ACFE CERTIFICATION TRAINING ON LAW.pptx

ACFE Fraud Examiners Manual
Section 2: LAW
Prof. Godwin Emmanuel
Oyedokun
Global President,
Association of Forensic Accounting Researchers
(AFAR)
ND (Fin), HND (Acct.), BSc. (Acct. Ed), BSc (Acct. & Fin.), BSc. (Bus. Admin), MBA (Acct. & Fin.),
MSc. (Acct.), MSc. (Bus & Econs), MSc (Tax), MTP (SA), PhD (Acct), PhD (Fin), PhD (FA), FCA,
FCTI, ACIB, ACS, ACIS, MNIM, FCNA, FCFIP, FCE, FERP, CICA, CFA, CFE, CIPFA, CPFA, ACAMS,
ABR, CertIFR, IPA, IFA, FFAR, FPD-CR, FSEAN

Content
• The Law session of the ACFE Fraud Examiners’
Manual focuses on the statutes and common law
principles involved in prosecuting fraudsters
both criminally and civilly, the legal nuances
involved in examining several specific categories
of fraud, such as money laundering and
securities fraud, and the legal challenges that
may be encountered in concluding an
investigation. The session also provides
information on testifying as a witness.
• Overall, the session covers in total, eleven (11)
topics which includes, but not limited to:
1. Overview of the Legal System
2. The Law Related to Fraud
3. Bankruptcy (Insolvency) Fraud
4. Tax Fraud
5. Securities Fraud
6. Money Laundering
7. Individual Rights During Examinations
8. Criminal Prosecutions
9. Civil Actions
10.Basic Principles of Evidence
11.Testifying

Introduction
Fraud examination is a law-intensive
field, and legal issues related to fraud
are often complex. Therefore, they
require proper interpretation with the
aid of legal advisors.
Having a successful investigation
hinges on following proper legal
procedures in relation to suspect’s
rights, document collection and
witnesses interview process.
This session covers:
• Basic Concepts of the Law
• Types of Legal Systems
• International Issues in Fraud Cases
• Court Systems
• Civil and Criminal Actions for Fraud
• Parallel Proceedings, and
• Administrative Proceedings

Basic Concepts of the Law
• Legal issues arising from fraud examination differs from place to
place because the structure and substance of the legal system in
each jurisdiction vary .
• There are common type of legal systems and approaches to
fraud-related issues.
• Familiarisation with legal processes of both home and foreign
jurisdictions is necessary because white collar crimes often cross
jurisdictional borders.

Types of Law (1/3)
• The outcome of legal disputes depends on the different types of law applicable.
• The main types of laws include constitutional law, statutory law, administrative
law and international law.
• Constitutional Law: Body of law established by a sovereignty’s constitution,
that deals with the fundamental principles by which a government exercises its
authority. Constitution is the supreme law of the country. Constitutions are
government charters that establish and empower the various branches of
government. It grants rights to individuals including the right against self-
incrimination and makes provision for the protection of such rights.

Types of Law (2/3)
• Statutory Law: Written law created by a legislature or other governing authority, and it includes
statutes and codes passed by the local, regional, or national legislatures (and regulations passed
by administrative bodies). In most jurisdictions, criminal law is based on statutes and codes.
• Common Law: Consists of the usages and customs of a society as interpreted by the judiciary;
and often referred to as judge-made law. In most common law jurisdictions, civil actions can be
on either statutory or common law.
• Administrative Law: Concerned with the rules and procedures of administrative agencies of
government. Administrative agencies have the authority to legislate, adjudicate, and enforce laws
within their specific areas of delegated power. Administrative agencies exist in the executive
branch and are created and assigned specific tasks by the legislature.

Types of Law (3/3)
• International Law: Body of legal rules, regulations, and accepted practices
observed by nations. It defines nations’ legal responsibilities in their conduct with
each other and with private individuals and transnational companies.
• International law is enforced primarily through diplomacy and for reasons of
courtesy or expediency.
• Sources of international law include international conventions and treaties,
international customs (i.e., international law derived from custom), general
principles of law recognized by the legal systems of civilized nations, the
decisions of international and municipal courts and the publications of scholars.

Categorisation of Laws (1/2)
• Laws are broadly categorised into two – substantive and procedural laws.
• Substantive law defines the type of conduct permissible and the penalties for violation. It is
composed of the basic laws of rights and duties. An act being “against the law” refers to
substantive law.
1. Public law governs the relationship between individuals and the state; it involves such
areas as constitutional law, administrative law, and criminal law.
2. Private law encompasses those areas where the legal system is used to resolve disputes
between private parties. Examples of private laws are the laws concerning real property,
contracts, civil wrongs (e.g., negligence), wills and estates, intellectual property, business
organization law, and so on.
• Substantive law sets the terms of any dispute while procedural law dictates how a legal dispute is
handled.

Categorisation of Laws (2/2)
• Procedural law: defines the rules by which individual cases are dedicated; it sets out the rules of the legal
system, including the procedures to be followed in hearing a grievance. Procedural law might include deadlines,
filing requirements, steps to follow in bringing a claim, rules of evidence, etc.
• Each state publishes its own procedural rules. Most states follow the general outline of federal rules, but
procedural rules differs widely .
• Procedural law vary a great deal in different jurisdictions.
1. Procedural law of the US Federal Courts – Federal Rules of Civil Procedure (FRCP), and Federal Rules of
Criminal Procedure
2. Procural law of US appeal courts and evidence – Federal Rules of Appellate Procedure contained in the US
Code
• Federal Rules on Evidence covers what counts as evidence, court admissibility conditions and the authorities
must use in acquiring and processing evidence.

Types of Legal System
• The most fundamental element to understanding a particular jurisdiction’s legal system is
to identify the structure of its government.
• The patterns of legal system are derived from regional ties, former colonial influences, and
international initiatives to conform laws to modern standards
• Understanding the laws of a particular jurisdiction requires identifying whether the system
uses a federal or unitary power or autonomous like the EU system.
• Fraud examiners handling criminal cases must be familiar with the specific technical
elements of the applicable statutes, and carefully review the evidence to make certain that
all essential elements of proof are met.

System of Government (1/2)
Unitary
• Central government
holds all governmental
power within the nation
• Central government
may delegate powers to
created agencies and
regional governments
but remains supreme
authority
Federal
• National government
(federal government) is
along with semi-
autonomous regional
governments (states or
provinces).
• Federal and State or
provincial governments
are likely to share the
space of fraud-related
laws
Autonomous
• Governments that does
not easily fit either as
unitary or federal
systems E.g. European
Union
• EU has considerable
power to create
mandatory directives
from members to
implement substantive
and procedural laws

System of Government (2/2)
• Unitary System: Majority of countries are unitary systems whereby the central government
delegate powers to created agencies and regional governments. Delegated powers might include
law-making authority but substantive law regarding criminal misconduct, including fraudulent acts,
are legislated by central government.
• Federal System: Not all governmental powers under federal system are held by a central authority.
The state or provincial governments are reserved certain independent powers. Geographically large
countries tend to be federations in some cases such as Russia, Canada, the US, Brazil, Australia and
India.
• Autonomous System: Each EU member has its own substantive laws required by the EU, so the laws
of relevant country are the primary determinant of legal issues in fraud cases occurring there.

Common Law and Civil Law Judicial Systems
(1/3)
• Apart from federal and unitary power structures, almost every country can be classified as having either a
common law or a civil law judicial system.
• This classification helps in understanding how legal and judicial processes work in foreign jurisdictions.
• Both Common and Civil law systems adopt adversarial or inquisitorial method respectively for fact-
finding.
• Regardless of which type of legal system is used, most countries develop their own variation or
incorporate other features into their systems.
• In common law countries, there are two sources of substantive law: statutory law and common law.
• Statutory law includes statutes passed by legislatures (and regulations passed by administrative bodies).
• The trend in common law countries in today’s world has been to move away from rules that originate in
common law to rely on statutory law as the basis of a dispute as well as the precedential value of court
decisions, whereby judges analyze prior cases with similar circumstances and apply the basic principles set
forth in those cases to the problem at hand.

(2/3)
Common Laws System
• A system of legal principles developed by
judges through decisions made in courts.
• It consists of usages and customs of a society
as interpreted by the judiciary and often
referred to as judge-made law.
• It has both laws that judges develop through
court decisions as well as the codes and
statutes that establish laws.
• It is developed on a case-by-case basis and
originated as a legal system in England.
Civil Law Systems
• Civil law systems apply laws from an accepted
set of codified principles or compiled statutes.
• Under a civil law system, the judges or judicial
administrators are bound only by the civil code
and not by the previous decisions of other
courts.
• Civil cases brought under the common law
usually contain fewer technical elements and
incorporate traditional principles of fairness
and morality
• In deciding legal issues, a civil law judge applies
the various codified principles to each case.

(3/3)
Common Laws System
• Characterised by legal disputes arising from
interpretation of a law
• Judges document in written opinion the
reasons for their decisions and these written
decisions serve to guide judges in deciding
cases of a similar nature.
• Decisions that establish legal principles are
called precedent.
• Precedents of higher courts are binding on
lower courts until or unless it is overturned by a
higher court or the legislature – doctrine of
Stare decisis.
Civil Law Systems
• Judges may seek to fill in such gaps by looking
to other authorities or similar laws, including
judicial decisions
• Judges under civil law systems are not bound by
precedents but by the civil code.
• Judges need to interpret the code and do not
rely on previous cases in doing so.

Civil Law System vs Civil Law & Criminal Law
• The concept of a civil law system should not be confused with the terms civil law and criminal law.
• Civil law is the body of law that provides remedies for violations of private rights,
• Civil action is a legal action that does not result in a criminal fine or incarceration.
• A civil suit in has nothing to do with whether the legal system used by the particular government
is a civil law jurisdiction or a common law jurisdiction.
• Civil refers to a suit between two private parties.
• Criminal law on the other hand, is the body of law pertaining to crimes against the state or
conduct that harms society.
• In this context, civil is used to differentiate a civil action from a criminal charge.

Adversarial & Inquisitorial Judicial Processes
(1/2)
• These are judicial processes and refer to the approach that courts take to discover evidence in a case.
Neither of these processes is exclusive of common law or civil law systems
1. Adversarial processes are judicial processes in which the parties to a proceeding drive the
discovery process (i.e., the search for evidence).
• The theory behind this approach is that the competing interests of the parties will serve to
expose the relevant facts of the case. In adversarial systems, the parties to the litigation gather
and present the evidence to the court.
• Most adversarial court systems do not require defendants to testify, and the burden of proof is
on the government to prove the criminal accusations.
• Role of Juries: Adversarial jurisdictions actively use juries as the fact-finding body while the
judge decides issues of law.

Adversarial & Inquisitorial Judicial Processes
(2/2)
2. Inquisitorial processes refer to fact-finding approach adopted by courts that places the primary
responsibility of discovering evidence on the presiding judge. The primary goal for this processes
is to find the truth, with the judges actively involved in its discovery. In essence, attorneys play a
smaller role in the evidentiary process than in an adversarial process.
• Once the trial is underway, inquisitorial processes focus on not trying a person unless there is
strong evidence to believe that the suspect is likely guilty.
• The defendants in criminal inquisitorial proceedings may be called to testify but civil proceedings
under both adversarial and inquisitorial processes allow the defendant to be called to testify.
• Role of Juries: The judge in an inquisitorial process both serves as the traditional fact finder and
makes determinations on issues of law.
• Civil law jurisdictions favor an inquisitorial process while common law systems feature an adversarial
system. The United States, for example, is a common law jurisdiction with an adversarial process.

Parallel & Administrative Proceedings
1. Parallel proceedings are simultaneous criminal and civil actions against the same defendant that are based upon a single set of
facts. For example, a victim of fraud might sue the fraudster in civil court while the fraudster is being prosecuted in criminal
court. Some jurisdictions permit parallel proceedings while others do not.
• In jurisdictions that allow parallel proceedings, the government or the defendant can generally petition one of the courts for
a stay of proceedings to have a proceeding temporarily suspended.
• Most courts are reluctant to grant a stay of proceedings if it determines that the parallel proceeding would harm the
government’s case or unduly prejudice the defendant.
2. Administrative proceedings are non-judicial proceedings conducted by government agencies.
• In addition to civil and criminal actions, fraud cases are sometimes resolved in administrative proceedings.
• Generally, administrative proceedings operate like civil courts with their own rules of evidence and procedure.
• In administrative proceedings, the presiding officer may be a special administrative judge, or the ultimate decision-maker is
a board or tribunal.
• Administrative proceedings impose administrative penalties such as Monetary fines and penalties, License suspension or
revocation and Debarment (i.e., excluded from participating in government programs).

Introduction
What is Fraud?
• Black’s Law Dictionary defines fraud
as:
• a knowing misrepresentation of
the truth or concealment of a
material fact to induce another to
act to his or her detriment.
• Fraud includes any intentional or
deliberate act to deprive another of
property or money by guile,
deception, or other unfair means.
• This session covers:
• Principal Types of Fraud, and
• International Initiatives Against
Fraud & Corruption

Principal Types of Fraud
1. Fraudulent misrepresentation of
material facts (or false pretenses)
2. Negligent misrepresentation
3. Concealment of material facts
4. Bribery
5. Illegal gratuity
6. Economic extortion
7. Conflicts of interest
8. Forgery
9. Theft of money or property
10. Breach of contract
11. Breach of fiduciary duty
12. Gross negligence
13. Conspiracy
14. Mail fraud
15. Wire fraud
16. Obstruction of justice
17. Perjury
18. False claims and statements to
government agencies

1. Fraudulent Misrepresentation of Material
Facts (1/3)
• This is the deliberate making of false statements to induce the intended victim to part with money or property.
Misrepresentation cases can be prosecuted criminally of civilly.
• The specific elements of proof required to establish a misrepresentation claim vary according to where the fraud
occurred and whether the case is brought as a criminal or civil action.
• The elements of fraudulent misrepresentation normally include:
• The defendant made a false statement (i.e., a misrepresentation of fact).
• The false statement was material (i.e., the statement was sufficiently important or relevant to influence decision-
making).
• The defendant knew the representation was false.
• The victim relied on the misrepresentation.
• The victim suffered damages because of the misrepresentation.
• Elements of proof in a civil case is that the victim relied upon the false statements and actually suffered a loss, but not
necessarily the case in criminal prosecution, which is usually based on materiality (i.e., statements sufficiently important
or relevant to a reasonable person in acting or making a decision). Note that the materiality of allegedly false statements
is often a central issue in securities fraud cases.
• In most instances, only false representations of “presently existing facts” can establish liability for misrepresentation
claims.

Facts (2/3)
• Opinions by nonexperts, speculative statements about future events, and other general assertions,
even if made with the intent to mislead, may not provide the basis for a misrepresentation claim
because such statements are not material facts.
• The general rule that opinions or speculative statements cannot give rise to a successful
misrepresentation claim is often applied to prevent fraud claims in contract disputes.
• The general rule precluding fraud actions based on opinions or speculative statements is subject to
certain exceptions, principally cases involving opinions provided by professional advisers.
• In almost all fraud cases, the party alleging fraud must prove that a false statement was intentional
and part of a deliberate scheme to defraud.
• People who hold themselves out as having special expertise on which another party reasonably
relies may be liable for a false opinion that is within that area of special expertise.

