FINANCIAL SERVICES CRIME - MODULE OUTLINE

1. White Collar Crime, aspects of the Fraud Act 2006 and trial by jury in Fraud Cases

2. White Collar Crime/Criminology:

3. The Role of the Financial Services Authority (FSA), Insider Dealing and Market Abuse

4. General Criminal Law on Fraud and Jury Trial In Fraud Cases

5. Money Laundering Offences and Regulatory Aspects, Confiscation Orders and Civil Forfeiture

6. Criminal Law and Regulation under the Financial Services and Markets Act 2000: Insider Dealing and Market Abuse plus FSA Role

7. Money Laundering, Confiscation & Civil Recovery

8. Insolvency: Delinquent Directors

FINANCIAL SERVICES CRIME

SEMINAR 1: WHITE COLLAR CRIME: THE CRIMINOLOGICAL BACKGROUND

Discussion and preparation

Note tasks of subgroups set out in Separate sheet:

1. Nelken

(a) Outline from Nelken‟s Introduction and the Karstedt, Levi, and Godfrey, “Introduction” what the authors see as the main problems of analysis and debates on white collar crime.

(b) List Nelken‟s seven types of ambiguity?

(c) Why does Nelken suggest that the concept is contested:

(i) because of definitional problems and

(ii) because of doubts about whether all “misbehaviours discussed under this rubric can be considered to count as crime”

(d) Why does Nelken suggest that criminologists have difficulty in explaining the causes of white collar crime using the concepts applied to other crimes

(e) How, according to Nelken, do some argue that the setting and context of white collar crime affect its nature and society‟s reaction to it

(f) What, in Nelken‟s view, are the main debates about the regulation or policing of white collar crimes

(g) How does Nelken argue that those problems relate to wider social factors?

(h) Do you agree with Nelken that there are severe difficulties in using the criminal law to control the groups most powerful within a given society?

2. Levi on Organised Crime

(a) How does Levi characterise the definitions of organised crime and the problems with them?

(b) How does he fit the work on drug dealing networks into his argument?

(c) What are his arguments on the links with terrorism?

Essential reading If possible, everyone might try to read:

1. Michael Levi, “Suite Revenge? The Shaping of Folk Devils and Moral Panics about White-Collar Crimes”(2009) 49 British Journal of Criminology 48 which gives some very up to date thoughts about the nature of white collar crime and why “moral devils” are not create from its perpetrators. It‟s on Westlaw.

2. Susanne Karstedt, Michael Levi, Barry Godfrey, “Introduction” to Markets, Risk and 'White-Collar' Crimes: Moral Economies from Victorian Times to Enron (2006) 46 British Journal of Criminology at page 971 (also on Westlaw UK Directory)

3. David Nelken, “White Collar and Corporate Crime” in M.Maguire, R.Morgan and R.Reiner (eds.) The Oxford Handbook of Criminology, Clarendon Press, Oxford, 4th Edition, 2007 - everyone should carefully study this excellent synthesis of the writing in this area with its sound Bibliography. The questions below should help you to gain from this text and will form the basis of the early part of our discussions in the Seminar.

4. M. Levi, “Organised Crime and Terrorism” in M.Maguire, R.Morgan and R.Reiner (eds.) The Oxford Handbook of Criminology, Clarendon Press, Oxford, 2007 is a very helpful introduction to the problems of definition and the recent developments in this area which will inform some of our later Seminars.

Further relevant reading

The following focus in more specifically in the themes which will inform the whole of this module. They will be useful reading not only for this Seminar but also for later ones. Given the amount of material this reading is optional for Seminar 1 but you should try to read some of it at some point during the Module. You can use references and bibliographies for further reading when looking to write an assessable paper on a particular area.

1. Michael Levi and John Burrows, “Measuring the impact of fraud in the UK: a conceptual and empirical journey” (2008) 48 Brit. J. Criminol. 293-318

This examines the difficulties of collecting figures on fraud and some of the implications of that problem for the classification of crimes and whether behaviour is seen as criminal. 2. Massimo Nardo, “Organised crime and networking economy: models, features, dynamics and related approaches” (2008) 11 Journal of Money Laundering Control 172-178

This is an interesting look at key issues on organised crime with some useful references in the footnotes

3. Doreen McBarnet, “After Enron will 'whiter than white collar crime' still wash?” in Markets, Risk and 'White-Collar' Crimes: Moral Economies from Victorian Times to Enron’ Editors: Susanne Karstedt, Michael Levi and Barry Godfrey (2006) 46 British Journal of Criminology at p 1091 (and Westlaw) This is an up to date debate on “creative compliance” by professionals with regulatory rules. This is perhaps how those involved in Enron saw their own behaviour.

4. Markets, Risk and 'White-Collar' Crimes: Moral Economies from Victorian Times to Enron’ Editors: Susanne Karstedt, Michael Levi and Barry Godfrey (2006) 46 British Journal of Criminology at p 971 onwards (and Westlaw) is very useful for this module on white collar crime.

