. The insurer is denied the information needed to price or decline the risk.

Question 7Insurance fraud: terminology, typologies and scale

Which statement correctly distinguishes 'hard' from 'soft' insurance fraud?

  1. Hard fraud occurs in life insurance, while soft fraud occurs only in motor insurance
  2. Hard fraud is prosecuted, while soft fraud is not a criminal offence
  3. Hard fraud involves deliberately planning or fabricating a loss, while soft fraud involves exploiting an otherwise genuine claim or policy Correct answer.
  4. Hard fraud is committed by organised groups, while soft fraud is always committed by employees

Explanation

The hard/soft distinction rests on whether the loss or policy itself is fabricated versus whether a genuine situation is exploited or exaggerated. It is about the nature of the deception, not the perpetrator type or line of business.

Question 8Insurance fraud: terminology, typologies and scale

Why is the reported 'scale' of insurance fraud typically described as an estimate rather than a precise figure?

  1. Much fraud is detected only through sampling and many cases are settled without an explicit fraud finding, so measurement relies on estimation models Correct answer.
  2. Insurers are legally prohibited from publishing fraud statistics
  3. Fraud only occurs in personal lines, so commercial data is irrelevant
  4. All detected fraud is prosecuted, making the court record the only reliable source

Explanation

Fraud measurement depends on detection, which is incomplete, and on how insurers record savings and detections. Industry estimates therefore use detection data, sampling studies and modelling rather than a census of all fraud.

Question 9Insurance fraud: terminology, typologies and scale

An investigator notes that a claimant provided a mobile phone number that matches the number given by the repairer handling the claim. What type of fraud indicator is this?

  1. A link indicator suggesting a possible relationship between parties to the claim Correct answer.
  2. A documentation indicator suggesting an invoice was altered
  3. A timing indicator suggesting the claim was made too soon after inception
  4. A quantum indicator suggesting the repair estimate is inflated

Explanation

Shared contact details, addresses or bank accounts are link indicators that can reveal undisclosed relationships between claimants, witnesses, repairers or intermediaries. Such links may point to collusion or a staged arrangement.

Question 10Insurance fraud: terminology, typologies and scale

Which of these is the best example of 'double insurance' fraud rather than 'double claiming'?

  1. The claimant submits the same invoice twice to one insurer
  2. The claimant exaggerates the number of days of lost earnings
  3. The claimant invents a second, separate accident later in the year
  4. The same loss is covered by two policies and the claimant seeks full indemnity from both without disclosing the other cover Correct answer.

Explanation

Double insurance fraud exploits overlapping cover so that the claimant recovers more than the loss, contrary to indemnity principles. Submitting the same document twice to one insurer is duplication within a single claim.

Question 11Insurance fraud: terminology, typologies and scale

In fraud terminology, what does 'abstraction' or 'claims abstraction' refer to in some markets?

  1. The process of abstracting a claim file for archiving
  2. The statistical extrapolation of undetected fraud from detected cases
  3. The removal or misappropriation of claim funds or property by an insider, such as an employee handling settlements Correct answer.
  4. The reduction of a claim offer through negotiation

Explanation

Abstraction describes internal misappropriation, where an insider diverts claim money or recovered property for personal gain. It is an internal fraud typology distinct from external claimant fraud.

Question 12Insurance fraud: terminology, typologies and scale

A broker repeatedly submits small claims for clients just below the insurer's audit threshold, each supported by plausible but similar receipts. Which typology and indicator combination fits best?

  1. Opportunistic fraud indicated by a single large claim after a genuine accident
  2. Non-disclosure indicated by an omitted medical condition
  3. Organised or serial fraud indicated by claim amounts clustered below a control threshold Correct answer.
  4. Internal fraud indicated by an employee altering the payment run

Explanation

Clustering of claim values just under an audit or authority limit is a recognised red flag for serial or organised abuse designed to avoid scrutiny. The pattern across multiple claims matters more than any single claim.

Question 13Insurance fraud: terminology, typologies and scale

Which statement about the relationship between fraud detection and fraud 'savings' reporting is most accurate?

