Terms in this set (358)

Digital currencies are often vulnerable to money laundering because many of them function as international person-to-person payment systems that cross jurisdictional boundaries, creating difficulties for authorities pursuing enforcement or legal actions. Furthermore, many service providers who exchange or otherwise deal with digital currencies do not have effective customer identification or recordkeeping practices, while others actively promote anonymous payments.

Mobile payments, also known as mobile banking, involve using an account associated with a mobile phone—as opposed to cash, credit cards, and debit cards—to facilitate transactions. Just as credit and debit cards significantly cut into the use of checks and cash for consumer transactions, mobile payments are likely to grow in popularity.

As compared to other transaction methods, mobile payments are vulnerable to money laundering schemes in a few key ways. For one thing, given that mobile payments are still in the process of growing and developing definition, regulations are not as sophisticated or complete as they are for older payment systems. For another thing, many developing countries lack functional AML and anti-terrorist laws, making mobile payments outside of the jurisdiction even more difficult to prevent and trace. Also, a user can send mobile payments to almost anywhere in the world, making them a tool that launderers often use to move funds to foreign jurisdictions.

In addition, the use of prepaid phones causes substantial money laundering issues because the owner of a prepaid phone can be virtually anonymous. Prepaid phones can be purchased for cash, and the user typically does not need to provide personal information to open or add funds to an account associated with the phone. Anonymity is a strong attraction for launderers because it helps to obscure the paper/digital trail leading back to them.
The anti-bribery provisions of the FCPA make it unlawful to bribe a foreign official for business purposes. Only regulated persons are subject to FCPA jurisdiction, and such persons include all of the following:
• A domestic concern, which is any citizen, national, or resident of the United States, or any business entity that has its principal place of business in the United States or that is organized under the laws of a state, territory, possession, or commonwealth of the United States
• An issuer, which is a corporation that has issued securities that have been registered in the United States or an entity that is otherwise required to file periodic reports with the SEC
• The agents, subsidiaries, or other representatives of domestic concerns and issuers
• A foreign national or business that takes any act in furtherance of a corrupt payment within U.S. territory

Also, the FCPA's anti-bribery provisions extend only to corrupt payments made to foreign officials.

Although the UK private company is attempting to influence a foreign official, the UK company did not violate the FCPA because it is not subject to FCPA jurisdiction. The UK company does not have its principal place of business in the United States, and it is not organized under the laws of the United States. Also, the UK company is a private company, so it is not an issuer. Moreover, the UK company did not take any act in furtherance of a corrupt payment within U.S. territory; the $60,000 transfer was made to a Chinese public official. Therefore, the $60,000 transfer does not violate the FCPA.
Both the UK Bribery Act and the FCPA make it a crime to offer foreign public officials bribes or to accept bribes from them in connection with international business transactions, and their prohibitions on bribing foreign government officials are broadly comparable. Thus, like the FCPA, the Bribery Act seeks to punish corruption on a global level, but the Bribery Act has an even broader application than the FCPA. One way in which the Bribery Act has a broader application than the FCPA is that it makes commercial bribery—bribes paid to people working in the private sector—a crime, whereas the FCPA only prohibits bribes involving foreign government officials.

Consequently, even if an organization's anti-corruption program is sufficiently robust for the purpose of complying with the FCPA, it might not be sufficient for the purpose of complying with the UK Bribery Act. Therefore, it is important for international organizations to be aware of the differences between the FCPA and the Bribery Act.

Another way that the UK Bribery Act differs from the FCPA concerns facilitating payments. The FCPA does not prohibit all payments to foreign officials; it contains an explicit exception for facilitating payments made to expedite or secure performance of a routine governmental action. The Bribery Act, however, makes no such exception.

The Bribery Act exercises jurisdiction over all individuals and corporate entities for acts of corruption when any part of the offense occurs in the UK. Furthermore, liability exists for acts committed outside the UK by individuals and entities with a close connection to the UK, including:
• British citizens
• Individuals who normally reside in the UK
• An entity incorporated under the law of any part of the UK

More specifically, foreign companies that have offices in the UK, employ UK citizens, or provide any services to a UK organization will be responsible for complying with the UK Bribery Act. A listing on the London Stock Exchange will not, in itself, subject a company to the Act.



See pages 2.246-2.247 in the Fraud Examiner's Manual
Each of the above acts would constitute a violation under the FCPA. For individuals and businesses within its jurisdiction, the FCPA prohibits any transfers of value to a foreign official in a corrupt effort to obtain an improper advantage. Promises to pay are considered something of value. Furthermore, foreign companies are within the reach of the FCPA if they have registered securities or are otherwise required to file under the Securities and Exchange Act of 1934. Here, the German company would be subject to the FCPA because it is publicly traded on the NYSE, which requires registration with the SEC.