In particular, the following:

a. Sarah Wilson, “Law Morality and regulation: Victorian Experiences of Financial Crime” at page 1073 gives a helpful historical perspective to our concerns; b. Ericson and Doyle on “The Institutionalization of Deceptive Sales in Life Insurance: Five Sources of Moral Risk” at page 993 provides interesting ethnographic data from Canada c. Michael Levi “The Media Construction of White Collar Crimes” at page 1037 debates the role of the press in this area d. D.J. Middleton, “The Legal and Regulatory Response to Solicitors Involved in serious Fraud: Is Regulatory Action More Effective than Criminal Prosecution?” at page 810 follows on one of the issues Nelken raises in the reading above. e. V and J Braithwaite, “Democratic Sentiment and Cyclical Markets in Vice” at page 1110 deal with “aggressive” tax “planning” using the Australian example. f. Oskar Engdahl, “The role of money in economic crime” (2008) 48 British Journal of Criminology p154 examines whether the involvement of “money” ( presumably, as opposed to goods etc.) is significant for the likelihood of economic crime

Two books worth looking at for more on organised crime are:

1. V. Ruggiero, Vincenzo, "Organized and corporate crime in Europe : offers that can't be refused" , Aldershot : Dartmouth, 1996. and

2. V.Ruggiero, "Crime and Markets : Essays in Anti-criminology " Oxford, OUP, 2000

An older source very much in our field is:

1. G. Geis and P. Jesilow (Special eds) THE ANNALS of the American Academy of Political and Social Science Vol 525, January 1993. The following papers from this excellent US collection will be of interest to read over the course of the Module. They provide excellent examples of the problems although we will be looking at more recent regulation and control methods:

H.N. Pontell and Kitty Calavita, “White Collar Crime and the Savings and Loan Scandal” E. Szockyj, “Insider Trading: The SEC meets Carl Karcher” K. Schlegel, “Crime in the Pits: The Regulation of Futures Trading” J.T. Wells, “Accountancy and White Collar Crime”

2. M. Levi and Royal Commission on Criminal Justice, The Investigation, Prosecution, and Trial of Serious Fraud, research Study No. 14 HMSO, London, 1993 (available on Short Loan) examines many of the big fraud cases of the 1980‟s and early 1990‟s and analyses the systems of investigation, prosecution and trial in the light of that experience. This is an invaluable resource throughout the Module.

Two older works still have helpful things to say on the problems although the legal rules have changed massively since they were written:

1. M. Levi, Regulating Fraud: white collar crime and the criminal process, Tavistock Publications, London, 1987 Especially Chapters 4, 5, & 6. - the detailed rules and procedures may have changed but the key problems and issues have not.

2. M. Levi, The Phantom Capitalists: the organisation and control of long- firm fraud Heinemann, London 1981 or Ashgate, 2008 edition with updated introduction. This is an entirely optional reading which, although old now, in Chapters VI to IX, gives a fine insight into the practical problems of distinguishing fraud from commercial incompetence or misfortune. Again, detailed legal provisions have changed but may of the issues remain.

LLM COMMERCIAL STREAM

FINANCIAL SERVICES CRIME

2009

SEMINAR 2: THE GENERAL CRIMINAL LAW BACKGROUND

Group A Prepare a brief presentation on the key problems with the law on fraud and the Theft Act deception offences before the Fraud Act 2006

Law Reform

The Government has now responded to Law Commission proposals on the reform of fraud with the Fraud Act 2006 - http://www.opsi.gov.uk/acts/acts2006/20060035.htm and see extracts at end of sheet.

The Law Commission prepared recommendations on the reform of the Criminal Law of Fraud to deal with the problems explained in the text books (see essential reading list below). The report on Fraud (2002) Law Com No 276 Cm 5560 is available at http://www.lawcom.gov.uk/docs/lc276.pdf in full and with http://www.lawcom.gov.uk/docs/lc276sum.pdf as a brief summary which everyone should read.

The 1999 Consultation Paper No 155 of 27th April 1999 “Legislating the Criminal Code: Fraud and Deception” is also available from there in summary and full forms on pdf. Fuller reasoning than the final report http://www.lawcom.gov.uk/docs/cp155.pdf

Access all these parts of the Law Commission site via “publications”, going to reports or consultations as appropriate.

Assessing those recommendations look also at:

1. P.Kiernan & Gary Scanlon, “Fraud and the Law Commission: The Future of Dishonesty” (2003) 24 Company Lawyer pp. 4-10

2. Gary Scanlon, “Offences Concerning Directors and Officers of a Company – fraud and corruption in the UK – the future” (2008) 29 Company Lawyer 264

3. Ian Dennis, “Editorial – Fraud Act 2006” (2007) Criminal Law Review pp 1-2 (Westlaw and on shelf)

4. David Ormerod, “The Fraud Act 2006 - criminalising lying?” [2007] Criminal Law Review 193-219

On the problems (Group A) some of the Law Commission references below are also useful as are:

1. The Law Commission, Law Com. No. 228 Report on: Criminal Law: Conspiracy to Defraud HMSO London 1994 (on Short Loan). 2. S Shute, “Appropriation and the Law of Theft” [2002] Criminal Law Review 445-458

Group B

Use the above material (and Fraud Act 2006 (below)) to prepare a presentation critically assessing the Law Commission‟s recommendations and the new Law The third topic we will look at trial by jury.

