LW: Fraud and criminal behaviour

Answer: C. Fraudulent trading occurs where the business has been carried on with intent to defraud creditors, or for any fraudulent purpose; it carries both civil liability (a contribution to the company's assets) and criminal liability, and requires proof of actual dishonesty. Options A, B and D describe legitimate business activities. The need to prove dishonest intent makes fraudulent trading harder to establish than wrongful trading.

Answer: A. Wrongful trading can make a director liable to contribute to the company's assets where, at some point before insolvent liquidation began, they knew or ought to have concluded there was no reasonable prospect of avoiding it, and then failed to take every step to minimise loss to creditors. Unlike fraudulent trading, no dishonesty is required. Options B, C and D describe ordinary conduct that does not give rise to wrongful trading liability.

Answer: D. Fraudulent trading requires proof of actual dishonest intent to defraud and can be both a civil and a criminal matter, whereas wrongful trading is a civil provision that does not require dishonesty — only that the director failed the objective/subjective standard once insolvent liquidation was inevitable. Option A reverses the tests. Option C is wrong — wrongful trading needs no dishonesty. Option B is wrong — both can lead to a director contributing to the company's assets.

Answer: A. Money laundering is typically analysed in three stages: placement (introducing the criminal proceeds into the financial system), layering (moving and disguising the funds through transactions), and integration (returning the apparently legitimate funds to the criminal). Option B lists contract formation elements. Option C is a generic project cycle. Option D lists share-capital steps — none describes the laundering process.

Answer: B. The principal offences under the Proceeds of Crime Act 2002 include concealing or transferring criminal property, entering into arrangements that facilitate the acquisition, retention, use or control of criminal property, and acquiring, using or possessing criminal property. There are also offences of failing to disclose and tipping off. Options A, C and D describe administrative or routine matters that are not money laundering offences.

Answer: A. A person in the regulated sector who knows or suspects money laundering must generally make a disclosure (a suspicious activity report) to the firm's nominated officer (MLRO) or to the National Crime Agency, as soon as practicable. Option B risks committing the offence of tipping off. Option C is wrong — there is no de minimis that removes the obligation. Option D would also risk tipping off and breaching confidentiality.

Answer: C. Tipping off occurs where a person in the regulated sector discloses, to the person suspected or to a third party, information likely to prejudice an investigation following a money laundering disclosure. Options A and D describe the proper, protected reporting process, which is not tipping off. Option B is simply good record-keeping. The tipping off rules are why advisers must handle suspicions discreetly.

Answer: A. The Bribery Act 2010 creates offences of bribing another person (offering, promising or giving an advantage to induce improper performance), being bribed, bribing a foreign public official, and the corporate offence of failing to prevent bribery. Option A states the core bribery offence. Option B is lawful remuneration. Option C describes legitimate, proportionate corporate hospitality. Option D is ordinary commercial pricing — none of these is bribery.

Answer: D. The corporate offence of failing to prevent bribery is one of strict liability where an associated person bribes for the organisation's benefit, but it is a defence for the organisation to prove it had 'adequate procedures' designed to prevent such bribery. Option A is not a defence — wilful blindness does not help. Option C is irrelevant to liability. Option B is wrong — there is no small-employer exemption.

Answer: B. The failure to prevent fraud offence makes a large organisation criminally liable where an associated person (such as an employee or agent) commits a specified fraud intended to benefit the organisation or its clients, unless the organisation had reasonable fraud-prevention procedures in place. Option A is an honest error, not fraud. Options C and D describe routine compliance and HR matters, not fraud. This offence was added to the syllabus this version.

Answer: A. Insider dealing involves an individual with inside information — specific, price-sensitive information not generally available — dealing in the affected securities, or encouraging another to deal, or disclosing the information improperly. Option B is lawful because the information is public. Option C is a pricing/competition matter. Option D is a normal, lawful distribution. The offence protects the integrity of, and confidence in, the securities markets.

Answer: A. Inside information is specific or precise information that has not been made public and which, if it were, would be likely to have a significant effect on the price of the securities — for example, an unannounced takeover or major contract. Option B is public, so it is not inside information. Option C is a mere rumour, lacking the required precision. Option D is general, public commentary, not specific non-public information.

Answer: C. Market abuse includes behaviour such as the improper disclosure or misuse of inside information and the dissemination of false or misleading information likely to give a false or misleading impression about an investment's value, distorting the market. Option A is proper disclosure. Options B and D describe legitimate governance and insolvency conduct. The market abuse regime is enforced largely through civil/regulatory penalties alongside the criminal insider-dealing offence.

Answer: D. Where an offence under the Bribery Act is committed by a body corporate with the consent or connivance of a senior officer (such as a director or manager), that officer, as well as the company, may be personally guilty of the offence. Option A wrongly grants immunity. Option C ignores personal liability. Option B is too narrow — consent or connivance, not necessarily personal receipt of the bribe, is the basis of the officer's liability.

Answer: B. Customer due diligence — verifying the client's identity, identifying beneficial owners and understanding the purpose of the relationship — is a central anti-money laundering control that helps firms detect and deter the use of their services for laundering. Option A is not its purpose. Option C is unrelated to client profitability. Option D is wrong — due diligence does not replace the statutory audit, which serves a different function.