The anti-bribery provisions of the FCPA make it unlawful to bribe a foreign official for business purposes. Only regulated persons are subject to FCPA jurisdiction, and such persons include all of the following:
• A domestic concern, which is any citizen, national, or resident of the United States, or any business entity that has its principal place of business in the United States or that is organized under the laws of a state, territory, possession, or commonwealth of the United States
• An issuer, which is a corporation that has issued securities that have been registered in the United States or an entity that is otherwise required to file periodic reports with the SEC
• The agents, subsidiaries, or other representatives of domestic concerns and issuers
• A foreign national or business that takes any act in furtherance of a corrupt payment within U.S. territory

Also, the FCPA's anti-bribery provisions extend only to corrupt payments made to foreign officials.

Moreover, the FCPA does not prohibit all payments to foreign officials; it contains an explicit exception for certain types of payments, known as facilitating payments or "grease payments," made to expedite or secure performance of a routine governmental action by a foreign official, political party, or party official that relates to the performance of that party's ordinary and routine functions.
To enjoy the benefits of being a secured creditor in a bankruptcy proceeding, the creditor must hold a claim for which there is a properly perfected security interest. The perfection of a security interest often requires the creditor to file a financing document, lien, or some other document to demonstrate to other potential creditors that the debtor's property is subject to a security interest. For instance, certain security interests in personal property require a Uniform Commercial Code filing. Real estate liens are recorded in the county where the property is located. The bankruptcy court will rely on state law where the property is located to determine if a secured claim exists.

A secured creditor's claim is secured to the extent of the value of the property. When the debt is undersecured (amount of note is greater than the value of the security interest), the debt will be considered both unsecured and secured. For example, if a note for $500 is secured by property having a value of $400, there will be a secured claim for $400 and an unsecured claim for $100. If the debtor and the creditor cannot agree on the value of the collateral, there will be a hearing under Section 506 of the Bankruptcy Code and the court will determine the value of the collateral.

At the time of the filing of the bankruptcy petition, an automatic stay precludes the creditor from taking any action to repossess the property, unless relief from the stay is granted. In a Chapter 11 case, the court generally will grant relief only if it can be shown that there is no equity in the property and that the property is not needed for reorganizing the business. The stay also might be removed if the property is declining in value and the debtor fails to compensate the creditor for this decline (referred to as "adequate protection payments"). If the stay is removed, the creditor then can proceed under state law to obtain possession of the property (often through a foreclosure) to satisfy the claim.
Designed to protect an individual's Fifth Amendment right against self-incrimination and Sixth Amendment right to an attorney, Miranda warnings advise suspects that they have the right not to answer questions and the right to legal counsel during interrogations. Miranda warnings are required only if a person is being interrogated by public authorities in a custodial setting. Custodial setting refers to questioning initiated by government agents after a person has been taken into custody, or otherwise deprived of his freedom or action in any significant way. As a result, both private and public employers may interview employees in noncustodial settings without giving Miranda warnings.

In the context of employee interviews by public employers, the answer to whether Miranda warnings are legally required depends on the applicability of the Fifth Amendment to the employee interviews. When a public employee is being questioned by his employer, he is being questioned by the government; therefore, the Fifth Amendment applies to employee interviews that are related to potentially criminal conduct.

And because the Fifth Amendment's protection against self-incrimination applies to internal investigations conducted by government employers, public employers must give Miranda warnings to employees being subjected to custodial interviews (i.e., employees in custody and subject to interrogation). That is, public employers must give Miranda warnings to employees being interviewed about a potentially criminal matter if the government (or its agent) has arrested the employee or deprived him of action in a significant way.
The U.S. securities and futures markets are regulated through a combination of self-regulation by self-regulatory organizations (SROs) and direct federal regulation. SROs in U.S. securities and futures markets are subject to federal regulation. Securities and futures laws authorize the SEC, which regulates the U.S. securities industry, and the Commodity Futures Trading Commission (CFTC), which has authority over U.S. futures markets, to delegate authority to and oversee SROs, empowering authorized SROs to regulate the markets in which securities and futures are traded.



There are several SROs in U.S. securities and futures markets, including:


• The national exchanges: The national exchanges that operate the markets where securities and futures are traded (e.g., the New York Stock Exchange, American Stock Exchange, and the Chicago Board Options Exchange) are SROs.
• The Financial Industry Regulatory Authority (FINRA): FINRA, which is overseen by the SEC, regulates all firms selling securities in the United States.
• The Municipal Securities Rulemaking Board (MSRB): The MSRB, which is overseen by the SEC, regulates the U.S. municipal bond market.
• The National Futures Association (NFA): The NFA, which is overseen by the CFTC, regulates the commodities and futures industry.