Group C

Prepare a presentation critically assessing the method of trial by jury as it applies to complex fraud trials

1. Peter Thornton “Trial by Jury: 50 Years of Change” (2004) Criminal Law Review 683-701

2. Gary Scanlon, “The Trial of Serious and Complex Frauds: Further Reforms” (2002) 23 Company Lawyer p 328

…Should be useful as will the text of the new provision in sections 43, 44 and 48 of the Criminal Justrice Act 2003 (below). These articles (all on Westlaw) will bring you up to date with these issues. Some of the earlier debates are reflected in articles under “relevant reading” below:

1. “Reforming Fraud – The Right Direction at Last” [2002] Criminal Law Review pp 769-770 - everybody as it‟s v. short. 2. P.Kiernan & Gary Scanlon, “Fraud and the Law Commission: The Future of Dishonesty” (2003) 24 Company Lawyer pp. 4-10 – everybody if possible please. 3. Gary Scanlon, “Dishonesty in Corporate Offences A Need for Reform” (2002) 23 Company Lawyer p114 – 4. S Shute, “Appropriation and the Law of Theft” [2002] Criminal Law Review 445-458 5. Peter Thornton “Trial by Jury: 50 Years of Change” (2004) Criminal Law Review 683-701 6. Gary Scanlon, “The Trial of Serious and Complex Frauds: Further Reforms” (2002) 23 Company Lawyer p 328 7. R McCusker, “E-Commerce, Business and Crime: Inextricably Linked, Diametrically Opposed” (2002) Company Lawyer pp3-8 – everyone to get a flavour of the particular problems. 8. R Hunter “The Honest Truth About Dishonesty” [2002] Private Client Business pp390-393 on developments on “civil” dishonesty in the constructive trust context.

GENERAL DISCUSSION AND PREPARATION

We will focus on the problems confronting the Criminal Law in dealing with issues of fraud and deception and the discussion will emerge on your reports of your reading allocated above.

1. What are the difficulties highlighted by the textbooks as to the application of Theft Act deception offences? 2. Why is the meaning of “appropriation” an issue? 3. How has dishonesty been assessed up to now? 4. Why is the Conspiracy to defraud offence seen as problematic? 5. How does the Law Commission approach these problems in its 2002 Report? 6. Why is jury trial seen as problematic in this area? 7. Will the proposal in the current Criminal Justice Bill deal with the problem? 8. How do these problems compare with the concept of dishonesty applied for the purpose of constructive trust liability? 9. How do these issues relate to the arguments about “white collar” and “organised” crime that we considered in the last Seminar?

ESSENTIAL READING

Current Law

Everybody should look at one or more of the following unless their English Criminal Law is very fresh in their minds:

1. Reed, Criminal Law, 2006 Sweet & Maxwell, Chapters dealing with fraud and deception 2. Card, Cross & Jones Criminal Law 18th Edition 2008 Butterworths, Chapters 9 and 10 – a comprehensive treatment of the range relevant offences – concentrate on the issues around fraud in these chapters – precise page references not to hand. 3. J.C. Smith, Smith and Hogan Criminal Law 12th ed Oxford University Press – Chapter(s) on property offences involving fraud or deception.

If you can‟t find any of these, go to any UK Criminal law Text Book published in 2006 or later and read the chapter on the Fraud Act 2006.

Best of all, on line, through Westlaw, without needing to find and borrow a book from the library or even leave the comfort of your own computer, you can read, and print out bits from, the “bible” of judges and barristers Archbold.

You find it thus: Open Westlaw– click on Commentary – Click on “United Kingdom” – click on "crime" under “by practice area”- click on “Archbold Criminal Pleading Evidence & Practice 2009 & First Supplement” – click “table of contents” in top right hand corner of the screen - this brings you to “Archbold from Sweet and Maxwells” – Click on "Archbold" - open Chapter 21 dealing with Offences under Theft and Fraud Acts– Open XVIII – Open and read or print out all text under (5) "elements of the offence". In Archbold there are also links to relevant cases and statutory provisions. This is a hassle but well worth it for the quality of the information.

Read: 1. B. Summers, “Update on Recent Fraud Cases” (2008) 29 Company Lawyer 342 2. Otherwise, use any standard work on Criminal Law referring to the sections dealing with crimes against property involving deception or fraud.

RELEVANT READING IF YOU WANT TO FOLLOW THIS UP

The most recent and definitive analysis of the problems surrounding the prevention, investigation and prosecution of fraud (as opposed to the legal definition of the offences) is to be found in the:

1. Final Report of the Review of Fraud by the Attorney General's office published in 2006 http://www.lslo.gov.uk/pdf/FraudReview.pdf . This is an excellent starting point for anyone researching these issues in greater depth, Both: 2. M. Levi and Royal Commission on Criminal Justice, “The Investigation, Prosecution and Trial of Serious Fraud” HMSO 1993 (On Short Loan); And: 3. M. Levi, Regulating Fraud: white collar crime and the criminal process, Tavistock Publications, London, 1987 (Available on Short Loan) - especially Chapters 4, 5, & 6; Which are older treatments of the same problems.