Facts (3/3)
• Independent accountants maybe liable for misrepresentation if they do any of the following:
 Falsely certify that a financial statement fairly presents the financial condition of the audited company
 Falsely state that the audit was conducted in accordance with generally accepted accounting principles
 Deliberately distort the audit results
 In instances involving civil actions for fraud and securities cases, the intent requirement is met if the
party alleging fraud is able to show that the false statements were made recklessly; that is, with
complete disregard for truth or falsity.
 There is no such thing as an accidental or negligent fraud
 Mistakenly entering incorrect numbers on a financial statement is not fraud; however, knowingly
entering incorrect numbers with the intent that someone will take action in reliance on them is
fraud if the other elements are present.

2. Negligent Misrepresentation
• Negligent misrepresentation occurs in situations where there is a special relationship that imposes a duty on the
defendant to provide correct information to the plaintiff
• The specific elements required to establish a negligent misrepresentation claim are as follows:
 The defendant made a misrepresentation of a material fact.
 The misrepresentation was made pursuant to a special relationship that imposed a duty on the defendant to provide
correct information.
 The defendant had no reasonable basis to believe the misrepresentation to be true.
 The victim relied on the misrepresentation, and the reliance was reasonable.
 The victim suffered damages as a result.
• Fraudulent misrepresentation differs from negligent misrepresentation in that fraudulent misrepresentation
requires that the statements be made intentionally and as a part of a deliberate scheme to defraud, but negligent
misrepresentation only requires that the statement was made while having no reasonable basis to believe it to be
true.
• Civil action is appropriate if a party suffered a loss because of the carelessness or negligence of another party upon
which the first party was entitled to rely.

3. Concealment of Material Facts
• An action for fraud may be based on the concealment of material facts if only the defendant had a duty in the
circumstances to disclose.
• The essential elements of fraud based on the failure to disclose material facts are:
 The defendant had knowledge of a material fact.
 The defendant had a duty to disclose the material fact.
 The defendant failed to disclose the material fact.
 The defendant acted with intent to mislead or deceive the victim(s).
• The duty to disclose usually depends on the relationship between the parties especially for people who occupy a
special relationship of trust e.g. lawyer, company directors, stockbroker, etc.
• There can be no liability if the withheld information was not material (i.e., the information would not have affected
the other party’s actions or decisions).
• A defendant might also be liable for negligent failure to discover and disclose material facts in addition to charge
for fraudulent concealment.

4. Bribery (1/2)
Bribery is a form of corruption. Bribery means the offering, giving, receiving, or soliciting of anything of value to influence an act or a decision.
1. Official Bribery: the corruption of a public official to influence an official act of government such as illegal payments to public officials
• Elements of official bribery vary by jurisdiction, but generally include:
 The defendant gave or received (offered or solicited) something of value.
 The recipient was (or was selected to be) a public official.
 The defendant acted with corrupt intent.
 The defendant’s scheme was designed to influence an official act or duty of the recipient.
2. Commercial Bribery: the corruption of a private individual to gain a commercial or business advantage (i.e., something of value is offered to
influence a business decision rather than an official act).
• Commercial bribery may not be a crime in every jurisdiction, but many states outlaw the practice.
• The elements of commercial bribery vary by jurisdiction, but they typically include:
 The defendant gave or received something of value.
 The defendant acted with corrupt intent.
 The defendant’s scheme was designed to influence the recipient’s action in a business decision.
 The defendant acted without the victim’s knowledge or consent.
• Commercial bribery requires a lack of knowledge or consent on the principal’s part, and the “without the knowledge or consent of the principal”
element is included on the theory that a private business owner is not defrauded if the owner knows of or allows employees to accept gifts,
favors, or other payments from vendors or other business contacts.

4. Bribery (2/2)
• Methods of Making Corrupt Payments
• To establish a bribery claim, the party bringing the action must prove that the defendant offered a thing of value
• In bribery schemes, the thing of value is not limited to cash or money but includes any tangible benefit given or received
with the intent to corruptly influence the recipient may constitute an illegal payment.
• The courts have considered things given or received with the intent to influence or be influenced as bribe.
• Corrupt Influence
• To establish a bribery claim, the party bringing the action must prove that the defendant acted with corrupt influence which
involves demonstrating that the person receiving the bribe favored the bribe-payer in some improper or unusual way.
• Corrupt influence often is established by showing that the person receiving the bribe:
 Provided preferential treatment to the bribe-payer
 Bent or broke the rules
 Took extraordinary steps to assist the bribe-payer
 Allowed the bribe-payer to defraud the agency or company
 To prove corrupt influence, it is not necessary that the prosecution or plaintiff demonstrate that the bribe-taker acted
improperly.

5. Illegal Gratuity & 6. Economic
Extortion
• Illegal Gratuity: This is an item of value given to reward a decision, often after the recipient has
made the decision.
• In general, the elements of an illegal gratuity are:
 A thing of value
 Given, offered, or promised to (or demanded, sought, received, or accepted by)
 A (present, former, or future) public official
 For or because of any official act performed or to be performed by that public official
• The difference between an official bribe and an illegal gratuity is that an illegal gratuity charge only requires
that the gratuity be given for, or because of, an official act.
• Economic Extortion: This is the flip side of a bribery case. Extortion is defined as the obtaining of
property, money, or services from another by using coercion.
• A demand for a bribe or kickback, coupled with a threat of adverse action if the payment is not paid, might
also constitute extortion. Generally, extortion is not a defense to bribery but may be a defense in certain
jurisdictions.

7. Conflict of Interest (1/2)
• A Conflict of Interest occurs when an employee or agent—someone who is authorized to act on behalf of a
principal—has an undisclosed personal or economic interest in a matter that could influence their professional
role.
• Conflicts of interest involve a state of opposition between an individual’s personal and professional interests, and
they can occur in various ways.
• Statutes (in some cases) or common law prohibit people from engaging in conduct that involves conflict of
interest.
• Elements of a typical civil claim for conflict of interest include:
 The defendant is an agent of a principal or employer.
 The agent takes an interest in a transaction.
 The agent’s interest is actually or potentially adverse to the principal (i.e., the interest is one that could cause the agent or
employee to place their personal interests ahead of the principal or employer).
 The agent did not disclose the interest and obtain approval by the principal.
 For a conflict of interest claim to be actionable, the conflict must be undisclosed.
 Conflicts of interest occur in principal-agent relationships which is an arrangement in which one person (the
“agent”) is authorized to make decisions on behalf of another person or entity (the “principal”).

7. Conflicts of Interest (2/2)
• Trust is central to the principal-agent relationship, and conflicts of interest exist when there is an incompatibility
between an agent’s personal interest and their duties and responsibilities in serving their principal.
• An agent is any person who, under the law, owes a duty of loyalty to another while a principal is an entity that
authorizes an agent to act on its behalf.
• All of the following situations might give rise to a conflict of interest claim:
 An employer’s interests are directly or indirectly affected or likely to be affected in some negative way by the private actions
of an employee.
 The private actions of employees impair their ability to pursue the interests of their employers.
 The private actions of employees compromise their employer’s business interests.
 The private actions of employees leave them in a position of gain or potential gain at the expense of their employer.
 Employees use knowledge or information learned through their employment to pursue their own private interests.
 If the defendant in a civil conflict of interest case is found liable, they may be ordered to repay any losses that the
conflict caused and “disgorge” any profits they earned because of the conflict, even if there was no actual loss to
the principal.
 The victim of a conflict of interest also may void any contracts entered into on its behalf that were the result of or
influenced by the conflict.

8. Forgery
• A forgery is any writing prepared with the intent to deceive or defraud.
• The crime of forgery occurs when an individual, with intent to defraud, makes or alters a document
apparently capable of defrauding another.
• A document containing a false representation with constitute a forgery if the writing as a whole has
apparent legal significance.
• Forgery occurs when an entire writing or instrument is created or there is any material alteration
that affects the legal significance of the document or whenever a signature on a writing is
fraudulently procured from a person who does not know what they are signing.
• Forgery is committed even if no one is actually defrauded.

9. Theft of Money or Property (1/4)
• Theft is a term often used to describe a wide variety of fraudulent conduct that encompasses many forms of
deceitful taking of property belonging to others.
• The term theft is limited to:
• Embezzlement,
• Larceny, and
• Misappropriation of trade secrets and proprietary information.
1. Embezzlement: This is the wrongful appropriation of money or property by a person to whom it has been
lawfully entrusted (or to whom lawful possession was given).
• It involves a breach of trust, although it is not necessary to show a fiduciary relationship (i.e., a relationship of
confidence, trust, or good faith) between the parties.
• The elements of embezzlement vary by jurisdiction, but generally are:
 The defendant took or converted
 Without the knowledge or consent of the owner
 Money or property of another
 That was entrusted to the defendant (the defendant had lawful possession of the property).

2. Larceny is defined as the wrongful taking of money or property of another with the intent to convert or to
deprive the owner of its possession and use.
• In larceny, the defendant never has lawful possession of the property.
• The elements of larceny typically include:
 Unlawfully taking or carrying away
 Money or property of another
 Without the consent of the owner
 With the intent to permanently deprive the owner of its use or possession
• The difference between larceny and embezzlement centers on who has legal custody over the stolen articles
• The major distinction between larceny and embezzlement lies in the issue of whether the thief had been
lawfully entrusted with the stolen articles.
• Although larceny was an offense under the common law of England, it has been abolished in England and
Wales, Northern Ireland, and the Republic of Ireland.

3. Misappropriation of Trade Secrets is the intentional, illegal use of the property, funds, or ideas of another person for an unauthorized purpose. For
fraud purposes, misappropriation claims involve trade secrets or other proprietary information.
• Trade secrets include both the secret formulas and processes and even more mundane proprietary information such as customer lists, business
plan, etc. What constitutes a trade secret depends on the organization, industry, and jurisdiction.
• Common characteristics of trade secrets:
 The information is not generally known to the relevant portion of the public.
 The information confers some sort of economic benefit on its holder (and the benefit is a result of the fact that the information is not generally known).
 The information is the subject of reasonable efforts to maintain its secrecy.
• The elements of a typical claim for misappropriation of trade secrets are:
 The defendant possessed information of value.
 The information was treated confidentially.
 The defendant took or used the information by breach of an agreement, confidential relationship, or other improper means.
• The owners of the information also should enforce restrictive agreements such as having employees sign nondisclosure and noncompetition
agreements
• Noncompetition agreements are unenforceable in some jurisdictions because the courts held that they are against public policy by limiting the
future employment of a person.
• Noncompetition agreements are only upheld if they satisfy the following elements:
• The agreement is supported by consideration at the time it is signed.
• The agreement protects a legitimate business interest of the employer
• The agreement is reasonable in scope, geography, and duration.

Civil Action for Misappropriation of Trade Secrets
• In most jurisdictions, a victim of trade secret theft may file a civil action for damages or request an injunction (i.e., a court order by
which a party is required to perform, or is restrained from performing, a specific act) under various types of laws.
• Civil damages for misappropriation of trade secrets might include reimbursement for actual losses caused by the defendant, such
as lost profits, reimbursement of development expenses and overhead costs, etc.
• The plaintiff in a civil action for misappropriation of trade secrets may obtain an injunction prohibiting further use of the
information by establishing that:
 The plaintiff is the proper owner of the trade secret.
 An unauthorized person has taken or used the trade secret.
 There is a high probability of improper disclosure.
 The injunction is necessary to prevent the plaintiff from suffering immediate and irreparable harm that cannot be adequately compensated by
monetary damages.
 The plaintiff probably will win the underlying case for misappropriation of trade secrets.
• Injunctions have been issued in trade secret cases to:
 Prevent the use of stolen information.
 Prohibit an employee in possession of a trade secret from accepting employment with a competitor.
 Order the wrongdoer to return the misappropriated information.

10. Breach of Contract
• A breach of contract occurs when one party to a contract (either oral or written) fails to perform, or
announces that it does not intend to perform, their contractual obligations without just cause.
• Certain implied or unwritten duties are recognised as a part of every contract.
• Some courts have held that it is an implicit part of a contract that each party will use their best efforts
to fulfill their duties under the contract including the duty imposed on each party to deal with each
other in good faith.
• A breach of good faith can lead to civil claim for breach of contract by non-breaching party.

11. Breach of Fiduciary Duty (1/2)
• People in a position of trust or fiduciary relationship owe certain duties to their principals or
employers, and any action that runs afoul of such fiduciary duties constitutes a breach.
• To state a claim for breach of fiduciary duty, the plaintiff must show only that the defendant:
 Occupied a position of trust or fiduciary responsibility with respect to the plaintiff (e.g., was an
employee or agent)
 Breached that duty to advance a personal interest.
 The principal fiduciary duties are loyalty and care.
• Duty of Loyalty requires that the employee/agent act solely in the best interest of the
employer/principal without any self-dealing, conflicts of interest, or other abuse of the principal for
personal advantage. Any traditional form of fraudulent conduct also violates the duty of loyalty and
may be redressed as such in addition to or instead of the underlying offense.

11. Breach of Fiduciary Duty (2/2)
• Duty of Care means that people in a fiduciary relationship must act with such care as an ordinarily prudent
person would employ in similar positions. Fiduciaries who act carelessly or recklessly are responsible for
any resulting loss to the corporate shareholders or other principals. Damages may be recovered in a civil
action for negligence, mismanagement, or waste of corporate assets. Corporate officers breach their duty
of loyalty if they accept kickbacks, engage in a conflict of interest, or are otherwise disloyal, but corporate
officers who carelessly fail to prevent such conduct, enforce controls, or pursue recovery of losses might
breach their duty of care.
• Breach of fiduciary duty claim is a civil wrong that is redressed by a civil action for recovery of damages. A
plaintiff who brings a successful breach of fiduciary duty claim may receive damages for lost profits and
recover profits that the disloyal employee/agent earned, which may be extended to the salary paid to the
employee or agent during the period of disloyalty. The plaintiff may recover profits earned by the disloyal
agent even if the principal did not suffer an actual loss. The plaintiff also may void any contracts entered
into on its behalf that were the result of or were influenced by the employee or agent’s disloyalty.

12. Gross Negligence
• Gross Negligence is generally defined as the intentional failure to
perform a duty in reckless disregard of the consequences to the victim.
• Gross negligence is a civil cause of action.
• The basic elements of the civil cause of action are that:
• The defendant committed an intentional act,
• Knowing that it was at least substantially likely to cause harm to the victim.
• Punitive or exemplary damages are available if the defendant is found
liable for gross negligence.

13. Conspiracy
• Conspiracy refers to a situation in which two or more people agree to commit an illegal act. In most jurisdictions,
the crime of conspiracy is a separate criminal offense from the underlying crime, meaning that the underlying
crime (e.g., bank fraud, bribery, or securities fraud) and the conspiracy to commit it are two separate offenses.
• The essential elements that must be shown to prove a conspiracy are as follows:
 The defendant entered into an agreement with at least one other person to commit an illegal act.
 The defendant knew the purpose of the agreement and intentionally joined in the agreement.
 At least one of the conspirators knowingly committed at least one overt act in furtherance of the conspiracy.
• The government must prove that the conspirators reached an agreement about the precise illegal act; the
defendant knew of the conspiracy’s existence and its objective and not necessarily in details or knowing the
identity of all the co-conspirators; and the purpose of the conspiracy need not be accomplished for a violation to
occur but at least one of the co-conspirators must have executed at least one overt act related to the conspiracy.
• If a conspiracy is shown, the acts and statements of one co-conspirator may generally be admitted into evidence
against all, and each co-conspirator may be convicted for the underlying substantive offense (e.g., destroying
government property) committed by any one of its members.