  1. Savings figures usually represent the value of claims avoided or reduced through fraud detection, and depend on how the counterfactual payment is estimated Correct answer.
  2. Savings figures are only recorded when a criminal conviction is obtained
  3. Savings figures are audited external statistics of total fraud in the market
  4. Savings figures equal the number of fraudulent claims detected

Explanation

Reported savings reflect the amount the insurer would otherwise have paid, so they rest on an estimate of the counterfactual. They are internal performance measures, not a market-wide census of fraud, and do not require a conviction.

Question 14Insurance fraud: terminology, typologies and scale

What does the term 'phantom' or 'fictitious' claim describe?

  1. A claim for a loss or insured person that never existed Correct answer.
  2. A claim where the policyholder is a real person but the amount is understated
  3. A genuine claim inflated by adding unrelated damage
  4. A claim submitted after the policy has lapsed

Explanation

A phantom or fictitious claim is fabricated in its entirety, involving a loss or even a person that does not exist. It differs from inflation, where a real loss is exaggerated.

Question 15Insurance fraud: terminology, typologies and scale

A claimant reports a burglary and provides a receipt for a television that the investigator finds was never purchased from the named retailer. Which fraud type is this?

  1. Abstraction by an insider
  2. Documentary fraud supporting an exaggerated or fabricated element of the claim Correct answer.
  3. Anti-selection at underwriting
  4. Fronting of the policy

Explanation

A forged or fabricated receipt used to support a claimed item is documentary fraud, often supporting either inflation or a wholly invented element. The document is the instrument of the deception.

Question 16Insurance fraud: terminology, typologies and scale

Which of the following is the most appropriate description of 'claims farming' or 'claims harvesting'?

  1. Intermediaries soliciting or generating accident claims, sometimes from people who were not involved or not injured Correct answer.
  2. Auditors sampling claim files for quality
  3. Policyholders farming out repairs to multiple garages
  4. Insurers harvesting data to price renewals

Explanation

Claims farming or harvesting involves intermediaries actively sourcing or manufacturing claims, often through cold contact or inducement. It can feed both genuine exaggeration and wholly fabricated claims into the system.

Question 17Insurance fraud: terminology, typologies and scale

In assessing the scale of fraud, why do personal injury and motor claims often attract particular attention from counter-fraud teams?

  1. They are the only classes where fraud is a criminal offence
  2. They are underwritten exclusively by brokers, removing insurer controls
  3. They are high-volume, involve many third parties and are hard to verify objectively, creating both opportunity and measurable leakage Correct answer.
  4. They generate no documentation, so detection is impossible

Explanation

High volume, multiple parties and subjective elements such as pain and suffering make personal injury and motor claims susceptible to exaggeration and staging. That combination produces both opportunity for fraud and material measurable leakage.

Question 18Insurance fraud: terminology, typologies and scale

A policyholder genuinely crashes but later adds a claim for a laptop that was not in the car. Which term best describes this behaviour?

  1. Claims inflation or build-up on a genuine loss Correct answer.
  2. Staged fraud
  3. Phantom claim
  4. Fronting

Explanation

Adding items or amounts to a genuine loss is claims inflation or build-up, a form of soft fraud that exploits a real event. The underlying incident occurred, so it is not staging or a phantom claim.

Question 19Insurance fraud: terminology, typologies and scale

Which statement best captures the distinction between 'fraud indicators' and 'proof of fraud'?

  1. Indicators are conclusive evidence that a claim is fraudulent
  2. Indicators and proof are interchangeable terms in claims handling
  3. Proof is only required for organised fraud, not for opportunistic fraud
  4. Indicators are risk signals that justify further enquiry, whereas proof requires evidence sufficient to support a finding of dishonesty Correct answer.

Explanation

Indicators raise suspicion and direct investigation, but they are not conclusive. A fraud finding needs evidence that establishes the deception to the standard the insurer applies, such as a civil balance of probabilities.

Question 20Insurance fraud: terminology, typologies and scale

An insurer notices a cluster of whiplash claims arising from the same junction, involving a small set of repeat claimants and the same two repair garages. Which typology is most consistent with this pattern?

  1. Internal abstraction by claims staff
  2. Non-disclosure at proposal stage
  3. Opportunistic inflation by unrelated individuals
  4. Organised staged-accident activity with linked parties Correct answer.

Explanation

Repeat claimants, a common location and shared suppliers indicate a coordinated network, which is characteristic of organised staged-accident fraud. The pattern of links across claims is the key signal.