Legal Texts

1. Arlidge, Arlidge and Parry on Fraud, 3rd Edition, London, Sweet and Maxwell, 2007 2. Farrell, Simon, Blackstone's guide to the Fraud Act 2006, Oxford, OUP, 2007

For older and more detailed material on the problems of legal definition see:

1. J. Dine, Criminal Law in the Company Context, Dartmouth, Aldershot, 1995 Chapters 2, 7 and 9. 2. The Law Commission, Law Com. No. 228 Report on: Criminal Law: Conspiracy to Defraud HMSO London 1994. 3. J.C. Smith “Obtaining Cheques by Deception or Theft” [1997] Criminal Law Review pp 396 - 405 4. J. Holroyd, “Property and Theft - developments since Preddy” (1998) 62 Journal of Criminal Law pp 271 to 278

5. The Law Commission Report on Preddy (Law Commission, Offences of Dishonesty: Money Transfer Law Com No 243) can be read in summary at http://www.lawcom.gov.uk/ 6. M. Adenas ands S Silva, “Serious Fraud and s34 of the Criminal Justice and Public Order Act 1994” (1998) 3 Company Lawyer 66 to 70X 7. See (1998) Amicus Curiae Vol 5 March R. Wright at pp 4-7; Vol 8 May, Dickson at pp 5 to 6 and Hansen at 4 to 5. 8. J.C. Smith “Conspiracy to Defraud: Some Comments on the Law Commission‟s Report [1995] Criminal Law Review pp 209 to 219 9. S. Silber “The Law Commission, Conspiracy to Defraud and the Dishonesty Project” [1995] Criminal Law Review pp 461 to 463 - a reply to Smith 10. Halpin “The Test for Dishonesty” [1996] Criminal Law Review pp 283 to 295

Appendix:

Fraud Act 2006 (EXTRACTS)

1 Fraud

(1) A person is guilty of fraud if he is in breach of any of the sections listed in subsection (2) (which provide for different ways of committing the offence).

(2) The sections are-

(a) section 2 (fraud by false representation), (b) section 3 (fraud by failing to disclose information), and (c) section 4 (fraud by abuse of position). (3) A person who is guilty of fraud is liable-

(a) on summary conviction, to imprisonment for a term not exceeding 12 months or to a fine not exceeding the statutory maximum (or to both); (b) on conviction on indictment, to imprisonment for a term not exceeding 10 years or to a fine (or to both). (4) Subsection (3)(a) applies in relation to Northern Ireland as if the reference to 12 months were a reference to 6 months.

2 Fraud by false representation

(1) A person is in breach of this section if he-

(a) dishonestly makes a false representation, and (b) intends, by making the representation- (i) to make a gain for himself or another, or (ii) to cause loss to another or to expose another to a risk of loss. (2) A representation is false if-

(a) it is untrue or misleading, and (b) the person making it knows that it is, or might be, untrue or misleading. (3) "Representation" means any representation as to fact or law, including a representation as to the state of mind of-

(a) the person making the representation, or (b) any other person. (4) A representation may be express or implied.

(5) For the purposes of this section a representation may be regarded as made if it (or anything implying it) is submitted in any form to any system or device designed to receive, convey or respond to communications (with or without human intervention).

3 Fraud by failing to disclose information

A person is in breach of this section if he-

(a) dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and (b) intends, by failing to disclose the information- (i) to make a gain for himself or another, or (ii) to cause loss to another or to expose another to a risk of loss. 4 Fraud by abuse of position

(1) A person is in breach of this section if he-

(a) occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person, (b) dishonestly abuses that position, and (c) intends, by means of the abuse of that position- (i) to make a gain for himself or another, or (ii) to cause loss to another or to expose another to a risk of loss. (2) A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.

5 "Gain" and "loss"

(1) The references to gain and loss in sections 2 to 4 are to be read in accordance with this section.

(2) "Gain" and "loss"-

(a) extend only to gain or loss in money or other property; (b) include any such gain or loss whether temporary or permanent; and "property" means any property whether real or personal (including things in action and other intangible property).

(3) "Gain" includes a gain by keeping what one has, as well as a gain by getting what one does not have.

(4) "Loss" includes a loss by not getting what one might get, as well as a loss by parting with what one has.

6 Possession etc. of articles for use in frauds

(1) A person is guilty of an offence if he has in his possession or under his control any article for use in the course of or in connection with any fraud.

(2) A person guilty of an offence under this section is liable-

(a) on summary conviction, to imprisonment for a term not exceeding 12 months or to a fine not exceeding the statutory maximum (or to both); (b) on conviction on indictment, to imprisonment for a term not exceeding 5 years or to a fine (or to both). (3) Subsection (2)(a) applies in relation to Northern Ireland as if the reference to 12 months were a reference to 6 months.

Criminal Justice Act 2003 (EXTRACTS)

PART 7

TRIALS ON INDICTMENT WITHOUT A JURY

43 Applications by prosecution for certain fraud cases to be conducted without a jury (NOT YET IN FORCE!)

(1) This section applies where-

(a) one or more defendants are to be tried on indictment for one or more offences, and

(b) notice has been given under section 51B of the Crime and Disorder Act 1998 (c. 37) (notices in serious or complex fraud cases) in respect of that offence or those offences.

(2) The prosecution may apply to a judge of the Crown Court for the trial to be conducted without a jury.