14. Mail Fraud & 15. Wire Fraud
• Mail Fraud: Mail fraud laws generally prohibit the use of the country’s mail system to perpetrate fraud. In some
jurisdictions mail fraud statutes applies to use of private interstate commercial carriers (e.g., UPS & DHL) in
connection with a fraud scheme. Mail fraud laws generally give the government broad authority to prosecute fraud
schemes, even if parts of the scheme occur in another country. E.g., an international Ponzi scheme perpetrated
from Nigeria could be prosecuted under the U.S. mail fraud statute if the Nigerian fraudsters used the U.S. mail
system to advance the scheme in a significant way.
• Wire Fraud: In addition to the mail fraud statute, the United States also has a wire fraud statute. The U.S. wire
fraud statute makes it a crime to defraud a victim of money or property by means of wire or other electronic
communications (e.g., computer, telephone, radio, or television) in foreign or interstate commerce. The wire fraud
statute requires an interstate or foreign communication to constitute a violation.
• Fraud examiners should be aware of the U.S. wire fraud statute because, while it is unique to the United States, the wire
fraud statute gives the U.S. federal government broad jurisdiction over a wide range of fraudulent activity, including some
fraud schemes that originate outside of the United States.

16. Obstruction of Justice
• Obstruction of justice occurs when an individual engages in an act designed to impede or obstruct the
investigation or trial of other substantive offenses.
• Prosecutors usually are pleased to discover such violations by defendants because they provide basis for the
white-collar charges and help to prove criminal intent.
• Some common types of obstruction statutes across jurisdictions are those that prohibit:
 Influencing or injuring any officer of the court or juror by force, threats of force, intimidating communications, or corrupt
influence
 Influencing a juror through a writing
 Stealing or altering records or processes by parties that are not privy to the records
 Using force or threats of force to obstruct or interfere with a court order
 Destroying documents related to a future proceeding
 Tampering with a witness, victim, or an informant (e.g., killing or attempting to kill, using force or threats of force,
intimidating, influencing with bribes or other corrupt means, misleading, or harassing the protected parties)
 Influencing, obstructing, or impeding a government auditor in the performance of their official duties
 Obstructing the examination of a financial institution.

17. Perjury
• Perjury is an intentional false statement given under oath on a material point at issue.
• The basic elements for the crime of perjury are as follows:
 The defendant made a false statement.
 The defendant made the false statement while under oath.
 The false statement was material or relevant to the proceeding.
 The defendant made the statement with knowledge of its falsity.
• Laws that criminalize perjury do not require that the false statement be given in a court of law. The forum
for a perjurious statement includes any court, depositions in connection with litigation, bail hearings, etc.
• An individual can commit perjury for false statements made somewhere other than a court of law.
• For a statement to be perjurious, it must be material (i.e. the statement tends to influence, or is capable
of influencing, the decision of the decision-making body to whom it is addressed).

18. False Claims and Statements to
Government Agencies (1/2)
• Laws prohibiting false claims and statements to government agencies make it illegal for a person to lie to, or to
conceal material information from, a government agency.
• A false claim is an assertion of a right to government money, property, or services that contains a
misrepresentation.
• A false statement is an oral or written communication, declaration, or assertion that is factually untrue.
• To prove a violation, the government must show that the defendant:
 Knowingly and willfully (or with reckless disregard for truth or falsity)
 Made a false claim or statement (or used a false document)
 That was material (i.e., sufficiently important or relevant to influence decision-making)
 Regarding a matter within the jurisdiction of a government agency
 With knowledge of its falsity
• An act is done knowingly and willfully if it is done voluntarily and intentionally and not by mistake or another
innocent reason.
• An individual can be found guilty of making a false statement or claim only if the individual knew the statement or
claim was false at the time it was made.

18. False Claims and Statements to
Government Agencies (2/2)
• General rules regarding laws that criminalize making false claims and statements to government agencies: An
individual can be found guilty of making a false claim or statement even if:
 the claim or statement is not made directly to a governmental department or agency but to a third party on
a matter within the jurisdiction of a governmental department or agency.
 the government was not deceived by the falsity.
 the government did not rely on the falsity.
 the government did not suffer a loss in reliance on the falsity.
• For an individual to be found guilty of making a false claim or statement, the claim or statement at issue must
have been capable of influencing the government entity involved.
• Common types of false claims and statement laws of greatest importance to fraud examiners include:
 Laws that prohibit the making of fraudulent demands for money against the government
 Laws that prohibit false statements or reports on credit applications or related document submitted to a
bank or credit institution
 Laws that prohibit schemes to obtain money or property from governments by means of false or fraudulent
pretenses involving government contracts.

International Initiatives Against Fraud
and Corruption

International Initiatives Against Fraud and
Corruption
• There are a range of different international
instruments designed to combat fraud and
corruption, including international treaties,
European Union (EU) instruments for member
countries, domestic laws, and non-legally binding
instruments.
• The international effort to combat corruption
gained significant momentum in the 1990s with
the US being the first to criminalise the bribery of
foreign public officials through the passage of its
Foreign Corrupt Practices Act (FCPA) in 1977.
• Increased media coverage of financial matters,
facilitated in part by the emergent internet,
brought greater public attention to bribery and
corrupt trade practices.
• Contemporary campaigns to promote
democratic principles throughout the world had
targeted corruption as an inherent obstacle to
good governance.
• The Organisation for Economic Cooperation &
Development (OECD) and other international
organizations developed strategies to combat
corruption through coordinated domestic
measures.

International Anti-Corruption Instruments
(1/2)
1. United States Foreign Corrupt Practices Act (FCPA)
2. OECD’s Recommendation On Combating Bribery In
International Business
3. OECD’s Tax Recommendation And Revised
Recommendation
4. OECD Convention On Combating Bribery Of Foreign
Public Officials In International Business Transactions
5. OECD’s Recommendations For Further Combating
Bribery Of Foreign Officials
6. OECD’s Guidelines For Multinational Enterprises
7. OECD’s Good Practice Guidance On Internal Controls,
Ethics, And Compliance
8. United Nations Convention Against Corruption
(UNCAC)
i. Prevention
ii. Criminalization
iii. Asset recovery
iv. International cooperation
a) Regional initiatives against corruption
 Inter-American Convention Against
Corruption
 European Union Convention on the Fight
Against Corruption Involving Officials of the
European Communities or Officials of
Member States
 Council of Europe Criminal Law Convention
on Corruption
 African Union Convention on Preventing and
Combating Corruption

International Anti-Corruption Instruments
(2/2)
b) The U.S. Foreign Corrupt Practices Act
c) FCPA’s Anti-bribery Provisions (15 U.S.C. §
78DD)
• Elements of a Bribery Violation
• Exception for Facilitating Payments
• Civil Enforcement of FCPA’s Anti-Bribery
Provisions
d) FCPA Accounting Provisions (15 U.S.C. § 78M)
• Internal Controls Provision
• SEC Regulations Regarding the
Accounting Provisions
• Enforcement of the Accounting
Provisions
e) Anti-corruption Compliance Programs
f) The UK Bribery Act
• Scope
• Three Categories Of Offenses
• Bribery of Foreign Officials
• General Commercial Bribery
• Failure to Prevent Bribery
• No Facilitation Payments Exception
• Enforcement
g) FCPA Versus UK Bribery Act
h) International Anti-Money Laundering
Instruments
i) International Banking and Financial Systems
j) Multilateral Memorandum of Understanding
Concerning Consultation and Cooperation
and the Exchange of Information
• Core Principles for Effective Banking
Supervision
• Core Principles Methodology

OECD Anti-Bribery Convention (1/3)
• The OECD is an intergovernmental institution dedicated to democracy and the market economy. It operates as a forum for
governments to cultivate and advance social and economic policies that expand world trade, promote sustainable economic
development, and improve living standards.
• The OECD coordinates domestic and international policy through either soft law or legally binding agreements.
• Soft law refers to guidelines, resolutions, codes of conduct, and other quasi-legal instruments that are not directly
enforceable, except for the OECD Convention on Combating Bribery of Foreign Public Officials in International Business
Transactions, which is a legally binding agreement.
• The OECD consists of 38 member countries which includes: the UK, the US, Canada, and a host of others.
• In 1994, the OECD gave recommendations on combating corruption in international business through member states’
adoption of effective measures to detect, prevent, and combat bribery by foreign public officials.
• OECD recommendation defines bribery as the act of offering and giving any undue benefit to obtain or retain business.
Thereby targeting the supply side of bribery (i.e., the offering side of the bribery bargain) and does not address the demand
side (i.e., the solicitation and receipt of bribes) to avoid complicated jurisdiction issues and interference with the sovereignty
of non-member countries.

 Areas for member states to improve to deter and penalize public officer’s bribery act are:
 Criminal, civil, commercial, and administrative laws
 Tax systems and regulations
 Banking and accounting requirements and practices
 Laws and regulations related to public subsidies, licenses, and contract procurement
• The OECD released Tax Recommendation and Revised Recommendation which prohibits tax deductions for bribes paid
to foreign officials and criminalizes the bribery of foreign public officials.
• The OECD’s revised recommendations advocates that the following steps be taken to strengthen banking and accounting
standards:
 Prohibit off-book transactions and accounts.
 Require companies to maintain adequate records of income and expenditures and to disclose material contingent liabilities in financial
statements.
 Establish and maintain standards to ensure independence when financial statements are audited externally.
 Encourage companies to adopt internal controls and standards of conduct that provide protection and channels for reporting violations.
 Suspend companies that have bribed foreign officials from competing for public contracts.
 Incorporate anti-corruption provisions into bilateral aid-funded procurements and international development institutions.
 Cooperate fully with other countries and international bodies in the investigation and prosecution of bribery cases.

• The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (i.e., OECD Anti-Bribery
Convention) is a legally binding agreement that sets a uniform, minimum standard that signatory countries must implement
through national legislation.
• The OECD Anti-Bribery Convention applies to only public sector officials and defines bribery as intentionally offering, promising, or
giving an undue benefit, either directly or through an intermediary, in order to obtain business or an improper advantage in the
course of international trade.
• The OECD Anti-Bribery Convention defines a foreign public official as any person who:
 Holds a legislative, administrative, or judicial office in a foreign country either by election or appointment
 Exercises a public function for a foreign country, public agency, or public enterprise
 Acts as an official or agent for a public international organization
 The OECD Anti-Bribery Convention defines bribery to include both pecuniary and non-pecuniary gains. It also requires signatory
countries to establish jurisdiction over acts of foreign bribery that occur, either in whole or in part, within their respective
territories as well as enhanced mutual legal assistance between countries in the investigation and prosecution of foreign
bribery, including the extradition of nationals.
 Signatory countries are mandated to establish effective, proportionate, and dissuasive criminal penalties for the offense of
foreign bribery and such penalties must be comparable to the respective penalties each country enforces for domestic bribery
which must include the seizure and confiscation of bribes, and the assets derived from bribery.

2009 OECD Anti-Bribery Recommendations
• Further recommendations issued in 2009 to encourage member countries to review, evaluate, and,
where necessary, strengthen the laws and regulations relevant to the fight against foreign bribery.
• Members are specifically advised to re-examine standards pertaining to:
 The adequacy of accounting requirements
 The independence of external audits
 Corporate internal controls and compliance programs
 The suspension of public advantages for enterprises that have engaged in foreign bribery
• New OECD recommendations introduced in 2009 include:
• Encouraging members to launch initiatives to raise awareness within both the public and private sectors of
the fight against foreign bribery
• Calling for measures to improve reporting acts of foreign bribery
• Establishment of easily accessible channels to report suspected acts of bribery to the appropriate authorities,
and
• Providing safeguards to protect individuals who, in good faith, file a report from discrimination or disciplinary
actions.

OECD Guidelines for Multinational
Enterprises
• The OECD Guidelines for Multinational Enterprises (i.e., OECD Guidelines) are a form of soft law, and
they contain principles and standards designed to engage corporations in the fight against
corruption.
• The OECD Guidelines discourage all forms of bribery, including illegal contributions to political
parties and candidates, and recommends the adoption of self-regulatory practices and compliance
programs to maintain high standards for accounting, auditing, and disclosing financial statements.
• The OECD Guidelines encourage companies’ management to enhance the transparency of their
anti-corruption activities to raise greater awareness within their communities and proposed
principles to halt anti-competitive activities such as price fixing and bid rigging.
• The OECD Guidelines include provisions intended to protect consumer, employee, and
environmental interests.

OECD Good Practice Guidance on Internal
Controls, Ethics, and Compliance
• OECD Good Practice Guidance on Internal Controls, Ethics, and Compliance (i.e. Good Practice Guidance) was adopted in 2010. It sets forth best
practices for establishing an anti-corruption compliance program for businesses.
• The OECD Good Practice Guidance identifies practices for effective compliance programs to detect and prevent the bribery of foreign officials, which
businesses can adapt to suit their unique circumstances and incorporate the identified practices into their operations to complement their overall
compliance framework.
• The OECD Good Practice Guidance recommends that organizational management adhere to the following measures when establishing compliance
programs:
 Establish a clear and unambiguous policy prohibiting the bribery of foreign officials.
 Create an ethical environment, and ensure that the anti-corruption policy has strong, explicit support from senior management.
 Provide that compliance with anti-bribery program is the duty of every employee.
 Make senior management responsible for implementation and oversight of the anti-corruption policies, standards, and procedures.
 Design the compliance program to detect and prevent corruption, and it should include policies covering gifts; hospitality, entertainment, and
expenses; customer travel; political contributions; charitable donations and sponsorships; facilitation payments; and solicitation and extortion.
 Make the program applicable to third party business partners
 Create an internal controls system designed to ensure compliance with the prohibition of bribing foreign officials.
 Implement mechanisms to ensure that anti-corruption policies, standards, and procedures are communicated effectively to all employees and,
where appropriate, agents and business partners.
 Implement appropriate measures to encourage and provide support for employees to comply with the compliance program.
 Institute appropriate disciplinary measures for violations of anti-corruption laws, policies, and procedures, as well as remedial actions to
prevent recurrences of such misconduct.
 Install a system that provides guidance and advice to employees regarding anti-corruption issues.
 Conduct periodic testing of the anti-corruption program to evaluate and improve its effectiveness.

United Nations Convention against
Corruption
• The United Nations Convention against Corruption (i.e. UNCAC), which came into force in 2005 and signed
by 189 parties, is an important instrument of the UN in the international fight against corruption.
• The UNCAC is wider in scope that the OCED Anti-Bribery Convention and establishes a framework to
combat all forms of corruption, including bribery, extortion, embezzlement, trading in official influence,
and general abuses of power.
 The UNCAC introduces standards for member states to incorporate into national legislation to address
corruption in both the private and public sectors. The standards are intended to respect the fundamental
principles of UN members’ respective legal systems while focusing on four specific areas of concern:
 Prevention
 Criminalization
 Asset recovery
 International cooperation

Corruption
• Prevention: This provides preventive measures aimed at both the public and private sectors with oversight
function by the independent anti-corruption bodies subject to codes of conduct and reporting requirements to
enhance transparency. This requires the independence of the judiciary and prosecution services, improvement in
accounting and auditing standards including maintenance of records and disclosures in the financial statements.
The UNCAC also mandates regulations to deter and detect all forms of money laundering by any bank or financial
institution, establishing professional codes of conduct, rules to prevent conflicts of interest, greater cooperation
between law enforcement agencies and private entities and engagement of civil society in the fight against
corruption.
• Criminalization: The UNCAC addresses all forms of corruption, not bribery alone and lists specific acts of
corruption for members criminalization actions. Members are to consider criminalising acts such as the demand
for bribes by foreign officials, supply and demand for bribes by private sector actors, trading in influence, and
obstruction of justice, amongst others while criminal offences should be established for the following acts of
corruption:
 The supply and demand of bribes to domestic public officials
 The supply of bribes to foreign public officials
 Money laundering
 The embezzlement, misappropriation, or diversion of public property by domestic officials

Corruption
• Asset Recovery: This is stated as a fundamental principle. Asset recovery is particularly important to
developing countries, which are vulnerable to corruption and in need of resources for reconstruction and
rehabilitation programs. Reaching consensus on the issue required intensive negotiations to balance the
needs of countries seeking recovery against the legal and procedural safeguards of the countries
providing assistance. Effective implementation of the asset recovery provisions will both remedy one of the
worst effects of corruption and send a message that illegal assets cannot be hidden anywhere. Member
states must implement the necessary mechanisms to detect and prevent the transfer of assets obtained
through illicit activities and the Authorities must have competence to confiscate, seize, or freeze any such
assets.
• International Cooperation: Parties to the UNCAC agree to cooperate with one another in the fight
against corruption, including the prevention, investigation, and prosecution of any offense. Cooperation is
mandatory in criminal matters, but only encouraged in civil and administrative issues. Countries must
assist one another in gathering and sharing evidence, returning the proceeds of illicit activity, and
extraditing offenders for effective prosecution.