Question 21Insurance fraud: terminology, typologies and scale

Which of the following best defines 'materiality' in the context of insurance non-disclosure?

  1. Whether the withheld information would have influenced the insurer's decision to accept the risk or the terms applied Correct answer.
  2. Whether the policyholder considered the information important
  3. Whether the information relates to a claim rather than a proposal
  4. Whether the withheld information was written in the proposal form

Explanation

Materiality is judged from the insurer's perspective: would the fact have affected acceptance, pricing or terms? The policyholder's own view of importance is not the test.

Question 22Insurance fraud: terminology, typologies and scale

Why can industry-wide fraud estimates differ substantially between sources?

  1. They use different definitions, detection bases and extrapolation methods, and cover different lines or time periods Correct answer.
  2. Only one source is legally permitted to publish estimates
  3. Fraud levels change so fast that no estimate can be valid for a year
  4. Estimates are always based on criminal convictions alone

Explanation

Differences arise from what counts as fraud, which detected cases underpin the model, how undetected fraud is extrapolated and which classes are included. Comparing figures therefore requires attention to methodology.

Question 23Insurance fraud: terminology, typologies and scale

What is meant by 'application fraud' in insurance?

  1. An error made by an underwriter in rating a risk
  2. A dispute about whether an application form was received
  3. A claim submitted through a mobile application
  4. Deliberate misrepresentation or concealment when proposing for or renewing a policy Correct answer.

Explanation

Application fraud occurs at the point of proposing for cover, where material facts are misrepresented or withheld to obtain better terms. It is distinct from claims fraud, which occurs when a loss is notified.

Question 24Insurance fraud: terminology, typologies and scale

A claims handler receives a medical report whose letterhead details do not match the practitioner's registered address, and the treatment dates overlap with a period the claimant was abroad. Which combination of indicators is present?

  1. Quantum and timing indicators only
  2. Documentation authenticity and factual inconsistency indicators Correct answer.
  3. Internal and abstraction indicators
  4. Link and third-party indicators only

Explanation

Mismatched letterhead details raise doubts about the authenticity of the document, while dates that conflict with known travel show factual inconsistency. Both are documentary and consistency red flags requiring verification.

Question 25Legal and regulatory framework for fraud

Under the Fraud Act 2006, which offence is committed when a person dishonestly makes a false representation intending to make a gain for themselves or another?

  1. Obtaining services dishonestly under section 11
  2. Fraud by failing to disclose information under section 3
  3. Fraud by false representation under section 2 Correct answer.
  4. Fraud by abuse of position under section 4

Explanation

Section 2 of the Fraud Act 2006 creates the offence of fraud by false representation, requiring a dishonest representation that is untrue or misleading, made with intent to gain. The representation can be express or implied and need not actually deceive anyone. Sections 3 and 4 cover different conduct elements entirely.

Question 26Legal and regulatory framework for fraud

Which mental element must accompany the conduct element in every offence of fraud under sections 2 to 4 of the Fraud Act 2006?

  1. Dishonesty plus an intention to make a gain or cause a loss Correct answer.
  2. Recklessness as to the victim's financial loss
  3. Knowledge that the victim will suffer actual loss
  4. Negligence as to the truth of the statement

Explanation

All three Fraud Act 2006 fraud offences require dishonesty and an intention to make a gain or cause a loss. The gain or loss can be to the defendant or another and need not be financial in every respect. Actual loss to the victim is not required, only the intention.

Question 27Legal and regulatory framework for fraud

A company director deliberately conceals a known safety defect from a purchaser during negotiations. Which Fraud Act 2006 offence most directly fits the concealment of information?

  1. Fraud by false representation under section 2
  2. Fraud by abuse of position under section 4
  3. Fraud by failing to disclose information under section 3 Correct answer.
  4. Conspiracy to defraud at common law

Explanation

Section 3 applies where a person dishonestly fails to disclose information they are under a legal duty to disclose, intending to make a gain. A duty to disclose can arise from statute, contract, or the nature of the relationship. Concealment of material facts owed to the counterparty fits this offence.

Question 28Legal and regulatory framework for fraud

Under the Fraud Act 2006, what is required for a representation to satisfy section 2?