(3) If an application under subsection (2) is made and the judge is satisfied that the condition in subsection (5) is fulfilled, he may make an order that the trial is to be conducted without a jury; but if he is not so satisfied he must refuse the application.

(4) The judge may not make such an order without the approval of the Lord Chief Justice or a judge nominated by him.

(5) The condition is that the complexity of the trial or the length of the trial (or both) is likely to make the trial so burdensome to the members of a jury hearing the trial that the interests of justice require that serious consideration should be given to the question of whether the trial should be conducted without a jury.

(6) In deciding whether or not he is satisfied that that condition is fulfilled, the judge must have regard to any steps which might reasonably be taken to reduce the complexity or length of the trial.

(7) But a step is not to be regarded as reasonable if it would significantly disadvantage the prosecution.

44 Application by prosecution for trial to be conducted without a jury where danger of jury tampering (IN FORCE 24th JULY 2006))

(1) This section applies where one or more defendants are to be tried on indictment for one or more offences.

(2) The prosecution may apply to a judge of the Crown Court for the trial to be conducted without a jury.

(3) If an application under subsection (2) is made and the judge is satisfied that both of the following two conditions are fulfilled, he must make an order that the trial is to be conducted without a jury; but if he is not so satisfied he must refuse the application.

(4) The first condition is that there is evidence of a real and present danger that jury tampering would take place.

(5) The second condition is that, notwithstanding any steps (including the provision of police protection) which might reasonably be taken to prevent jury tampering, the likelihood that it would take place would be so substantial as to make it necessary in the interests of justice for the trial to be conducted without a jury.

(6) The following are examples of cases where there may be evidence of a real and present danger that jury tampering would take place-

(a) a case where the trial is a retrial and the jury in the previous trial was discharged because jury tampering had taken place,

(b) a case where jury tampering has taken place in previous criminal proceedings involving the defendant or any of the defendants,

(c) a case where there has been intimidation, or attempted intimidation, of any person who is likely to be a witness in the trial.

Leicester LLM Commercial Stream

FINANCIAL SERVICES CRIME

2009

SEMINAR 3 CRIMINAL LAW AND REGULATION ON THE FINANCIAL MARKETS

This Seminar focuses on the regulation of the financial services industry and the markets. The essential reading is intended to give you an outline of the key features of the regulation of the financial markets in the UK and the key issues in the areas of market manipulation and insider dealing. I have chosen these two areas to illustrate the interface between Criminal law and regulatory approaches in the context of the special features of the financial markets. Please read the required reading for your Group first so that when the groups meet in the Seminar you can develop your presentations quickly.

DISCUSSION AND PREPARATION

Please come prepared to discuss:

(a)The Structure of the Regulatory System

(b) The insider dealing offence under the Criminal Justice Act 1992

(c) The method proposed for dealing with market abuse under FSMA including:

(d) How “market abuse” is defined and what we really mean by the concept.

(e) Why should it be regulated?

(f) The relationship between Criminal and Civil Law/Regulatory approaches. Is the criminal law, civil law, or regulatory regime the best approach?

(g) The relationship of the Human Rights Act 1998 and the European Convention on Human Rights to the legal regime in this area.

All members of Group A Read the following before the Seminar and present a ten to fifteen minute talk on the structure of financial services regulation in the UK and its relevance to market abuse and insider dealing

1. Company Lawyer 2007 Article Carlos Conceicao, “The FSA's Approach to Taking Action against Market Abuse” (2007) 28 Company Lawyer 43-45 2. Clare Bennett, “The Market Abuse Link between Shell and Enron” (2005) 26 Company Lawyer 180-185

All members of Group B Read the following in advance of the Seminar and prepare a ten to fifteen minute presentation on the nature of insider dealing and the problems of the various methods used to deal with it

1. Rosalind Wright, “Market Abuse and Market Manipulation: The Civil Criminal and Regulatory Interface” (2001) 3 Journal of International Financial Markets 19-25 – Westlaw 2. Jason D Haines, “FSA determined to improve the cleanliness of markets: custodial sentences continue to be a real threat” (2208) 29 Company Lawyer 370 3. Stuart Bazley, “Market Cleanliness, Systems and Controls and Future Regulatory Enforcement” (2007) 28 Company Lawyer 341-343

All members of Group C Read the following in advance of the Seminar and prepare a ten to fifteen minute presentation on the key Human Rights problems affecting the Financial Services and Markets Act 2000.

1. Joe Coffey, “The Compatibility of the Financial Services and Markets Act 2000 with the Human Rights Act 1998” (2001) 12 International Company and Commercial Law Review 50-56. - Westlaw 2. James Eadie, “Market Abuse and the European Convention on Human Rights” (2001) 3 Journal of International Financial Markets 74-78 – Westlaw 3. Saleem Sheikh, “FSMA Market Abuse Regime: a review of the sunset clauses” (2008) 19 International Company and Commercial Law Review 234 on the differences between the UK regime and the EU Directive. [The Financial Services and Markets Act 2000 (Market Abuse) Regulations 2008 SI 2008/1439 have now extended the life of the UK provisions mentioned to 31.12.2009.]