Introduction
• If a person or business cannot repay the debts owed to
creditors, it may file for bankruptcy to initiate a process
whereby it can resolve its debts.
• The types of parties that may file for bankruptcy vary
by jurisdiction, but individuals and entities can file for
bankruptcy.
• Filing for bankruptcy allows partial or full discharge of
debts. Thus, creditors can no longer collect such debts.
• Bankruptcy fraud occurs when an individual or
organization makes false or misleading representations
in the course of petitioning for debt relief. This is a
criminal offense because bankruptcy is governed by
legislation.
• Role of Bankruptcy proceedings in fraud examinations:
1. There are many fraud schemes that are
perpetrated using the bankruptcy system.
2. For any investigation into financial crimes, fraud
examiners need to be able to consider the role
that bankruptcy might play if attempting to
recover the victim’s assets because losses due to
fraud might cause a company or individual to file
for bankruptcy, leading to an investigation into
the source of the fraud.
• Key Parties in the Bankruptcy System
• Types of Bankruptcy Fillings, and
• Bankruptcy Schemes.

Key Parties in the Bankruptcy System
(1/3)
Debtors
Creditors
Courts
Bankruptcy Agencies
Bankruptcy Trustees

Key Parties in the Bankruptcy System (2/3)
• Debtors are the subject of a bankruptcy filing and might have different goals in seeking bankruptcy which are:
• Liquidation bankruptcy to be relieved of all dischargeable debts and to either start over with a clean slate
or to dissolve (depending on whether the debtor is an individual or a company).
• Reorganization bankruptcy if, despite its financial problems, it wants to reorganize and continue operating
as a business.
• Creditors are owners of the money, and they are either secured or unsecured
i. Secured Creditor: One who has a secured interest in some of the debtor’s property (i.e. that if the debtor
defaults on payments to the creditor, the creditor may possess or liquidate the secured property to satisfy
the debt). The method of establishing a person as a secured creditor varies from jurisdiction to jurisdiction
and might have filing requirements with a public registry or government agency.
ii. Unsecured Creditor: One who does not have any secured interests in the debtor’s assets
In jurisdictions that recognize a distinction between secured and unsecured creditors, the secured creditors are
entitled to payment before unsecured creditors in bankruptcy proceedings.

Key Parties in the Bankruptcy System (3/3)
iii. Preferential Creditors: the person may be paid before unsecured creditors and sometimes
before secured creditors, depending on the specific laws of the jurisdiction and the terms of the
applicable liquidation agreement.
• Courts are central to bankruptcy because it is a court process. bankruptcy is a formal, court-governed
process used to eliminate and reorganize debt.
• Bankruptcy Agencies: Some countries have government agencies that are responsible for overseeing
bankruptcies.
• Bankruptcy Trustees: Some countries use trustees to administer bankruptcy estates. A bankruptcy
trustee is a neutral professional assigned to administer an estate in bankruptcy.

Types of Bankruptcy Filings (1/2)
• Three common types of bankruptcy designed to deal with different debt situations are liquidation,
reorganization, and debt adjustment.
• Liquidation: This is the most basic type of bankruptcy proceeding and involves accounting for all
dischargeable debts the subject owes, identifying all the subject’s assets, and liquidating non-exempt
assets to pay off creditors. This process allows the debtor to get a court or administrative order
under which some or all debts may be eliminated.
• Each jurisdiction determines what exceptions exist in terms of debts that may not be discharged
such as taxes owed and assets that may not be liquidated such as debtor’s primary residence or
items deemed necessary for the debtor to maintain employment.
• Bankruptcy laws will not protect assets that were obtained through fraudulent means even if they
are normally subject to protection. The laws might also only protect assets up to a certain amount.

Types of Bankruptcy Filings (2/2)
• Reorganization: The purpose of reorganization bankruptcy is to allow the debtor respite from
creditors so that the debtor can reorganize its financial affairs and continue as a going concern. This
is with the hope that the debtor will be able to pay the creditors back more of the debt in the long
run by staying in business than if the entire business was ended and liquidated. In reorganisation,
debt is often restructured and reduced to some extent. Thus, some reorganization proceedings
involve putting the debtor’s business under receivership for a certain period to ensure as much debt
is paid back as possible. Many countries allow business entities to go through reorganization
bankruptcies while some countries also allow individuals to use reorganization.
• Debt Adjustment: This is another alternative to liquidation that allows a debtor pay off debts over
time in accordance with a court-approved plan. Under this type of case, the debtor may keep certain
property that the debtor would not be allowed to retain in a liquidation bankruptcy. Typically, the
court reviews the debtor’s financial situation and comes up with a plan to repay creditors. This type
of bankruptcy, if available, is primarily for individuals.

Bankruptcy Schemes (1/2)
• Generally, bankruptcy fraud occurs when an individual knowingly engages in prohibited conduct during the
pendency of a bankruptcy proceeding with a fraudulent intent to defeat the bankruptcy laws. Common
bankruptcy fraud schemes include:
• Concealed Assets: This involves the concealment of assets rightfully belonging to the debtor’s estate to avoid
forfeiting the assets in bankruptcy. Concealed assets may include cash, houses, interest in corporations, books
and records as well as lawsuits in which the debtor is a plaintiff.
• Fraudulent Conveyance: This is the transfer of the debtor’s assets to another person or a company to hinder,
delay, or defraud a creditor. Depending on the law, a court or a bankruptcy trustee might have the power to set
aside a fraudulent conveyance and seize the assets that were fraudulently conveyed.
• The Planned Bustout: A bustout is a planned and fraudulent bankruptcy. The basic approach for the bustout is
for an apparently legitimate business to order large quantities of inventory or other goods using credit, and
then dispose of those goods through legitimate or illegitimate channels with the aim of going into bankruptcy.

Bankruptcy Schemes (2/2)
• Other characteristics of bustout schemes include:
 They are planned from the beginning.
 Sometimes organized crime is involved.
 Credit is established with numerous vendors; prompt payments are made to all vendors; and
vendors feel comfortable in dealings, thereby extending existing credit lines.
 Perpetrators build inventory by ordering everything they can from vendors; they promise to pay
soon and order more merchandise.
 Perpetrators sell out inventory at a significant discount or move it before vendors can take
possession of it.
 The business fails or closes up, files bankruptcy, or creditors beat them to it with involuntary
bankruptcy.

Introduction
• Tax Fraud refers to intentional actions that a
taxpayer commits to defraud the government of
owed tax dollars. It is a type of fraud committed
against the government, typically involving false
claims or concealed information.
• Most governments have laws prohibiting tax fraud,
but these laws differ in substantive ways from
country to country.
• Tax Evasion: This is a subset of tax fraud and refers
to any fraudulent actions that a taxpayer commits
to avoid reporting or paying taxes. The intent of the
taxpayer in the case of tax evasion is to wrongly file
a tax return or provide other false tax information.
It is therefore an illegal act.
• Tax Avoidance on the other hand refers to a legal
means of lowering one’s tax bill through legitimate
deductions, credits, and shelters.
• Overview of Tax Fraud
• Evidence of Tax Fraud
• Types of Tax Evasion Schemes
• Common Defenses to Allegations of Tax
Evasion
• Fraud Schemes Targeting Taxpayers

Overview of Tax Fraud (1/3)
• To establish criminal liability for tax fraud or tax evasion, most jurisdictions require a willful attempt to evade or defeat taxes in an
unlawful manner.
• Willfulness might be inferred from conduct such as:
 Keeping a double set of books (not to be confused with keeping separate books and tax records, which might require
different recording techniques)
 Making false entries or alterations or creating false invoices or documents
 Destroying books or records
 Concealing assets
 Covering up sources of income
 Avoiding making records that are typical in transactions of the kind
 Moving taxable assets beyond the government’s reach (e.g., into offshore accounts)
 Engaging in misleading or deceitful conduct
 The presence of willfulness is a determinant of criminal liability for tax fraud, but violations of proper tax procedures result in
fees and interest penalties. Honest mistakes and misinterpretations of the law typically do not prevent such fines.

• Some of the most common indicators of tax fraud includes Misrepresentation of facts, Artifice, Efforts to hide income or assets,
Double set of books, Secret bank accounts under false names, Overstatement of deductions and Fictitious transactions.
Civil, Criminal, and Administrative Cases
• In many jurisdictions, the government can file either civil or criminal charges against taxpayers, but governments of some
jurisdictions can seek both civil and criminal sanctions for same offences. In criminal cases, the penalties are more severe and
might include imprisonment as well as substantial fines while in civil cases, the penalties are usually limited to monetary
damages.
• On administrative side, tax cases may be heard by administrative boards or tribunals, which generally operate like civil courts with
similar penalties.
• Tax fraud cases might have different burdens of proof, statutes of limitations, and available defenses.
Burden of Proof
• The burden of proof in a tax case can depend on whether the case is criminal, civil, or administrative. Determination of which
party has the burden of proof, either the government or taxpayer, depends on the circumstances and the laws of the jurisdictions.
In criminal cases for tax fraud, however, the government brings the charges, and therefore, it bears the burden of proving the
alleged fraud.

International Tax Avoidance and Evasion: Individuals use tax shelters, tax havens, and secrecy jurisdictions to
evade taxes thereby making tax evasion transcend national boundaries.
a) Tax shelters are investments that are designed to yield a tax benefit to the investor. They might be legal or
illegal. Though tax shelters are aimed at avoidance, taking abusive forms can lead to tax evasion. An illegal,
abusive shelter is one that involves artificial transactions with little or no economic reality. E.g. falsely identify an
asset for business use that is mainly intended for pleasure or claiming excess depreciation or depletion, etc.
b) Tax havens are countries that offer low rates of taxation to corporations and individuals. The use of tax havens
might be legal or illegal, depending on the nationality and residence of the individual and the tax code of the
country where the activity takes place. E.g. Moving revenue from country of high tax regime to a shell company
in low tax regime might be tax evasion under the laws of the country of high tax regime.
c) Secrecy jurisdictions are often relatively small countries whose customers are largely foreigners. Individuals try
to avoid their tax responsibilities by hiding their assets abroad in secrecy jurisdictions. A secrecy jurisdiction is a
country that has enacted laws that afford financial secrecy such as domestic bank secrecy laws that bar insight
by outsiders.

Evidence of Tax Fraud
Evidence of tax fraud may be direct or circumstantial.
• Direct evidence includes testimony that tends to prove or disprove a fact in issue directly, such as eyewitness
testimony or a confession.
• Certain circumstances constitute direct evidence of tax fraud, including:
 Unexplained bank deposits
 Submission of false documents
 False explanations for prior conduct
 Participation in an illegal business
 False claims of extra withholding exemptions
• Circumstantial evidence is evidence that tends to prove or disprove facts in issue indirectly, by inference.
• Certain circumstances constitute circumstantial evidence of tax fraud, including:
 Illicit income, which can be proved by showing that the subject’s assets or expenditures for a given
period exceed that which can be accounted for from admitted sources of income
 Income in excess of deposits

Types of Tax Evasion Schemes (1/2)
• Tax evasion schemes vary, depending on the types of taxes that exist in a jurisdiction. Some common types of tax evasion
schemes include:
 Income and wealth tax evasion
 Falsifying tax deductions
 Tax credit schemes
 Consumption tax schemes
1) Income and wealth tax evasion: Fraudsters commit this tax evasion by falsifying or omitting material information in relation to
income or wealth. Common forms of criminal income and wealth tax evasion include:
 Failing to submit a report of one’s taxable income, if such a report is required
 Intentionally misrepresenting one’s income or wealth
 Pretending to transfer assets to another person or entity to lower tax liability
 Intentionally failing to withhold the taxable portion of an employee’s income, if so required
 Failing to report foreign bank accounts or other taxable assets, if required
 Falsely claiming income was earned in another jurisdiction to lower tax liability

Types of Tax Evasion Schemes (2/2)
2) Falsifying Tax Deductions: Tax deductions are itemized expenses subtracted from gross income or assets to reduce the taxpayer’s total liability.
Deductions are designed to make certain taxes fairer, but they can also be used inappropriately by tax evaders. Examples of the fraudulent use of
deductions include:
 Falsifying expenses, such as recording fictitious salaries to non-existent employees
 Fraudulently inflating expenses, such as bribing a supplier to inflate an invoice
 Submitting false information to qualify for improper deductions, such as pretending to qualify for atax deduction for having children living at
home
 Misclassifying non-deductible expenses as deductible
3) Tax Credit Schemes: Tax credits are an amount subtracted from a person’s or entity’s tax liability but are not necessarily tied to an expense. Tax credits
are often used to encourage certain behavior of economic benefits. Taxpayers might attempt to evade taxes by misrepresenting their eligibility for a tax
credit.
4) Consumption Tax Schemes: Consumption taxes are those collected from the proceeds of the sale of goods or services. Some of the common taxes
includes: sales tax, value added tax, and excise tax. common schemes by which fraudsters attempt to evade consumption taxes, including:
 Omitting transactions from tax records to evade consumption taxes
 Deflating the value of transactions in tax records
 Disguising a transaction that should be subject to a domestic consumption tax as a tax-free foreign transaction
 Missing trader schemes, in which the culprit collects a VAT from a large transaction but, rather than paying the tax to the government, disappears
with the proceeds
 Applying for a refund of a VAT that the subject or a co-conspirator in the transaction chain never paid to the government (called a carousel
scheme because the goods are often transferred among the co-conspirators several times)
 Smuggling goods into a jurisdiction to avoid paying excise taxes

Common Defenses to Allegations of Tax
Evasion (1/2)
1. No Tax Deficiency: This is generally the best defense because if there is no deficiency, then there is no tax
liability.
2. Lack of Willfulness: This reduces the defendant’s culpability for fraud. A good faith belief that one is not
violating the tax law, based on a misunderstanding caused by the law’s complexity, negates willfulness. The
existence of the belief is an issue for the jury or fact finder to decide.
3. Avoidance, Not Evasion: Establishing that the taxpayer was engaging in tax avoidance (i.e., legal lowering of
tax liability) and not evasion provides a defense to tax fraud.
4. Objectively Reasonable Position: This is a position taken with respect to tax obligations.
5. Claim of Right Doctrine: A taxpayer may seek to avoid a tax by claiming that they do not have an unrestricted
right to the money at issue (or evade the tax by falsely claiming that their rights are restricted).
6. Reliance on an Attorney or Accountant: For this type of defense to succeed, the defendant must establish all
the following conditions:
 The taxpayer specifically relied on the advice from an expert.
 The expert is qualified, which is determined by a facts-and-circumstances test.
 The taxpayer gave full disclosure of the facts to the expert.