  1. It must be untrue or misleading as a matter of fact
  2. It must be untrue or misleading, whether express or implied Correct answer.
  3. It must be made in writing and signed by the maker
  4. It must have actually deceived the victim

Explanation

Section 2 covers representations that are untrue or misleading, and they may be express or implied. The Act expressly confirms that a representation may relate to fact, law, or current intention. There is no requirement that anyone actually be deceived.

Question 29Legal and regulatory framework for fraud

Which statute created the offence of obtaining services dishonestly, separate from the main fraud offences?

  1. Theft Act 1968, section 15
  2. Fraud Act 2006, section 6
  3. Fraud Act 2006, section 11 Correct answer.
  4. Theft Act 1978, section 1

Explanation

Section 11 of the Fraud Act 2006 created obtaining services dishonestly, replacing earlier deception-based offences. It applies where a person obtains services by dishonest act, knowing payment is expected. The offence is complete when the services are obtained without payment being made as required.

Question 30Legal and regulatory framework for fraud

Which offence under the Fraud Act 2006 deals with a person who possesses or controls an article for use in connection with fraud?

  1. Section 8, participating in a fraudulent business
  2. Section 6, possession of articles for use in fraud Correct answer.
  3. Section 7, making or supplying articles for use in fraud
  4. Section 11, obtaining services dishonestly

Explanation

Section 6 makes it an offence to possess or control any article for use in connection with fraud, or in connection with dishonesty in obtaining property or services. The prosecution does not need to prove an actual fraud was committed. Intent to use the article dishonestly must be established.

Question 31Legal and regulatory framework for fraud

A sole trader knowingly runs a business that carries out fraudulent transactions on customers. Which Fraud Act 2006 offence applies?

  1. Making or supplying articles for fraud under section 7
  2. Possession of articles for fraud under section 6
  3. Fraud by abuse of position under section 4
  4. Participating in a fraudulent business under section 9 Correct answer.

Explanation

Section 9 of the Fraud Act 2006 creates an offence for a person who knowingly participates in, or is knowingly concerned in, the carrying on of a fraudulent business. It applies to sole traders and similar businesses, filling a gap not covered by fraudulent trading provisions. The defendant must know of the fraudulent nature of the business.

Question 32Legal and regulatory framework for fraud

In England and Wales, which body is the principal prosecutor of serious and complex fraud, including cases investigated by the Serious Fraud Office?

  1. The Financial Conduct Authority
  2. The National Crime Agency
  3. The Crown Prosecution Service
  4. The Serious Fraud Office Correct answer.

Explanation

The Serious Fraud Office investigates and prosecutes the most serious and complex frauds in England, Wales, and Northern Ireland. It has its own statutory powers to compel documents and answers. The Crown Prosecution Service handles most other criminal cases.

Question 33Legal and regulatory framework for fraud

Which statutory power allows the Serious Fraud Office to compel a person to answer questions and produce documents during an investigation?

  1. Section 330 of the Proceeds of Crime Act 2002
  2. Section 1 of the Police and Criminal Evidence Act 1984
  3. Section 9 of the Fraud Act 2006
  4. Section 2 of the Criminal Justice Act 1987 Correct answer.

Explanation

Section 2 of the Criminal Justice Act 1987 gives the SFO Director power to require persons to produce documents and answer questions in a fraud investigation. Answers given under compulsion cannot generally be used against the person in subsequent criminal proceedings. This is a distinctive investigative tool of the SFO.

Question 34Legal and regulatory framework for fraud

Under the Proceeds of Crime Act 2002, which offence is committed by a person in the regulated sector who knows or suspects money laundering but fails to make a required disclosure?

  1. Tipping off under section 333A
  2. Failure to disclose under section 330 Correct answer.
  3. Concealing under section 327
  4. Acquisition, use and possession under section 329

Explanation

Section 330 of POCA 2002 imposes a duty on those in the regulated sector to disclose knowledge or suspicion of money laundering to the authorities. Failure to do so, in the circumstances specified, is a criminal offence. The defence includes a reasonable excuse for non-disclosure.

Question 35Legal and regulatory framework for fraud

Which body receives suspicious activity reports submitted under the Proceeds of Crime Act 2002 in the United Kingdom?

  1. The Serious Fraud Office
  2. The National Crime Agency Correct answer.
  3. The Bank of England
  4. The Financial Conduct Authority

Explanation

Suspicious activity reports are submitted to the National Crime Agency, which hosts the UK Financial Intelligence Unit. The NCA analyses reports and disseminates intelligence to law enforcement. Regulators such as the FCA receive supervisory information but not SARs directly as the receiving authority.