ESSENTIAL READING FOR EVERYONE

1. Ashurst Morris Crisp, London, James Perry, (Ed.) The Financial Services Act: A Practical Legal Guide, Sweet & Maxwell, London 2001 Chapters 1, 2, 8 and 13 2. Richard Stones, “Regulating Financial Services: The Human Rights Dimension” (2000) 11 International Company and Commercial Law Review 12-16 - Westlaw 3. Nigel Clayton, “The FSA and Articles 1 and 6 of the ECHR” (2003) 24 Company Lawyer 41-44 - Westlaw That reading will give you a basic outline of the FSA regulatory system with more detail on the human rights issues.

Additional General Reading for a fuller understanding after the seminar or earlier if these matters are of particular interest: 1. Andrew Haynes, “Market Abuse: An Analysis of its Nature and Regulation” (2007) 28 Company Lawyer 323-335 2. Karen Anderson, David Mayhew, “Whither Market Abuse (in a more principles-based regulatory world)” (2007) 22 Journal of International Banking Law and Regulation 515-531 3. Michael Filby, “Part VIII Financial Services and Markets Act: Filling insider dealing's regulatory gaps.” (2004) 25 Company Lawyer 303-311 4. Michael. Chan, “Regulation in the City: Sharing Information” (2000) 21 Company Lawyer 135 to 136 – a note on police powers to share information with regulators. 5. Andrew Henderson, “Misuse of Information, Chinese Walls and Changes the FSA‟s Code of Market Conduct” (2005) 20 Journal of International Banking Law and Regulation 1 to 6. 6. Christa Band, “Conflicts of Interest in Financial Services and Markets” (2006) 21 Journal of International Banking Law and Regulation, 677- 688 and (2007) 22 Journal of International Banking Law and Regulation 88-100

7. Joe Coffey “the Market Abuse Directive – The First Use of the Lamfalussy Process” (2003) 18 Journal of International Banking Law and Regulation 370 8. Andrew Henderson, “Financial Services Authority v Morgan Grenfell in light of the market abuse directive” (2004) 19 Journal of International Banking Law and Regulation 310-312. 9. Harry McVea, “‟Laddering, „Spinning‟ and „Hot IPO‟s‟ – Assessing the Regulatory Implications” (2004) 25 Company Lawyer 303-311 10. Xian-Quan Liu, “Securities and Futures crimes in the PRC” (2004) 25 Company Lawyer. 345-351. 11. Alistair Alcock, “Market Abuse”, (2002) 23 Company Lawyer 142 - Westlaw 12. Lisa Linklater, “The Market Abuse Regime: Setting Standards in the Twenty-First Century” (2001) 22 Company Lawyer 267- Westlaw 13. Therese L. Miller, “Market Abuse: An Alternative Approach (or What Uncle Sam Does)” (1999) 1 Journal of International Financial Markets 104 - Westlaw

If you want to read an account of an actual example of market manipulation (in the copper commodity market) with consideration of its regulatory impact see:

1. Benjamin E Kozzin, “The Great Copper Caper: Is Market Manipulation Really a Problem in the Wake of the Sumitomo Debacle?” (2000) 69 Fordham Law Review 243 2. Julia Black, “The Emergence of Risk-based Regulation and the New Public Risk Management in the United Kingdom” [2005] Public Law 512 -548

LEICESTER LLM

FINANCIAL SERVICES CRIME

2009

SEMINAR 4 Money Laundering

This Seminar focuses on a topic of particular relevance to the financial services sector. It encompasses the Criminal Law, regulatory provisions and Civil Law issues. The reading is intended to give you an insight into the following matters which we shall discuss in the Seminar:

The definition of money laundering Why it is seen as a problem How the International Community has developed its response to the problem by UN and Council of Europe Treaties and Conventions; FATF; the EC Directive. The techniques used to deal with laundering: criminal offences; confiscation orders; regulatory provisions such as the EC Directive. Whether provisions should extend beyond drug money and terrorism to all “serious” or „organised” or “financial” crime. The effects of developments on traditional concepts of bank secrecy. The interface with Civil Law - especially liability as a constructive trustee.

READING

Visit for access to a wealth of information on this topic. Note especially the FATF recommendations of 1990 and how they have been updated to deal with terrorism.

1. http://www.soca.gov.uk/ 2. http://www.oecd.org/pages/0,3417,en_32250379_32235720_1_1_1_1_ 1,00.html 3. http://www.ex.ac.uk/~RDavies/arian/scandals/launder.html 4. http://www.hm- treasury.gov.uk/documents/financial_services/money/fin_money_index. cfm 5. http://www.homeoffice.gov.uk/crime-victims/reducing-crime/organised- crime/?version=2 6. http://www.assetsrecovery.gov.uk/

For a clear outline of the overall UK position – legislation and measures - EVERYONE should read 1. Angela Veng Mei Leong, “Anti-Money Laundering Measures in the United Kingdom: A review of recent legislation and the FSA‟s Risk Based Approach” (2007) 28 Company Lawyer 35-42 (library and Westlaw) 2. See also HM Treasury, “Financial challenge to crime and terrorism” ISBN 978-1-84532-255-7 for the latest (February 2007) UK Strategy on these issues - http://www.hm- treasury.gov.uk/media/042/B2/financialchallenge_crime_280207.pdf for the latest UK strategy on this