Generally, SROs in U.S. securities and futures markets perform various regulatory responsibilities, but in basic terms, SROs oversee the markets in which they operate and police the members and member firms participating in those markets.

More specifically, the regulatory responsibilities of SROs include matters such as:
• Creating rules to protect the integrity of the market in which they operate (e.g., rules that govern market conduct and that regulate exchange trading)
• Establishing the standards and rules under which their members operate (e.g., regulating their members' trading practices, member qualifications, and how members should relate to their clients)
• Offering professional training, testing, and licensing to individuals in their industry
• Monitoring compliance with and enforcing the rules of the markets in which they operate through market surveillance programs, trading analysis, and examinations of member firms' trading operations
Direct examination is the initial questioning of a witness by the side that called the witness. Most of the time, direct examination is a nonconfrontational questioning aimed at exposing the facts and issues of the case. Because experts are hired for their opinions, they are not subject to the usual restrictions about statements of judgment.

Expert witnesses present their findings in various ways, such as narratives, hypotheticals, specialized materials, and special exhibits. Experts are commonly asked to answer narrative questions, which are all but forbidden to lay witnesses. Narrative questions are broad, open-ended questions that allow experts to present their opinions in their own words with minimal prompting from the lawyer. Fraud cases, with their divergent paths of activity and intrigue, can require complex summarizing for the facts to make any sense. The average group of jurors has never considered how someone could manipulate store inventories to drive up the company's stock price and then make millions on the phony surge. The expert witness in cases dealing with such issues often will begin testimony by recounting the narrative background of a case, the tests and experiments that were performed during the investigation, and a summary of the findings based on his professional expertise.

On direct examination, an attorney wants to ask questions that the expert is comfortable answering, so compound (two-part) and hostile questions do not generally occur in this process. Additionally, it is generally objectionable for leading questions to be asked during direct examination of the expert (e.g., "The results were negative, weren't they?").
Direct examination is the initial questioning of a witness by the side that called the witness. Most of the time, direct examination is a nonconfrontational questioning aimed at exposing the facts and issues of the case. During direct examination, expert witnesses present their findings in various ways, such as narratives, hypotheticals, specialized materials, and special exhibits. Experts are commonly asked to answer narrative questions, which are all but forbidden to lay witnesses. Narrative questions are broad, open-ended questions that allow experts to present their opinions in their own words with minimal prompting from the lawyer. Fraud cases, with their divergent paths of activity and intrigue, can require complex summarizing for the facts to make any sense. The average group of jurors has never considered how someone could manipulate store inventories to drive up the company's stock price and then make millions on the phony surge. The expert witness in cases dealing with such issues often will begin testimony by recounting the narrative background of a case, the tests and experiments that were performed during the investigation, and a summary of the findings based on his professional expertise.

For example, during a direct examination, counsel for the party presenting the expert witness would likely ask open questions such as "Could you please tell us about the background of this case?" or "What procedures did you perform in your examination?"

In contrast, a cross-examining attorney needs to control the flow of testimony and would not likely ask an expert witness a narrative question.
Direct examination is the initial questioning of a witness by the side that called the witness. Most of the time, direct examination is a nonconfrontational questioning aimed at exposing the facts and issues of the case. During direct examination, expert witnesses present their findings in various ways, such as narratives, hypotheticals, specialized materials, and special exhibits. Experts are commonly asked to answer narrative questions, which are all but forbidden to lay witnesses. Narrative questions are broad, open-ended questions that allow experts to present their opinions in their own words with minimal prompting from the lawyer. Fraud cases, with their divergent paths of activity and intrigue, can require complex summarizing for the facts to make any sense. The average group of jurors has never considered how someone could manipulate store inventories to drive up the company's stock price and then make millions on the phony surge. The expert witness in cases dealing with such issues often will begin testimony by recounting the narrative background of a case, the tests and experiments that were performed during the investigation, and a summary of the findings based on his professional expertise.

For example, during a direct examination, counsel for the party presenting the expert witness would likely ask open questions such as "Could you please tell us about the background of this case?" or "What procedures did you perform in your examination?"

In contrast, a cross-examining attorney needs to control the flow of testimony and would not likely ask an expert witness a narrative question. Instead, cross-examining attorneys often attempt to ask leading questions, where the answer is suggested in the question. They might also ask questions that would call for the expert to go beyond the proper scope of his testimony.
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