Question 36Legal and regulatory framework for fraud

A bank employee suspects a customer is laundering proceeds of fraud and wishes to proceed with a transaction. What statutory mechanism allows the transaction to proceed lawfully?

  1. An appropriate consent request to the NCA Correct answer.
  2. A declaration of confidentiality
  3. A defence of due diligence
  4. A report to the Financial Ombudsman

Explanation

Under POCA 2002, a person may seek appropriate consent from the NCA before dealing with suspected criminal property. If consent is given or the moratorium period expires, the person has a defence to the money laundering offences. This protects the institution while allowing legitimate transactions to proceed.

Question 37Legal and regulatory framework for fraud

Which offence under POCA 2002 is committed when a person discloses information likely to prejudice an investigation to someone suspected of money laundering?

  1. Tipping off under section 333A Correct answer.
  2. Concealing under section 327
  3. Failure to disclose under section 330
  4. Arrangements under section 328

Explanation

Section 333A of POCA 2002 makes tipping off an offence where a person discloses information likely to prejudice a money laundering investigation. The disclosure must be made to a person the discloser knows or suspects is involved. There are limited defences, such as disclosures within the same institution for legitimate purposes.

Question 38Legal and regulatory framework for fraud

Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, which approach to customer due diligence is required?

  1. A risk-based approach proportionate to the risk Correct answer.
  2. A purely rules-based approach with fixed thresholds
  3. An approach based solely on transaction value
  4. A one-size-fits-all approach applied to every customer

Explanation

The 2017 Regulations require a risk-based approach to customer due diligence, with measures proportionate to the assessed risk of money laundering and terrorist financing. Firms must carry out risk assessments and apply enhanced due diligence in higher-risk situations. Simplified measures may be applied only where risk is demonstrably lower.

Question 39Legal and regulatory framework for fraud

Under the 2017 Money Laundering Regulations, when must enhanced due diligence be applied?

  1. Only when a customer requests it
  2. In higher-risk situations such as politically exposed persons Correct answer.
  3. Only for corporate customers
  4. Whenever a transaction exceeds one thousand pounds

Explanation

The Regulations require enhanced due diligence in higher-risk situations, expressly including politically exposed persons and correspondent relationships. Enhanced measures include additional identification, source of funds checks, and senior management approval. The obligation is risk-driven rather than value-driven.

Question 40Legal and regulatory framework for fraud

Under the Bribery Act 2010, which offence can a commercial organisation commit where it fails to prevent bribery by an associated person?

  1. Section 6, bribery of a foreign public official
  2. Section 1, bribing another person
  3. Section 2, being bribed
  4. Section 7, failure to prevent bribery Correct answer.

Explanation

Section 7 of the Bribery Act 2010 creates a strict liability offence for a relevant commercial organisation that fails to prevent bribery by an associated person. The only defence is that the organisation had adequate procedures in place. The offence does not require proof that senior management knew of the bribery.

Question 41Legal and regulatory framework for fraud

Which defence is available to a commercial organisation charged with failure to prevent bribery under section 7 of the Bribery Act 2010?

  1. That the bribe was made overseas
  2. That the bribe was paid without the directors' knowledge
  3. That the organisation had adequate procedures to prevent bribery Correct answer.
  4. That the associated person was not an employee

Explanation

The only statutory defence to section 7 is that the organisation had adequate procedures designed to prevent associated persons from undertaking bribery. The adequacy of procedures is assessed having regard to the size and nature of the organisation and the risk it faces. Ignorance or geography does not provide a defence.

Question 42Legal and regulatory framework for fraud

Which guidance sets out the principles for adequate procedures under the Bribery Act 2010?

  1. The SFO Operational Handbook
  2. The CPS Code for Crown Prosecutors
  3. The FCA Handbook
  4. Statutory guidance issued by the Secretary of State Correct answer.

Explanation

The Secretary of State issued statutory guidance under section 9 of the Bribery Act 2010 setting out six principles for adequate procedures. These include top-level commitment, risk assessment, and due diligence. The guidance is expressly referenced in the Act as the source of procedural adequacy.

Question 43Legal and regulatory framework for fraud

Under the Criminal Finance Act 2017, which order allows the court to freeze or seize property suspected of being recoverable criminal property without a criminal conviction?