Group A Members should please prepare, in advance of the Seminar, a brief outline of the FATF Recommendations as they stand now from the above website - http://www1.oecd.org/fatf/

1. Paul Marshall, “Risk and Legal Uncertainty under the Proceeds of Crime Act 2002” (2004) 25. Company Lawyer 354-362 (Westlaw) 2. M. Levi, “Regulating Money Laundering The Death of Bank Secrecy in the UK” 31 British Journal of Criminology 109 (1991) 3. Michael Isaacs, Money Laundering Dilemmas for Banks” (2004) 19 Journal of International Banking Law and Regulation 284-288 – Westlaw 4. V. Mitsilegas and B Gilmore, “The EU Legislative Framework Against Money Laundering and Terrorist Finance: A Critical Analysis in the Light of Evolving Global Standards” 56 International & Comparative Law Quarterly 119 (Westlaw) 5. Nicholas Ryder, “The Financial Services Authority and money laundering: a game of cat and mouse” (2008) 67 Cambridge Law Journal p 635

Group B Members should please summarise the critique of EU measures developed by Mitsilegas and Gilmore.

1. Olujoke e Akindemowo, “The Pervasive Influence of Anti Terrorist Financing Policy Post 9/11 Non-Bank Electronic Money Issuance” (2004) 19 Journal of International Banking Law and Regulation 289- 297 – Westlaw 2. Richard Alexander, “Corruption as a financial crime” (2009) 30 Company Lawyer 2009, 98-104 on the use of money laundering, confiscation orders etc in the context of corruption 3. David C. Gardner, “Closing loopholes to take the cash out of crime - practical changes in legislation to improve confiscation order enforcement” [2009] Criminal Law Review 90 - on detailed loopholes and effectiveness of confiscation orders 4. Robert Thomas Kudrle, “Did blacklisting hurt the tax havens?” (2009) 12 Journal of Money Laundering Control 33-49 – on the blacklisting approach to havens for tax avoidance/evasion.

Some of the above are on the Law as it was before Proceeds of Crime Act 2002 consolidated the money laundering offences on an all crimes and whole UK basis but should help you understand the overall picture. The 2002 Act did not radically change the offences or the confiscation order process but introduced a new Civil Recovery Procedure and new forfeiture rules and an agency to pursue criminal proceeds (since replaced by SOCA (below)).

1. Sally Broadbridge, Proceeds of Crime Bill House of Commons Library Research Paper 01/79 pages 1 to 32 (from http://www.parliament.uk/commons/lib/research/rp2001/rp01-079.pdf) – a good summary of the rationale for the Proceeds of Crime Act 2002 and the Reports leading up to it. 2. For a similar useful summary of the lead up to the Serious and Organised Crime and Police Act 2005, see Tim Edmonds, “The Serious and Organised Crime and Police Bill – the new Agency and new powers in Criminal proceedings”, Research Paper 04/88 from the House of Commons Library at: http://www.parliament.uk/commons/lib/research/rp2004/rp04-088.pdf

Group C Members please prepare a report on the history leading up to the Proceeds of Crime Act 2002 and the Serious and Organised Crime and Police Act 2005 the from Broadbridge and Edmonds (above) 1. On http://www.legislation.hmso.gov.uk/acts/acts2002/20020029.htm read over Proceeds of Crime Act 2002 sections 1 to 5 (Assets Recover Agency); 240-286 (Civil Recover Procedure) and 327-340 (Money Laundering Offences) The former Asset Rocovery Agency‟s role has been transferred to SOCA http://www.soca.gov.uk/ which was set up under the Serious and Organised Crime and Police Act 2005 http://www.opsi.gov.uk/acts/acts2005/20050015.htm 2. See also HM Treasury, “Financial challenge to crime and terrorism” ISBN 978-1-84532-255-7. For a review of the working of the suspicious activity reports system in the UK see: http://www.jdi.ucl.ac.uk/downloads/publications/research_reports/Flemi ng_LEA_Use_and_Mgmt_of_SARs_June2005.pdf

Other recent developments include the second and third EU Directives and the increased emphasis on preventing the financing of terrorism. The following articles from Westlaw are helpful on this and also raise the civil liberties issues. 1. Peter Binning, “In Safe Hands? Striking the Balance between Privacy and security – Anti Terrorist Finance Measures” (2002) European Human Rights Law Review 737-749 2. Editorial (by BAK Rider), (2002) 23 Company Lawyer 33-35 3. Alexander Fox, “Fed up Doing Other People‟s Laundering An Essential Guide on How Money Laundering Affects Your Business (2002) 4 Journal of International Financial Markets 134-136 4. George A Lyden, “The International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001: Congress Wears a Blindfold While Giving Money Laundering Legislation a Facelift” (2003) 8 Fordham Journal of Corporate and Financial Law 201.

There is much more material. The FSA is involved in ensuring the businesses it regulates have proper anti-laundering systems in place – See http://www.fsa.gov.uk/Pages/About/What/financial_crime/money_laundering/i ndex.shtml and the links from there on that aspect of the regulation of laundering.