Common Defenses to Allegations of Tax
Evasion (2/2)
7. Innocent Spouse: In some jurisdiction, innocent spouse relief permits a spouse to avoid tax liability in certain circumstances
when joint tax return is filed or the innocent spouse to obtain relief for “erroneous” income items. The spouse can establish
the following elements:
 The underpayment of tax is due to unreported income or disallowed deductions that are attributable to the other
spouse.
 The spouse “did not know and did not have reason to know” of the facts surrounding the underpayment of tax.
8. Mental Illness: This conditions negate criminal intent for tax crimes and applicable in relation to the time tax return was
prepared.
9. Ignorance of the Law: This is not a defense to criminal charges, but in some jurisdictions, this defense might succeed
against allegations of tax fraud if the defendant can show that they had a good faith misunderstanding of the tax
requirements.
10. Statutes of Limitations: set the maximum time after an event when legal proceedings may be initiated This can be
applicable for tax fraud in some jurisdictions and not applicable in others. There is no statute of limitations for civil actions
relating to tax fraud (including false returns, failure to file returns, and tax evasion), but there are statutes of limitations for
criminal charges and the assessment and collection of taxes.
11. Ineffective Defenses: some defenses will be ineffective against charges for tax crimes.. the death of the taxpayer often
cannot be used as a defense because taxes owed due to tax evasion typically survive the taxpayer’s death

Fraud Schemes Targeting Taxpayers
• These are fraud schemes that use the taxation system to target taxpayers such as tax identity theft scheme.
• EXAMPLE: A fraudster uses Alisa’s government identification number to file a fraudulent tax return in her name. The government accepts the fraudulent
return and issues a tax refund to the fraudster. When Alisa files her tax return months later, the government rejects it because a tax return has already
been filed in her name.
• Another possible indication of tax identity theft is when the government’s tax records indicate that the taxpayer received wages
from an employer for whom the taxpayer did not work.
• In some countries where taxpayers can claim dependant relief for their children or other family members, fraudsters sometimes
commit tax identity theft by using stolen government identity numbers to claim strangers as their dependents.
• In other fraud schemes, fraudsters use email, text messages, the telephone, or the internet (i.e. phishing emails or unsolicited
telephone calls) to impersonate government tax authorities and obtain money or information from taxpayers.
• EXAMPLE: In the United States, fraudsters often impersonate the Internal Revenue Service (IRS), the government agency responsible for assessing and
collecting federal taxes. By way of phishing emails or unsolicited telephone calls, fraudsters claim that they are IRS agents and demand immediate
payment for delinquent taxes. The taxpayer thinks that they are making a payment to the IRS, but the money goes directly to the fraudster.
• In some other cases, some fraudsters impersonate government tax authorities to obtain taxpayer’s personal information, such as
the taxpayer’s government identification number, passwords, or banking information and then then use this information to
commit identity theft.

Introduction
• Securities fraud refers to deceptive
practices in the purchase or sale of
securities, and the term covers a broad
range of illegal activities.
• Securities are not inherently valuable. Their
value stems from various factors, including
the issuer’s financial condition, markets, and
competitive and regulatory climates.
• Securities are not a commodity to be
consumed but more closely resemble
currency being traded.
• Overview of Securities Fraud
• What constitutes a Security
• Securities Law and Regulations
• Self-Regulatory Organizations
• Securities Fraud Schemes, and
• Investigative Tips

Overview of Securities Fraud
• Most countries have laws that prohibit false statements and other fraudulent activity in
connection with securities transactions, which vary by jurisdiction.
• Most jurisdictions define securities fraud violations to include the following elements:
 The defendant made a material misstatement (false statement) or omission.
 The misstatement or omission was in connection with the purchase or sale of a
security.
 The defendant acted with a specific intent to defraud.
 The victim relied on the misrepresentation or omission.
 The victim suffered economic loss caused by the misrepresentation or omission.
 In most cases involving allegations of securities fraud, the exact nature of the investment does not
need to be determined

What Constitutes a Security? (1/4)
• In basic terms, a security is a fungible, negotiable financial
instrument that represents an interest or a right in something else.
This is a broad definition under which many types of instruments
may be classified as securities.
• What is considered a security varies from country to country as well
as in the use of the term itself. For example, the U.S. definition of a
security is substitutable with securities in India and South Africa,
investments in the United Kingdom, and financial product in Australia.
• Determining whether a financial instrument is a security can be
difficult but establishing this fact is often necessary, because any
financial instrument that is a security is governed by extensive rules
and regulations.
• The United States (U.S.) Securities Act of 1933 (the 1933 Act) and
the U.S. Securities Exchange Act of 1934 (the Exchange Act) gave
elaborate definitions of security that are functionally
indistinguishable as follows:
• Section 2(1) of the 1933 Act provides: “The term ‘security’ means
any note, stock, treasury stock, security future, bond, debenture,
evidence of indebtedness, certificate of interest or participation in
any profit-sharing agreement, . . . investment contract, . .. or, in
general, any interest or instrument commonly known as a
‘security’, . . . or any . . .guarantee of, or warrant or right to
subscribe to or purchase, any of the foregoing.”
• By including investment contracts within this definition of a security,
U.S. lawmakers allowed this definition to include classes of financial
instruments that are not specifically listed in it.
• In SEC v. W.J. Howey Co., 328 U.S. 293 (1946), case law, the U.S.
Supreme Court defined an investment contract as “a contract,
transaction or scheme whereby a person invests his money in a
common enterprise and is led to expect profits solely from the
efforts of” someone other than the investor. Thus, the case
established a four-factor test, (known as the Howeytest), to
determine whether a financial instrument is an investment
contract. All the four factors must be present for an
investment contract to exist

• The U.S Howey test is not definitive, and each state has its own set of
securities laws. Although a majority of the states use the Howey test,
many states use the risk capital test as an alternative to the Howey
test. This test allows the investor to play a more active role if the
funds they contribute are part of the “risk capital” of the business.
• Though Several states have formally adopted the Howey test, which
is sometimes known as the Hawaii Market Test, as an alternative
definition of investment contract, the U.S. Supreme Court has
expressly declined to decide if this test should be used.
• The European Union (EU) policymakers have been able to
harmonize securities law to have certain level of uniformity in how
the term security is defined among European countries. In the UK,
the Financial Services and Markets Act 2000 (FSMA), which is the
primary legislation regulating securities markets in the UK, defines
investment in terms similar to the U.S. securities definition.
• An investment is a regulated activity that is specified in the classes of
activity and categories of investment in Part II of Schedule 2 to the
FSMA, which includes:
 Securities
 Instruments creating or acknowledging indebtedness
 Government and public securities
 Instruments giving entitlement to investments
 Certificates representing securities
 Units in collective investment schemes
 Options
 Futures
 Contracts for differences
 Contracts of insurance
 Participation in Lloyd’s syndicates
 Deposits
 Loans secured on land
 Rights in investments

• Australian securities laws (the Corporations Act of 2001) contains several
definitions of a security and securities, but these definitions are
aggregated, defined, and regulated as financial products in the context of
financial market and services regulation.
• India’s definition of securities is akin to the U.S. definition, and
contained in Section 2(h) of the Securities Contracts (Regulation) Act 1956,
as:
• (i) shares, scrips, stocks, bonds, debentures, debenture stock or other
marketable securities of a like nature in or of any incorporated company or
other body corporate; (ia) derivative; (ib) units or any other instrument issued
by any collective investment scheme to the investors in such schemes; (ic)
security receipt as defined in clause (zg) of section 2 of the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002; (id) units or any other such instrument issued to the investors under
any mutual fund scheme; (ie) any certificate or instrument (by whatever name
called), issued to an investor by any issuer being a special purpose distinct
entity which possesses any debt or receivable, including mortgage debt,
assigned to such entity, and acknowledging beneficial interest of such
investor in such debt or receivable, including mortgage debt, as the case may
be; (ii) Government securities; (iia) such other instruments as may be declared
by the Central Government to be securities; (iii) rights or interest insecurities.
• In the Republic of South Africa, the definition of securities as stated in the
Securities Services Act provides:
• (i) shares, stocks and depository receipts in public companies and other
equivalent equities, other than shares in a share block company as defined in
the Share Blocks Control Act, 1980 (Act No. 59 of 1980); (ii) notes; (iii)
derivative instruments;(iv) bonds; (v) debentures; (vi) participatory interests in
a collective investment scheme as defined in the Collective Investment
Schemes Control Act, No. 45 of2002, and units or any other form of
participation in a foreign collective investment scheme approved by the
Registrar of Collective Investment Schemes in terms of section 65 of that Act;
(vii) units or any other form of participation in a collective investment scheme
licensed or registered in a foreign country; (viii) instruments based on an
index; (ix) the securities contemplated in subparagraphs (i) to (viii) that are
listed on an external exchange; and (x) an instrument similar to one or more
of the securities contemplated in subparagraphs (i) to (ix) declared by the
registrar by notice in the Gazette to be a security for the purposes of this Act;
(xi) rights in the securities referred to in subparagraphs (i) to (x); (b) excludes-
(i) money market instruments except for the purposes of Chapter IV; and (ii)
any security contemplated in paragraph (a) specified by the registrar by
notice in the Gazette.

• These definitions are important for numerous reasons:
i. investments classified as securities are subject to the rules and
procedures set up by regulatory bodies like the United Kingdom’s
Financial Conduct Authority (FCA), which impose a host of reporting
and compliance obligations for securities.
ii. whether an international transaction is classified as a security affects
the jurisdictions under which it falls.
• Although the definition of securities varies among jurisdictions, most of
these definitions cover instruments that can easily be identified as
securities, (i.e. the traditional securities).
Traditional Securities:
• These are types of Investments most commonly recognized as securities
include: stocks, bonds, and certificates of deposit (CDs).
i. Stocks: instruments that represents an ownership interest in a
corporation and a claim on a proportional share in the corporation’s
assets and profits.
ii. Bonds: debt instruments (i.e. certificates of debt issued by a
government or corporation guaranteeing payment, plus interest, on
the original investment by a specified future date).
iii. Certificates of Deposit: interest-bearing investment products that
provide limited access to the money invested and a modest rate of
interest. CDs are issued by financial institutions.
Futures and Options:
• Numerous securities fraud schemes involve futures contracts, option
contracts, and over-the-counter (OTC) options (i.e., an option that does
not trade on a major exchange).
• Futures and options are the main types of derivative instruments (i.e.,
financial instruments whose value is based on an underlying asset or
economic factor).
• Financial markets for derivatives: Exchange-traded and Over-the-
counter (OTC)
• Futures and options are methods of managing price risk, often called
hedging.
• Trading derivatives is risky and, requires airtight internal controls in any
firm that engages in hedging or trading activities using exchange-traded
or OTC derivatives.

Futures Contracts or Future
• Futures Contracts, or Future: is an agreement between buyers and
sellers to make delivery (i.e., sell) or to take delivery of (i.e., buy) a given
quantity and quality of a commodity at a specified price and on a specified
future date. It is the basic instrument of exchange in the commodities
market.
• The underlying asset to a futures contract is commodities. Futures
contracts are bought and sold on commodities exchanges, which
operates like stock exchanges because they function as a central
marketplace and provide facilities to buy and sell commodities.
• A commodity is anything that can be turned to commercial advantage
such as agricultural products, gold and silver, petroleum products, etc.
• Prices of commodities are highly volatile, as they are affected by factors
including, but not limited to, weather, industry, economy, employment,
technology, and political and global events. Investors, who have no
intention of taking delivery of the actual physical commodities, trade in
commodity futures contracts with the goal of profiting from price
fluctuations in the underlying commodity..
• Futures contracts are standardized and contain terms with specifications
such as the contract size, delivery months, commodity grade, location of
delivery, etc. Price and quantity are the only things negotiated by the
counterparties to a commodity trade.
• Futures contracts are either physically delivered (i.e. the holder must
either produce the underlying commodity or take delivery from the
exchange) or cash settled (i.e., settling futures contracts by cash whereby
traders use a calculated “fair value” to determine if the futures are high or
low compared to the underlying index).
• Futures contracts settlement by physical delivery: The possibility of
delivery keeps futures contracts in line with their underlying cash
markets. If a contract rises too high in price relative to the cash market,
traders might sell futures with the intent of making delivery.
• Futures contracts settlement by cash: If fair value indicates that futures
are too high, a trader might sell futures, expecting the difference to
narrow
• Futures contracts are called derivatives because they do not have any
intrinsic value in and of themselves, but their value is derived from the
underlying commodity, index, or security (i.e. futures contracts “derive”
their price from their underlying cash market).

Futures Contracts or Future: The Principle of
Offset
• One of the features of commodity futures markets that make
them so liquid and cost effective.
• In a futures contract, the delivery or sale of the product is
assumed, and the investor has an obligation to fulfill the
contract; therefore, buying or selling a futures contract does
not necessarily mean that the investor will accept or make
delivery of the actual commodity itself. The obligation of the
buyer (to accept future delivery) and the obligation of the seller
(to make future delivery) is not with each other but with the
central clearing function of the exchange.
• The primary means of fulfilling each party’s obligation under a
futures contract is through an off-setting contract.
• An off-setting contract: A purchase (sale) of futures contracts is
liquidated through the sale (purchase) of an equal number of
futures contracts with the same delivery month, to close out a
position (i.e., outstanding obligation legally cancelled).
• Futures Exchange Clearing: The process by which a clearing
organization acts as a third-party intermediary to futures
contracts and assumes the role of the buyer and seller in such
contracts so that it can reconcile the orders between the
transacting parties.
• Futures Clearing Services: The matching of futures
transactions by the clearing organization, thereby becoming
counterparty to both sides of the trade to eliminate
counterparty credit risk by guarantying both sides of the
transaction.
• Futures Liquidation: Traders liquidate their positions by
executing an equal and opposite offsetting transaction (i.e.
selling out a long position of buying back a short position).
Funds transfer to parties when futures are marked to market at
the end of each day.

Futures Contracts or Future: Trading on
Margins
• Futures are traded on margin (i.e., the initial
amount of money that is invested by both buyers
and sellers of futures contracts to ensure
performance on the terms of the contract. A
margin in futures is a performance bond.
• Margins are set by the exchange for each
commodity and are raised or lowered from time
to time to reflect changing market volatility and
notional contract values.
• Types of Margins: Initial margin and
Maintenance margin
• Initial margin: the amount of money per
contract that must be present in the account
when the position is initiated.
• Maintenance (variation) margin: the minimum
amount of money per contract that must be
maintained in the account while the position is
open.
• EXAMPLE: Closing price for December corn
contract = $2.84 1/4 per bushel; Notional value of
the contract = $14,212 (5,000bushels x $2.84 1/4).
Therefore, Initial margin requirement = $810 per
contract (i.e., 5.69% of the notional contract
value) and Maintenance margin = $625 per
contract (i.e., 4.39% of the notional contract
value). Exchange can liquidate parties’ positions
without customer authorization in accounts that
violate margin requirements.