  1. A serious crime prevention order
  2. A confiscation order
  3. A restraint order under POCA
  4. An unexplained wealth order Correct answer.

Explanation

Unexplained wealth orders were introduced by the Criminal Finances Act 2017 and allow enforcement agencies to require a person to explain the origin of assets. They are civil orders available without a criminal conviction and operate alongside POCA powers. Failure to explain can support later recovery action.

Question 44Legal and regulatory framework for fraud

Which corporate offence was introduced by the Criminal Finances Act 2017 in relation to tax evasion?

  1. Failure to prevent fraud
  2. Failure to prevent facilitation of tax evasion Correct answer.
  3. Failure to prevent money laundering
  4. Failure to prevent bribery

Explanation

The Criminal Finances Act 2017 introduced the offence of failure to prevent the facilitation of tax evasion, applying to bodies corporate and partnerships. It covers both UK and overseas tax evasion and applies where an associated person facilitates evasion. A reasonable prevention procedures defence is available.

Question 45Legal and regulatory framework for fraud

Under the Economic Crime and Corporate Transparency Act 2023, which new corporate offence was introduced for large organisations?

  1. Failure to prevent fraud Correct answer.
  2. Failure to prevent tax evasion
  3. Failure to prevent money laundering
  4. Failure to prevent bribery

Explanation

The Economic Crime and Corporate Transparency Act 2023 introduced a failure to prevent fraud offence applying to large organisations. It covers frauds committed by associated persons intending to benefit the organisation. A reasonable fraud prevention procedures defence is available.

Question 46Legal and regulatory framework for fraud

What is the standard of proof required in a criminal prosecution for fraud in England and Wales?

  1. Clear and convincing evidence
  2. Preponderance of the evidence
  3. Balance of probabilities
  4. Beyond reasonable doubt Correct answer.

Explanation

In criminal proceedings in England and Wales, the prosecution must prove its case beyond reasonable doubt. This applies to every element of a fraud offence, including dishonesty and intent. Civil standards such as the balance of probabilities apply only in civil proceedings.

Question 47Legal and regulatory framework for fraud

Which case established the current test for dishonesty applied in fraud prosecutions in England and Wales?

  1. R v Cunningham
  2. R v Ghosh
  3. Ivey v Genting Casinos Correct answer.
  4. R v Woolin

Explanation

In Ivey v Genting Casinos, the Supreme Court clarified the test for dishonesty by asking whether the defendant's conduct was dishonest by the standards of ordinary reasonable people, having regard to what the defendant knew or believed. This replaced the second limb of the Ghosh test. The Ivey approach was subsequently confirmed in criminal law.

Question 48Legal and regulatory framework for fraud

Which regulator is responsible for supervising anti-money laundering compliance by banks and investment firms in the United Kingdom?

  1. The Information Commissioner's Office
  2. The Financial Conduct Authority Correct answer.
  3. The Competition and Markets Authority
  4. The Pensions Regulator

Explanation

The Financial Conduct Authority supervises anti-money laundering and counter-terrorist financing compliance by banks, investment firms, and other financial institutions it regulates. It can take enforcement action for breaches of the Money Laundering Regulations. Other supervisors cover different sectors.

Question 49Legal and regulatory framework for fraud

Which type of fraud involves manipulating financial markets by artificially inflating the price of a security before selling it?

  1. Pump and dump fraud Correct answer.
  2. Advance fee fraud
  3. Invoice fraud
  4. Boiler room fraud

Explanation

Pump and dump fraud involves spreading false or misleading positive information to inflate a security's price, then selling holdings at the inflated value. It is a form of market manipulation and can constitute fraud and regulatory offences. The conduct deceives investors about the true value of the security.

Question 50Legal and regulatory framework for fraud

In England and Wales, which court generally tries the most serious fraud cases that are sent for trial on indictment?

  1. The Magistrates' Court
  2. The County Court
  3. The Crown Court Correct answer.
  4. The Court of Appeal

Explanation

Fraud is an either-way offence, but the most serious and complex cases are sent to the Crown Court for trial on indictment before a judge and jury. The Crown Court has jurisdiction to impose the full range of sentencing powers for fraud offences. Magistrates' courts handle summary matters and allocation decisions, not the trial of the most serious frauds.