The Customs and Excise deal with Bureaux de Change in the same way and with other high value dealers e.g. in art who want to use cash above £10.000. That is part of UK implementation of the second EU Directive see http://www.hm- treasury.gov.uk/media//3F064/monlaund_proprev_93and01_condoc.pd f for the rationale and Money Laundering Regulations 2003 SI 2003 3075. See http://www.hm- treasury.gov.uk/media/B60/AC/moneylaundering310706.pdf for the consultation document on the Third Money Laundering Directive and http://www.opsi.gov.uk/si/si2007/uksi_20072157_en_1 for the UK‟s Money Laundering Regulations 2007 which replaced all earlier regulations. LEICESTER LLM

FINANCIAL SERVICES CRIME

2009

SEMINAR 5 THE EXAMPLE OF INSOLVENCY

This Seminar focuses on problem of defining and detecting behaviour which has resulted in or contributed to the insolvency of a business and which can be regarded as culpable. The spectrum will range from innocent business misfortune through incompetent management to fraud. We will begin with a short “mini lecture” on the main features of the UK Corporate Insolvency system. The reading from Levi‟s book “The Phantom Capitalists” explores the activity known as “long firm fraud” and so some of the problems which arise in locating a business failure within the spectrum mentioned above.

Group A Please prepare, in advance of the Seminar, a brief outline of the points made by Levi in the Phantom Capitalists Chaps VII to IX and circulate it electronically or in hard copy

The extracts from the Goode or Finch books illustrate the policy issues and main procedures involved in corporate insolvency while the Tolmie extracts highlight the problems of investigation and enforcement in the public interest and, in particular, the interests of public confidence in the system. This gives a modern account of the system to compare with the account in Levi of the system in the early 1980‟s. However, few of the essentials have changed.

Group B Please prepare, in advance of the Seminar, a brief outline of the main policy Issues and principles identified by Goode or Finch as the main features of the UK Insolvency Regime and circulate it electronically or in hard copy.

The Milman (1997) article and (2001) editorial on curbing the phoenix syndrome and Mayer on delinquent directors and company names both highlight the way the courts have developed an Insolvency Act provision intended to prevent the much criticised “phoenix company” syndrome. Schulte on wrongful trading discusses the effectiveness of the wrongful trading remedy for incompetent directors and the problems with the use of private finance to overcome the liquidator‟s risks as to costs. Brandt and Vance briefly compare equivalent US rules. Griffin updates the other material to take account of the speeded up director disqualification process allowed under the Insolvency Act 2000.

Group C Please prepare, in advance of the Seminar, a brief outline of the points made by Milman and Mayer in those three articles and circulate it electronically or in hard copy.

Mitchell and Stockdale look at the Human Rights Act implications of the interface between the investigating powers of insolvency practitioners and DTI investigators and criminal prosecution while Vanessa Finch discusses the specialist public interest liquidation possibility conferred on regulators such as the FSA and the DTI – another device used in the borderlands between insolvency, regulation and criminal proceedings.

Think about the implications of this reading for the role of the Criminal Law on insolvency, for the special investigative and litigation techniques provided by the insolvency regime, and as to the level of commercial morality implicitly or explicitly imposed by the system.

We will review the reading in the Seminar and consider the special nature of the insolvency regimes and the divide between its remedies and the criminal law.

Should the role of the Criminal law be greater or less than it is?

READING

1. M. Levi, The Phantom Capitalists: The Organisation and Control of Long Firm Fraud Heineman, 1981, Chapters VII to IX. (available also a newly issued revised edition of 2008). 2. Roy Goode, Principles of Corporate Insolvency Law, Sweet and Maxwell, 2005, 3rd edition. Chapter 1 to 3. or Vanessa Finch, Corporate Insolvency Law: perspectives and principles, 2002. 3. Fiona Tolmie, Corporate and Personal Insolvency Law, Sweet and Maxwell, 2003, Part IV. 4. David Milman, “Curbing the Phoenix Syndrome” [1997] Journal of Business Law 224 to 230 - Westlaw 5. David Milman, “The Phoenix Syndrome” [2001]] Insolvency Lawyer 199-200 - Westlaw 6. Timothy Mayer, “Personal Liability for Trading in a Prohibited Name: sections 216-217 Insolvency Act 1986” (2006) 27 Company Lawyer 14 - Westlaw 7. Richard Schulte, “Enforcing wrongful trading as a standard of conduct for directors and a remedy for creditors: the special case of corporate insolvency” (1999) 20 Company Lawyer 80 to 87 – Westlaw 8. W.A. Brandt & C. Vance, “Deepening Insolvency and the United Kingdom‟s Wrongful Trading Statute: A Comparative Discussion” (2006) 19 Insolvency Intelligence 156 - Westlaw 9. Stephen Griffin, “Accelerating Disqualification under section 10 of the CDDA 1986” (2002) 2 Insolvency Law Journal 32-41 – Westlaw 10. Rebecca Mitchell and Michael Stockdale, “Your Answers May Not Be Used In Evidence Against You” (2002) 23 Company Lawyer 232 - Westlaw 11. Vanessa Finch, “Public Interest Liquidation: PIL or Placebo?” (2002) 5 Insolvency Law Journal 157-165 - Westlaw