Options (1/3)
• Options (or option contracts) are like futures contracts,
but do not impose obligations on the buyer and seller
to make or take physical delivery of the commodity.
• An option contract confers a right (not obligation) to
the option buyer to take delivery of (i.e., buy) the
underlying asset and imposes obligations on the option
seller.
• Options can be traded on exchanges, OTC, between
individual business entities, or between individuals.
• Option contracts have widespread appeal and
application, and they are used and abused.
• If an option is not exercised, it expires unexercised.
• The object of the option contract (what the option is
written on) is called the underlying. The value of the
underlying is the main (but not only) factor from which
the option contract derives its value.
• Options are a zero-sum transaction (i.e., one party must
suffer a loss for the other party to gain).
• Option trading has conservative aspect (i.e. used to
hedge other security positions or assets) and
speculative aspects (i.e., enable a speculator to control
large quantities of securities with a small amount of
capital).
Kinds of Options:
1) Calls (i.e. the right to purchase the underlying security
at the strike (exercise) price by the option’s expiration
date), and
2) Puts (i.e., the right to sell the underlying security at
the strike(exercise) price by the option’s expiration
date).

Options (2/3)
• Call Writer - Call option seller; Put Writer - Put option seller
• Option buyers pay a premium to option writers for the options
bought.
• Option writers (sellers) collect premiums for the options
written and are obligated to deliver the underlying security if
the option is exercised.
Option Styles
i. Plain vanilla option - have simple expiration dates and strike
prices and no additional features.
ii. Exotic option - has more complex features than plain vanilla.
iii. American option - may be exercised on any trading day on or
before expiration.
iv. European option - may only be exercised on expiration.
Relationship of the Underlying Security to an Option
• Options are derivatives; therefore, their value is derived
primarily from the value of their underlying instruments.
• EXAMPLE: US Inc. common stock closed today at $88.29 per share
and the strike prices of the October 2008 US Inc. calls ranged from
$65 per share to $135 per share. The more that the share price of
US Inc. is above a particular strike price, the greater the value of
that option. The stock price of $88 per share is about $23 over the
strike price of the US Inc. $65 calls. The current premium for US Inc.
$65 calls is $22.90 per share. A trader who had previously bought
this call option could sell it back into the market for about $2,290
($22.90 x 100 shares) or could exercise the option and buy the stock
at $65 with the market at $88.
• Options can be in the money, out of the money, or at the money.
• Call Option in the money – security price exceeds strike price;
Put Option in the money – security price less than strike price
• Options at the money – security price is about same as trike
price

Options (3/3)
Option Premium Values
• Intrinsic value - the difference between the underlying
stock’s price and the strike price
• Option must be in the money to have intrinsic value.
• Out of value options have only one time value.
• Time value – complex concept. The mathematical
formula takes six factors into account:
• underlying price,
• strike price,
• time to expiration,
• volatility of the underlying,
• dividends, and
• interest rates
Over-The-Counter (OTC) Options
• OTC options are not traded on a major exchange,
centrally cleared or standardized, but conducted
electronically through direct contact with the market
maker or other players in the OTC options markets.
• The risk in OTC options is counterparty credit risk. If
the option writer cannot perform the option is
worthless.
• OTC Options Styles
• Plain vanilla, or
• Exotic (which can be problematic).

Investment Contracts
• Based on Howey test established by the U.S. Supreme
Court, a contract, transaction, or scheme is an
investment contract if all the following four elements
are met:
• There is an investment of money or another asset.
• The investment is in a common enterprise.
• The investment was made with expectations of making a
profit.
• The profits are to come solely from the efforts of people other
than the investor.
• The Howey test definition cover obscure, deceitful, new,
uncommon, or irregular devices.
• Many fraudulent schemes involving exotic investments
can be argued to constitute the offer or sale of
investment contracts.
• Investments that frequently qualify as investment
contracts include:
 Ponzi schemes
 Illegal pyramid schemes
 Prime bank note schemes
 Investment schemes involving precious metals or stones
 Viatical settlements
 Partnerships
 Joint ventures
 Oil, gas, and mineral interests
 Hedge funds
 Promissory notes

Securities Laws & Regulations (1/6)
• Securities Regulation refers to laws, rules, and procedures
enacted by a legislative body and administered by dedicated
agencies that govern the way in which companies, consumers,
and financial professionals behave when trading securities.
• Securities regulation focus on balancing the legitimate needs of
businesses to raise capital against investors’ protection. It also
serves other purposes, including:
 Promoting an active and competitive market
 Maintaining market confidence
 Reducing financial crime
 Discouraging behavior that might harm the market
• The power to prescribe and enforce securities laws and
regulations is territorial, and most securities markets, which
are the markets in which securities are traded, are regulated by
laws and regulations enacted and promulgated on a national
basis.
• Due to various challenges faced by investors in securities,
especially in the globalized market, different countries’
exchanges have varying methods of regulating the
transactions.
• To compete in the global securities market, each country must
have a national regulatory authority to regulate all securities
markets and administer securities laws under its jurisdiction.
• Global securities regulators include, but not limited to:
 U.S. Securities and Exchange Commission
 Australian Securities and Investments Commission
 Canadian Securities Administrators
 European Securities and Markets Authority (EU)
 Federal Financial Supervisory Authority (Germany)
 Financial Services Agency (Japan)

Exchanges:
• An exchange is a market in which securities, commodities,
futures, or options are traded. Several types of exchanges exist,
including securities exchanges, commodities exchanges, and
futures exchanges.
Securities Exchanges:
• A securities exchange (or stock exchange) is a market in which
stocks, bonds, and other securities are traded. Securities
exchanges provides a platform to host markets where
securities are traded (i.e., a market that provides services for
brokers and traders to buy and sell stocks, bonds, and other
securities).
• Securities exchanges provide a mechanism for private
enterprises to raise investment funds, supply investors with a
forum to liquidate their holdings, help in the valuation of
securities, and serve as indicators of economic trends.
• Securities exchanges are largely self-regulatory and also
regulated by being subject to national control and supervision.
• To trade securities on a certain exchange, the securities must
be listed in the exchange and must meet the exchange’s
requirements for listing and trading on the particular
exchange.
• Some key securities exchanges include but not limited to:
 New York Stock Exchange (NYSE)
 Australian Securities Exchange (ASX)
 Deutsche Böerse (DBG) (operator of the Frankfurt Stock
Exchange)
 Hong Kong Stock Exchange (HKEX)
 London Stock Exchange (LSE)
 Tel Aviv Stock Exchange (TASE)
 Tokyo Stock Exchange (TYO)

• Commodities Exchanges: A commodities exchange is an institution,
organization, or association that serves as a market where various
commodities and derivatives products are traded.
• Futures Exchanges: A futures exchange is an institution,
organization, or association that serves as a market where futures
contracts can be bought and sold. In Practice futures are traded at
commodity exchanges.
• International Securities Regulatory Institutions
• Apart from securities regulation at national levels, there are also
international bodies involved in the regulation or governance of
international securities trading, most importantly:
• Basel Committee on Banking Supervision (BCBS),
• International Organization of Securities Commissions (IOSCO),
• International Accounting Standards Board (IASB)
• Other international securities regulatory organizations include:
• The International Securities Association for Institutional Trade
Communication (ISITC)
• The World Federation of Exchanges (WFE)
• International Swaps and Derivatives Association (ICSA)
• The European Securities and Markets Authority (ESMA)
• BCBS: provides a forum for regular cooperation on banking
supervisory matters. Its objective is to enhance understanding of
key supervisory issues and improve the quality of banking
supervision worldwide. BCBS only formulates broad supervisory
standards and guidelines and recommends statements of best
practice for individual authorities to implement within their national
systems.
• IOSCO: IOSCO is an international organization comprised of
securities commissioners and administrators responsible for
securities regulation and the administration of securities laws in
their respective countries. IOSCO is recognized as the international
standard-setter for securities markets, and the organization’s
members regulate more than 95% of the world’s securities markets.
IOSCO develops, implements, and promotes adherence to
recognized standards for securities regulation. Though IOSCO’s
documents are not binding, its work shapes securities regulation
worldwide.

IOSCO’s Objectives:
 Cooperate to promote high standards of regulation in order to maintain
just, efficient, and sound markets.
 Exchange information on their respective experiences in order to
promote the development of domestic markets.
 Unite their efforts to establish standards and an effective surveillance of
international securities transactions.
 Provide mutual assistance to promote the integrity of the markets
through a rigorous application of the standards and effective
enforcement against offenses.
IOSCO’s 2005 MOU:
• IOSCO 2005 MOU serves as the benchmark for international cooperation
among securities regulators and set out clear strategic objectives to
rapidly expand the network of IOSCO MOU signatories.
• The IOSCO Principles and the IOSCO MOU are considered by members as
primary instruments to facilitate cross-border cooperation, reduce global
systemic risk, protect investors, and ensure fair and efficient securities
markets. With 124 signatories to the IOSCO MOU, its growth made it a
significant document in combating violations of securities and derivatives
laws.
IOSCO’s Principles of Securities Regulation
• IOSCO principles are not binding but based on three objectives:
 The protection of investors
 Ensuring that markets are fair, efficient, and transparent
 The reduction of systemic risk
Investors protection:
 Investors should be protected from misleading, manipulative, or
fraudulent practices, including insider trading, front running or trading
ahead of customers, and the misuse of client assets.
 Full disclosure of information material to investors’ decisions is the most
important means for ensuring investor protection.
 Only duly licensed or authorized persons should be permitted to hold
themselves out to the public as providing investment services, for
example, as market intermediaries or the operators of exchanges.
 Supervision of market intermediaries should achieve investor protection
by setting minimum standards for market participants.
 Investors should have access to a neutral mechanism (such as courts or
other mechanisms of dispute resolution) or means of redress and
compensation for improper behavior.

Ensuring that markets are fair, efficient, and transparent:
 Regulation should detect, deter, and penalize market
manipulation and other unfair trading practices..
 Regulation should aim to ensure that investors are given fair
access to market facilities and market or price information.
 Regulation should promote market practices that ensure fair
treatment of orders and a price formation process that is
reliable.
 Regulation should promote market efficiency.
 Regulation should ensure the highest levels of transparency.
Reduction of Systemic Risk:
 Regulation should aim to reduce the risk of failure (including
through capital and internal control requirements).
 Regulation should, where financial failure occurs, seek to
reduce the impact of that failure, by making attempt to isolate
the risk to the failing institution.
 Regulation should not unnecessarily stifle legitimate risk
taking but regulators should promote and allow for the
effective management of risk and ensure that capital and
other prudential requirements are sufficient to address
appropriate risk taking, allow the absorption of some losses,
and check excessive risk taking.
 Regulators’ responses to market disruptions should seek to
facilitate stability domestically and globally through
cooperation and information sharing.

IOSCO’s Revised Principles of Securities Regulation (2010 &
2017)
 The revised principles categorisation securities regulation
into:
A. Principles Relating to the Regulator
B. Principles for Self-Regulation
C. Principles for the Enforcement of Securities Regulation
D. Principles for Cooperation in Regulation
E. Principles for Issuers
F. Principles for Auditors, Credit Ratings Agencies, and
Other Information Service Providers
G. Principles for Collective Investment Schemes
H. Principles for Market Intermediaries
I. Principles for the Secondary Market
J. Principles Relating to Clearing and Settlement
IOSCO FRAUD REPORT
 Seven fraud areas related to high-profile financial scandals
involving large publicly traded companies in the late 1990s
and early 2000s are:
1. Corporate governance,
2. Auditors and audit standards
3. Issuer disclosure requirements
4. Bond market regulation and transparency
5. The role and obligations of market intermediaries
6. The use of complex corporate structures and special
purpose entities
7. The role of private-sector information analysts

Self-Regulatory Organizations
• In some jurisdictions, securities markets are regulated through
a combination of self-regulation by self-regulatory
organizations (SROs) and direct government regulation.
• An SRO is a nongovernmental entity that exercises some level
of regulatory authority over the operations, standards of
practice, and business conduct of an industry or profession.
• SROs oversee the markets in which they operate and police the
members and member firms participating in those markets.
• SROs play an important role in the resolution of disputes
arising from market transactions.
• Examples of SROs that regulate securities markets
• The Investment Industry Regulatory Organization of
Canada (IIROC),
• The Securities Association of China (SAC),
• The Association of Mutual Funds in India (AMFI),
• The Japan Securities Dealers Association (JSDA), and
• The U.S. Financial Industry Regulatory Authority (FINRA)
• Regulatory responsibilities of SROs include matters such as:
 Creating rules to protect the integrity of the market in
which they operate.
 Establishing the standards and rules under which their
members operate
 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 analyses, and
examinations of member firms’ trading operations.
• There may be multiple SROs regulating a country’s securities
markets

Categories of Securities Fraud Schemes
(1/2)
Schemes by registered persons and entities
1. Professional misconduct (i.e., not complying
with the rules and regulations for the
profession)
2. Churning (i.e., excessive trading to maximise
commission)
3. Selling away (i.e., professionals soliciting for
private securities transaction)
4. Failure to supervise (i.e., brokers not monitoring
the activities of registered representatives)
5. Failure to report client complaints (i.e., not
complying in a jurisdiction where there are
reporting requirements)
6. Parking (i.e., selling a security to one party with
understanding that the seller will repurchase it
later at an agreed upon price)
7. Operating Without a License or Registration
8. Excessive markups (i.e., selling at a marked-up
price or buying as a marked-down price not
related to market price)
9. Misuse or Misappropriation of Customers’
Securities
10.Unauthorized trading (i.e., trading on a
customer account without customer’s
authorisation).
11.Systematically trading accounts against each
other (i.e., using investment pool)

Categories of Securities Fraud Schemes
(2/2)
12.Block order schemes (i.e., an order placed for
the sale or purchase of a significant number of
securities)
13.Market manipulation (i.e., designed to artificially
raise or lower price or to give the appearance of
trading activity for the purpose of inducing
others to buy or sell)
14.Insider trading (i.e., whereby an insider -
someone who possesses inside information
about a security - buys or sells securities based
on material information about the security that
is not available to the public)
15.Front running - Dual trading (i.e., a form of
insider trading whereby privileged knowledge of
customers’ orders is used to trade in large
volume of securities ahead of customers)
16.Material misrepresentations and omissions (i.e.,
an advisor giving an investor or prospective
investor false or misleading information in an
investment suggestions or a trading strategy
suggested for a client to undertake)
Schemes by unregistered persons
17.Fraud involving unregistered securities
18.Backdating stock options

Investigative Tips for Securities Fraud
Examination (1/2)
• For investigation of security Fraud, examine the
prospectus, sales literature, contracts, and any
correspondence.
• Examine solicitation disclosure documents provided to
investors and potential investors in detail, especially in
cases involving misrepresentations or omissions of
material facts.
• Examine the information in advertising media that is
designed to persuade the public to invest.
• Questions to ask: How did the investor hear of this
opportunity? Through cold calls, direct mail,
newspapers, magazines, television, or the internet?
• Examine solicitation documents and information
thoroughly especially for misrepresentations and
omissions.
• Conduct a detailed background investigation of the
principal officers of the corporation
• Look for any previous criminal or regulatory action
relating to securities fraud or offenses involving
dishonesty
• Check for lawsuits, bankruptcies, or other civil or
administrative action against the entity or its principals
• Verify any claimed experience in the relevant industry
or academic qualifications.
• Compare the background information with the
information, if any, disclosed in advertisements and the
offering document

Investigative Tips for Securities Fraud
Examination (2/2)
• Pertinent questions for investigating an entity’s
background:
 What promises are made regarding the viability
of the product or service? Is a patent claimed?
Does it exist?
 Is there a functioning business that can be
checked out or is it in the developmental stage?
Ascertain when and where the corporation was
legally incorporated, or in the case of a
partnership, where it was legally filed.
 Are investors promised guaranteed returns?
 Can financial statements concerning assets,
liabilities, and income be verified?
 How will investor funds be used? Follow the
money trail. Were the proceeds invested as
represented or used for other purposes? Is the
issue potentially oversubscribed?
 Are sales commissions paid to unregistered
persons? If yes, are the commissions paid
unusually high or are concealed from investors.
 Are the insiders retaining a majority of the stock
while the investors fund the company?
 Are there any other undisclosed benefits to
insiders?
 Is there adequate risk disclosure? Investors might
not have been made fully aware of a high
percentage of failure, the degree of competition,
or inexperience on the part of the principals.

Introduction
• Money Laundering is the disguising of the existence,
nature, source, control, beneficial ownership, location,
and disposition of property derived from criminal
activity.
• Put differently, money laundering is the process by
which criminals attempt to disguise illicit assets as
legitimate assets that they have a right to possess and
spend.
• In this context, the term assets assumes the wider
definition of that which is physical, intangible, or
represented in the form of rights or obligations, such
as a pension or trust fund.
• Money laundering operations are designed to take the
proceeds of illegal activity, such as profits from drug
trafficking, and cause them to appear to come from a
legitimate source. Once illegal money has been
laundered, the perpetrator is able to spend or invest
the illicit income in legitimate assets.
• Money Laundering Process
• Money Laundering Methods
• Alternative Remittance Systems
• International Anti-Money Laundering Efforts
• The Financial Action Task Force on Money
Laundering
• Enforcement and Prevention Strategies
• Special Problems for Insurance Companies

Money Laundering Process
• Money Laundering (ML) process is generally divided into three
stages: (1) placement, (2) layering, and (3) integration.
Placement:
• Placement is the first stage of the money laundering process. In
this stage, the launderer introduces their illegal profits into the
financial system. It is at this stage that legislation has been
developed to prevent launderers from depositing or converting
large amounts of cash at financial institutions or taking cash
out of the country. ML can be detected easily at this stage.
• The two forms of placement are: physical cash movement and
transaction structuring to avoid regulatory reporting
requirements or an institution’s internal controls (E.g., smurfing
to perform multiple transactions)
Layering:
• If the placement of the initial funds goes undetected, the
launderer can design numerous financial transactions in
complex patterns to prevent detection. This stage of the money
laundering process is referred to as layering, and it represents
the most difficult area of detection. Once the funds have been
deposited into a financial institution, a launderer can move
them around by using layers of financial transactions designed
to confuse the audit trail.
• Layering primarily involved smuggling cash or running funds
through traditional financial institutions, both domestic and
foreign
Integration:
• This is the final stage in the laundering process. In this stage,
the money is integrated back into the economy in a way that
makes it appear to be part of a legitimate business transaction.
This stage of the process is also difficult to detect; however, if
the integration process creates a paper trail (i.e., deeds for real
estate, invoices, loan documents, transaction reports at
financial institutions or checks) and there is informant or
foreign entities’ cooperation, detection chances is improved.

EXAMPLE
Alberto Barrera ran a rather
sophisticated structuring
operation that involved bank
accounts in cities all over the
United States. Barrera and his
accomplices would fly to
different U.S. cities, traveling to
various banks and purchasing
cashier’s checks and money
orders in amounts less than
$10,000 (to avoid U.S. federal
reporting requirements).
They would then travel to
banks in other cities, where
they would deposit some of
the purchased checks and
money orders into accounts
controlled by Barrera. Once
the money was converted
or deposited, it was
transferred to banks in
other countries

Money Laundering Methods
One of the most common methods of laundering funds is to filter the money through a seemingly legitimate business, known as a front business. Front businesses provide
a safe place for organizing and managing criminal activity, where the comings and goings of large numbers of people will not arouse undue suspicion. The two methods
most commonly used to hide assets or launder money through a front business are: --
Overstating reported
revenues and expenses
Depositing but not recording
revenue

Common Money Laundering Methods (1/2)
• Fictitious employees
• Fictitious fees
• Inflated invoices
Overstating Reported Revenues and
Expenses. Overstating revenues occurs
when the money launderer records
more income on a business’s books
than the business actually generates.
The fictitious revenue accounts for the
illegal funds that are secretly inserted
into the company. Overstating
expenses can be accomplished using
various methods. Such as

Depositing But Not Recording Revenue.
In one of the most common schemes at
the local level, launderers deposit illicit
cash into the front company’s bank
account rather than disguising it as
revenue. These funds are not recorded
like the money that flows into and out of
a business as revenues and expenses.
Like a loan, this excess cash
represents the proceeds of a
transaction that is handled outside
of the front business’s daily activity.
Also, like a loan, it appears on the
company’s balance sheet, which
includes both assets and liabilities.
Common Money Laundering Methods
(2/2)

Favorite Businesses for Hiding or Laundering Money
In general terms, the businesses
chosen for money laundering
possess one or more of the
following characteristics
•Revenue—Generally, revenue is difficult to measure in businesses
with revenue from cash transactions with a highly variable amount
per customer. In such businesses, extra money can be brought into
the business and disguised as revenue.
•Expense—Front businesses often have variable expenses that are
difficult to measure. With such businesses, launderers can extract
money without raising undue suspicion.
•History—Many businesses used to launder money have historical
ties either with the ethnic base of a particular criminal group or
with other parts of an industry—either suppliers or customers.
Example of such
businesses
•Bars, Restaurants, and Nightclubs
•Vending Machine Operations
•Wholesale Distribution Businesses
•The Real Estate Industry
•Loan-back Schemes
•Shell Companies

Emerging Payment Methods and Schemes
•The option is attractive for money launderers because there are currently few jurisdictions that regulate the use
and operation of privately-owned ATMs.
Automated Teller Machines
•They generate cash flow for items that have not been purchased yet, and some prepaid purchases are
never redeemed, resulting in a windfall.
Prepaid Access Items
•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
Mobile Payments
•The term typically excludes government-backed currencies, despite the fact that they can also exist and
be traded digitally. E.g Bitcoin
Digital Currencies
•These are similar to digital currencies but are generally intangible assets tied to a particular service. For instance, a
gambling website might offer its own mock-currency that users can purchase.
Virtual Assets
•The smuggling of cash out of the country where it was earned for deposit in foreign jurisdictions with lax
financial institutions
Bulk-Cash Smuggling
•Using the chips as currency to purchase narcotics, with the drug dealer later cashing in the chips
Casino Chips

Alternative Remittance Systems
•Does not require formal identification
•Takes hours rather than days to transfer the
money overseas
•Is cheaper than paying bank and shipping fees
because brokers generally take a very small
commission
•Does not require currency conversion
•Lacks a coherent paper trail
Alternative remittance systems (also
called parallel banking systems) are
methods of transferring funds from a
party at one location to another party
(whether domestic or foreign) without
the use of formal banking institutions. in
the typical alternative remittance
system, the payer transfers funds to a
local broker who has a connection to
another broker in the region where the
payee is located. The latter broker then
distributes the funds to the payee. An
alternative remittance system is a
tempting opportunity for launderers
because it:

Example
Ana in London contacts and gives $50,000 in cash to Broker A in London to get $48,000 to Bob in
Dubai. Broker A takes a commission of $2,000.
Broker A contacts Broker B in Dubai and arranges the transfer; a code is exchanged.
Broker A gives Ana a code to be communicated to Bob.
Ana communicates the code to Bob.
Broker B and Bob make contact in Dubai.
Bob relays code to Broker B and is given the money.
Broker A owes Broker B $48,000 worth of t-shirts. Broker A sends the merchandise from London to
Broker B in Dubai, plus $1,000 in extra merchandise as a share of the commission.
Transaction is complete.

Common Indications of Money
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Combating Money Laundering in Alternative Remittance Systems
The absence of a traditional paper trail has always been
a challenge in working with these systems, but the
advent of instant global communications has made
them far more difficult to monitor. The leading
emerging threat in alternative remittance systems is
identity theft. It has all but displaced the traditional
fake identities used in fraud cases, especially money
laundering. It is easier to assume the identity of a real
person than it is to create a convincing fake identity.
Considering that when a money launderer uses a
stolen identity, it is not used to gain credit or exposed
to loss, there is no reason for the identified person to
ever learn that the accounts were opened using their
name. Thus, the risk of discovery is low and the
opportunity for misdirection is high. It is a near-
perfect solution to the enhanced due diligence
requirements being exercised by financial institutions.

International Anti-Money Laundering
Efforts
The United Nations
• The UN has steadily increased its role in fighting money laundering over time, particularly in the areas of illegal drugs and human trafficking. The UN
provides informational resources such as statistical studies, expert advice to policymakers, red flags, and risk factors of money laundering. The UN also sets
policies for its 193 member states to adopt, such as its requirement that members criminalize money laundering.
• While these policies generally lack an effective enforcement mechanism, many members take measures to comply with them. The UN was the first
international organization to undertake significant steps to combat money laundering, and it continues to play an important role in AML efforts.

United Nations Convention
•In 1988, the UN adopted the United Nations Convention against Illicit Traffic
in Narcotic Drugs and Psychotropic Substances, a mandate to combat money
laundering and organized crime.
•In 1997, the UN established the Global Programme against Money
Laundering, which provides member states with assistance to comply with
international AML standards.
•In addition, the GPML, in participation with other international organizations,
maintains the International Money Laundering Information Network, a
website that provides the international community with information and tools
concerning AML.
United Nations
Convention Against
Illicit Traffic in
Narcotic Drugs and
Psychotropic
Substances

United Nations Resolution
Resolution 1373
The UN-adopted
Resolution 1373
•This was created in September 2001 as a response to the 9/11
attacks in the United States. It called on countries to criminalize
aiding terrorist groups, suspend funding to such groups, and
cooperate with other countries to pursue them.
•It also marked an increased authority of international law.
United Nations
Convention Against
Transnational Organized
Crime
•The UN also created the United Nations Convention against Transnational Organized Crime, which
requires members to: Criminalize participation in an organized criminal group, laundering of the
proceeds of a crime, and corruption involving public officials.
•Regulate and supervise financial institutions and other industries vulnerable to facilitating laundering.
Take measures to confiscate proceeds of crimes.
•Process requests of other members to enforce penalties for criminal offenses, confiscation, and so on;
subject to approval. Afford member countries mutual legal assistance and law enforcement
cooperation in transnational investigations.
•Train law enforcement personnel to prevent, detect, and control laundering and organized criminal
offenses.

The Financial Action Task Force on Money
Laundering
The Financial Action Task
Force on Money
Laundering The FATF is an
intergovernmental body
that was established at the
G-7 Summit in 1989. Its
purpose is to develop and
promote standards and
policies to combat money
laundering and terrorist
financing at both the
national and international
levels. The FATF works in
close cooperation with
other international and
regional bodies.
Notably, the International
Monetary Fund (IMF) and
the World Bank provide
assistance in monitoring
countries’ progress in
implementing and
adhering to the
standards set forth by the
FATF. Originally
composed of 16
members, the FATF has
expanded continuously
and is presently made up
of 39 members (37
countries and territories
and 2 regional
organizations).
The current members of the
FATF are: Argentina, Australia,
Austria, Belgium, Brazil,
Canada, China, Denmark,
European Commission
(https://ec.europa.eu/info/inde
x_en), Finland, France,
Germany, Greece, Gulf
Cooperation Council, Hong
Kong (China), Iceland, India,
Ireland, Israel, Italy, Japan,
Kingdom of the Netherlands,
Luxembourg, Malaysia,
Mexico, New Zealand, Norway,
Portugal, Republic of Korea,
Russian Federation, Saudi
Arabia, Singapore, South
Africa, Spain, Sweden,
Switzerland, Turkey, the United
Kingdom, and the United
States.

Substantial Money Laundering Issues
International Monetary Fund/World Bank
• Created to revive international trade in the post-World War II era, the IMF and the World Bank were designed to enhance international commerce by creating a system supported by global monetary cooperation.
Today, the IMF and the World Bank actively participate in global AML efforts through financial sector assessments, technical assistance in the financial sector, and policy development.
The Egmont Group
• The Egmont Group is an informal international network of FIUs, which are national centers that collect information on suspicious or unusual financial activity, designed to fight money laundering by encouraging
global cooperation and mutual exchange of information. The Egmont Group exists to increase the sharing of information and coordination between FIUs, and it offers training for FIU personnel.
European Union
• The European Commission enforces several European Union (EU) policies that involve AML efforts. The most prevalent is the Anti Money Laundering Directive (now in its sixth iteration and referred to as the Sixth Directive). The Sixth Directive applies to the financial sector
as well as to lawyers, notaries, accountants, real estate agents, casinos, and company service providers. Its scope also encompasses all providers of goods when cash payments are made or received in excess of EUR 10,000.

Enforcement and Prevention Strategies
At a minimum, a written Anti Money Laundering compliance program should:
• Establish a system of internal policies, procedures, and controls to ensure ongoing compliance with the regulatory AML regime.
• Provide for independent testing of compliance by internal auditors and/or outside examiners.
• Designate a compliance officer(s) to ensure day-to-day compliance with AML laws and regulations.
• Provide training on an ongoing basis for all personnel

Anti-Money Laundering Compliance
Programs
Compliance Officer: A business should select a person or team responsible for the day-to-day
monitoring of the compliance program. The compliance officer should be given broad
authority to monitor all aspects of the institution’s compliance, including the development
and refinement of the program and the monitoring of employee training programs. Such an
individual should also have the authority to conduct regular and ad hoc audits to ensure that
the program is functioning effectively, and to hire outside consultants as necessary to
investigate problems. Policy
Know-Your-Customer Programs: Financial institutions should implement know-your-customer
(KYC) programs. Generally, there are two components to an effective KYC program. First, a
financial institution should identify and conduct background checks on all customers opening
an account to prevent the creation of fictitious accounts. Second, financial institutions should
monitor existing customers’ activity to recognize when customers might be involved in
suspicious activity.

Special Problems for Insurance Companies
Although financial institutions, such as banks, are
primarily associated with money laundering activities,
insurance companies have become major targets of
money laundering operations due to the variety of
services and investment vehicles they offer that can be
used to conceal the source of funds. The most common
form of money laundering that insurance companies
face involves single premium contracts or policies.
Examples include purchases of annuities, lump-sum top-ups
to an existing life insurance contract, and lump-sum
contributions to personal pension contracts. Insurance
companies, like other financial institutions, should educate
their employees to look out for transactions that appear to
be inconsistent with a customer’s known legitimate
business or personal activities, or the normal transactions
for that type of account. To that end, insurance companies
should institute know-your-customer (KYC) programs.

Red Flags
Large purchase of a lump-sum contract when the customer typically purchases small,
regular payment contracts Use of a third-party check to make a purchase or investment
Lack of concern for the performance of an investment, but great
concern for the early cancellation of the contract
Use of cash as payment for a transaction that is typically handled with checks or other
forms of payment Lump-sum payments made by wire transfer or with foreign currency
Reluctance to provide normal information when setting up a policy or
account, or providing minimal information
Purchase of investments in amounts considered beyond the customer’s apparent means Use of a letter
of credit or other methods of trade finance to move money between countries where such trade is
inconsistent with the customer’s usual pattern
Establishment of a large investment policy, and within a short time period, the
customer requests cancellation of the policy and cash value paid to a third party
Use of wire transfers to move large amounts of money to or from a financial haven country, such as the
Cayman Islands, Colombia, Hong Kong, Liechtenstein, Luxembourg, Monaco, Panama, or Switzerland
Request to borrow the maximum cash value of a single premium
policy soon after paying for the policy

Detection of money laundering
Most insurance companies must
file reports of suspicious activity
and comply with the requirements
imposed by anti-money laundering
(AML) legislation, including the
implementation of an AML
compliance program. Accordingly,
insurance companies should
implement mechanisms to detect
suspicious activity. Incoming and
outgoing wire transfer logs can
help companies identify possible
patterns suggestive of money
laundering.
Account activity reports generally
show weekly and/or monthly
balances, deposits, and withdrawals.
Review of these statements can
identify those accounts with large
increases in average balances and
numbers of transactions. Policy
cancellation reports should identify
policies canceled within a specific
time period. Report details should
include the amount of the cash
surrender value, the identity of the
sales agent, and the actual term of
the policy.

Supplemental Regional Information (1/3)
Belgium
• Belgium’s primary AML law is the Law
on the Prevention of Money Laundering
and Terrorist Financing and on the
Restriction of the Use of Cash. Under
the law, financial entities and other
covered parties must conduct customer
due diligence (CDD), retain certain
records, and report suspicious
transactions. The law has been
amended periodically to incorporate
the latest European Union
(https://european-union.europa.eu/ind
ex_en) (EU) Anti-Money Laundering
Directives. Criminal money laundering
offenses are listed in Article 505 of the
Belgian Criminal Code.
China
• China combats money laundering with
several AML laws. Intentional money
laundering activities are prohibited by:
The Criminal Law The Law of the
People’s Republic of China on the
People’s Bank of China .The Anti-Money
Laundering Law of the People’s
Republic of China. Additionally, Chinese
financial institutions must employ
specific procedures to prevent, detect,
and report money laundering. AML
protocols include: Know-your-customer
(KYC) client identification checks
Prudent storage of client identification
materials and transaction records
Reporting of significant or suspicious
transactions Restrictions against
transactions with unidentified clients or
the opening of anonymous or
pseudonymous accounts
Germany
• Germany’s primary AML law is the
Money Laundering Act i (known as
Geldwäschegesetz or GwG), which is
part of the German Criminal Code
Under the GwG, financial entities and
other covered parties must conduct
customer due diligence (CDD),
implement risk-management policies
and procedures, retain certain records,
and report suspicious transactions. A
2021 amendment to the GwG adopted
the requirements of the European
Union’s (https://european-
union.europa.eu/index_en) (EU) Sixth
Anti-Money Laundering Directive.
of 15
of 15

Hong Kong
•ANTI-MONEY LAUNDERING AND COUNTER-
TERRORIST FINANCING ORDINANCE:
•Hong Kong’s Anti-Money Laundering and Counter-
Terrorist Financing Ordinance requires financial
entities and other covered entities to conduct
customer due diligence (CDD) and keep certain
records. Suspicious transaction reporting is
required by the Drug Trafficking (Recovery of
Proceeds) Ordinance Organized and Serious Crimes
Ordinance The Joint Financial Intelligence Unit
(JFIU), which is operated by members of the Hong
Kong Police Force
India
•THE PREVENTION OF MONEY-LAUNDERING
ACT 2002:
•The Parliament of India enacted this legislation
in 2002 to combat money laundering and
provide for the confiscation of property derived
from money laundering; the provisions went
into effect on July 1, 2005. The Act establishes
money laundering as a crime punishable by
imprisonment of between 3 and 7 years, unless
the involved funds are related to drug
trafficking, in which case the maximum prison
term extends to 10 years
Indonesia
•ANTI-MONEY LAUNDERING LAW
•The main AML law in Indonesia is Law No. 8 of
2010 regarding the Prevention and Eradication
of Money Laundering (Anti-Money Laundering
Law), which criminalizes money laundering and
related offenses.
•Under the Anti-Money Laundering Law, along
with Government Regulation No. 43/2015,
financial institutions and other covered entities
are subject to record keeping and reporting
requirements.
Supplemental Regional Information (2/3)

Japan
•ACT ON PREVENTION OF TRANSFER OF
CRIMINAL PROCEEDS
•Japan’s primary AML law is the Act on Prevention
of Transfer of Criminal Proceeds Under the Act,
financial entities, lawyers, accountants, and
other specified parties must conduct customer
due diligence (CDD), retain certain records, and
report suspicious transactions.
•Money laundering can be criminally prosecuted
under the Act on Punishment of Organized
Crimes and Control of Proceeds of Crime
Kenya
•PROCEEDS OF CRIME AND ANTI-MONEY
LAUNDERING ACT, 2009
•Kenya’s primary anti-money laundering law is the
Proceeds of Crime and Anti-Money Laundering Act,
Act No. 9 of 2009 Under the Act, financial entities
and other covered parties must conduct customer
due diligence (CDD), retain certain records, and
report suspicious transactions.
•The Act is enforced by the Financial Reporting
Centre (https://frc.go.ke/about-frc/mandate.html),
which was created by the Act to combat money
laundering and help identify criminal proceeds.
Netherlands
•MONEY LAUNDERING AND TERRORIST FINANCING
PREVENTION ACT
•The Dutch Money Laundering and Terrorist Financing
Prevention Act requires banks, insurers, accountants,
solicitors, and other persons and businesses to screen
their customers and report suspicious financial
transactions to the Dutch Financial Intelligence Unit.
This was enacted in 2008 and amended as recently as
2018. Compliance with this is monitored by De
Nederlandsche Bank, the Dutch central bank; the
Netherlands Authority for the Financial Markets; the
Bureau Financieel Toezicht) (BFT), the Dutch Financial
Supervision Office; and other entities.
Supplemental Regional Information
(3/3)

United States
THE BANK SECRECY ACT (BSA), which went into
effect in the United States in 1970, was the first
major piece of legislation aimed at detecting and
preventing money laundering. The purpose of the
law as stated in Section 5311 is “to require certain
reports or records where they have a high degree
of usefulness in criminal, tax, or regulatory
investigations or proceedings.” The BSA sets forth
a system of reporting and recordkeeping
requirements designed to help track large,
unusual, and suspicious financial transactions.
The BSA consists of two titles. Title I and Title II
Title I contains provisions requiring that financial institutions and securities brokers and dealers keep
extensive records of the transactions and accounts of their customers. It is codified in Title 12 of the
United States Code (U.S.C.), Sections 1829b and 1951–1959. Title II of the BSA (originally entitled
Currency and Foreign Transactions Reporting Act) requires banks, financial institutions (which include
casinos, securities brokers and dealers, currency exchanges, and others), and, in some cases,
individuals to report to the government certain transactions. Title II is codified at 31 U.S.C. §§ 5311–
5330.
Supplemental Regional Information
in The US

Conclusion
Global money laundering and fraud
remain persistent threats to the integrity
of financial systems worldwide. Criminals
continue to evolve their methods,
exploiting new technologies and
international loopholes to move illicit
funds. However, through stringent
regulatory frameworks like the Financial
Action Task Force (FATF) guidelines,
enhanced due diligence, and improved
global cooperation among law
enforcement agencies, significant
progress is being made to combat these
crimes.
Organizations must stay vigilant,
adopting robust anti-money
laundering (AML) practices,
utilizing advanced analytics, and
fostering a culture of compliance.
Fraud prevention efforts must also
include continuous education,
ethical leadership, and the
integration of technology, such as
AI and machine learning, to detect
and prevent suspicious activities.
Ultimately, the fight against global
money laundering and fraud requires
a concerted, multidisciplinary
approach that involves regulators,
businesses, and fraud examiners
working together to protect the
financial system and uphold the rule of
law. As financial criminals become
more sophisticated, so must our
efforts to counter them through
innovation, collaboration, and
unwavering commitment to
transparency and accountability.

Individual Rights
During
Examinations

Table of Contents
• Many fraud examinations might lead to legal action
therefore fraud examiners should be familiar with the
basic rights and freedoms of those involved in
investigations, especially of those suspected of fraud.
• This is very important for fraud examiners conducting
investigations that could result in criminal action.
• The gathering of evidence, which is in violation of the
law related to the rights of suspects may result in the
exclusion of that evidence later at a criminal trial.
• Employees’ Duties And Rights During
Investigations
• Electronic Communications Privacy Act Of 1986
• Monitoring Employees’ Social Media Activity
• Effect Of Violating Employees’ Privacy Rights
• Whistleblower Protections
• Rights And Obligations Under Criminal Law
• Data Protection Laws-united States
• The Law Relating To Government Search And
Seizure
• Understanding Consent Searches
• Understanding Defamation
• Privacy Laws And Data Privacy

Employees’ Duties and Rights
During Investigations - Italy
EMPLOYEES’
CONTRACTUAL
RIGHTS
• Italian companies can implement a code of conduct
for employees, provided that it does not violate the
provisions related to equality, nondiscrimination, and
the right of defense set forth in the Constitution of
the Republic of Italy.
According to Article 7 of
Italy’s Workers’ Statute,
when enforcing disciplinary
actions, employers must do
the following:
•Notify employees of disciplinary rules and display them in a manner accessible to all
employees.
•Clearly state the grounds for the disciplinary action.
•Issue a written warning to the employee, giving them a chance to respond within five days
before carrying out any disciplinary action beyond a verbal reprimand.
•Ensure that the disciplinary action is proportionate to the conduct.

•An employer, in certain circumstances, can use monitoring and surveillance
methods to uncover employee wrongdoing. Various federal and state laws govern
the availability and methods of such techniques.
•The ability to conduct monitoring and surveillance activities can be affected by laws
passed by Congress and state legislatures, common law
Surveillance
of Employees
•The ECPA, codified at 18 U.S.C. §§ 2510–2521, 2701–2710, 3121–3126, is the primary
federal statute that offers workers protections in communications privacy.
•The ECPA restricts employers’ right to monitor or search employees’ electronic
communications (e.g., phone calls, email, internet use).
•Both public and private employers are subject to the ECPA.
Electronic
Communications
Privacy Act of 1986
•The Wiretap Act, which governs the interception of electronic communications
•The Stored Communications Act (SCA), which covers access to stored
communications and records
•The Pen Register Act, which regulates pen
The ECPA is divided
into three parts:
Employees’ Duties and Rights During
Investigations – United States

Electronic Communications
Privacy Act of 1986
The ECPA contains multiple exceptions. The exceptions that employees and employers
should be familiar with, as they relate to the workplace, are:
• The ordinary course of business exception
• The consent exception
• The provider exception
Accessing Employees’ Email and Voice Mail
• The provider exception exempts providers of electronic communications services from the restrictions of the ECPA. In other words, if a message is stored on an email or voice
mail system that the company provides, then the employer can access those messages as it sees fit without violating the ECPA. Note, however, that this exception does not
allow the employer to access messages stored with an outside provider such as Google
• The consent exception permits access of stored messages if such access is authorized by the intended recipient of the communication. This means that employers will be free
to access employee email and voice mail (including messages stored with outside providers) as long as the employees have given their consent.

Monitoring Employees’ Social Media Activity
General guidelines for U.S. companies
that want to monitor social media
activity:
•Know traditional employment laws,
as well as laws that affect social
media monitoring.
•Provide a written social media policy.
•Obtain consent to monitor social
media activity conducted on
employee-owned devices.
•Apply the company’s policy on
disclosure of trade secrets and
confidential information to social
media use.
•Train managers, supervisors, and
human resources personnel on the
social media policy.
•Create a system for monitoring
employees’ social networking in a
consistent manner.
Monitoring Employees’
Internet Activity
•As with monitoring
employees’ email and social
media use, employers should
be aware of federal
protections against
monitoring employees’
internet use, including an
employee’s instant messages,
website postings, and so on.
Employers should be aware of
such protections even though
federal law provides
employees little protection
from an employer’s electronic
monitoring.

EFFECT OF VIOLATING EMPLOYEES’ PRIVACY RIGHTS
•Under the exclusionary rule, which is in effect in all federal and state
courts, evidence seized in violation of the Fourth Amendment will
be suppressed—that is, it becomes inadmissible—in any criminal
prosecution against the suspect except under a few limited
exceptions
The Exclusionary
Rule
•Section 1983 of Title 42, U.S. Code (https:// , provides
equitable and monetary remedies for violations of federally
protected rights where state action is involved. To prevail in
a claim under Section 1983, the plaintiff must prove
Civil Liability for
Damages (42
U.S.C. § 1983)
•(1) that they have been denied a right guaranteed by
the Constitution (2) that the defendant(s) deprived
them of that right while acting under the color of state
law.
two critical
issues:

Whistleblower Protections (1/2)
Belgium
•Belgium has no comprehensive
whistleblower protection laws;
however, a 2017 law protects
individuals who report financial
crimes to the Belgian Financial
Services and Markets Authority
(FSMA) under some
circumstances. Belgian law also
protects certain public
employees who report fraud or
abuse in the government.
France
•The 2016 Sapin II Law created a
single regime to protect
whistleblowers in all legal areas
and required organizations
subject to the law to adopt a
whistleblower protection program.
Whistleblowers cannot be barred
from recruitment, discriminated
against, sanctioned, terminated,
or subjected to any direct or
indirect retaliation
Germany
•Germany does not have
comprehensive
whistleblower protection
laws, and it has not adopted
the European Union’s (EU)
Whistleblowing Directive. In
some cases, however,
German courts may protect
whistleblowers from
retaliation.

Indonesia
•Indonesia does not have a
comprehensive
whistleblower law. However,
Article 153(1)(h) of the
Indonesian Labour Law
prohibits an employer from
terminating an employee
who reports a crime
committed by the employer.
Japan
•The Whistleblower Protection
Act protects certain
whistleblowers and prohibits
companies from retaliating
against whistleblowers.
Under the Act, companies
with more than 300
employees must establish a
reporting mechanism for
potential whistleblowers.
Kenya
•The Anti-Corruption and
Economic Crimes Act
protects persons who
provide assistance to the
EACC as well.
•Kenya’s Witness
Protection Act, 2006
protects witnesses in
criminal proceedings
Whistleblower Protections (2/2)

Rights and Obligations Under
Criminal Law
The Right to
Remain
Silent
Right to
Counsel
Right to a
Trial by Jury
Right to Be Free
from
Unreasonable
Search and
Seizure by
Government
Agents
Limits on
Using
Confessions
in Criminal
Cases

The Law Relating to Government Search
and Seizure
United States - EMPLOYEE PRIVACY RIGHTS UNDER THE FOURTH AMENDMENT
• The Fourth Amendment is the principal constitutional limitation on searches and seizures by
public authorities. In short, the Fourth Amendment prohibits unreasonable searches and
seizures, but it only applies to actions by the police or other governmental authorities. There
must be some form of “state action” involved for an individual to recover for violations of
constitutional rights. State action is involved during any investigation by a state or federal entity

Data Protection Laws - United States
Private Financial Information
• Privacy protections in the
financial services industry
are primarily contained in
the Fair and Accurate
Credit Transactions Act
(FACT Act) and the
Gramm-Leach-Bliley Act
(GLBA).
Fair and Accurate Credit Transactions
Act’s Red Flags Rule
• In 2007, the Federal Trade
Commission (FTC) issued final rules
and guidelines (known as the Red
Flags Rule) Implementing Sections
114 and 315 of the FACT Act. The
Red Flags Rule requires financial
institutions and certain creditors to
develop and implement a formal
written program to identify, detect,
and respond to red flags of
possible identity theft.
Gramm-Leach-Bliley Act
• Like the FACT Act’s Red Flags
Rule, the GLBA, which protects
customers’ financial information
held by banks working in
personal finance, imposes
privacy obligations on financial
institutions. Specifically,
financial institutions have
privacy obligations under the
Financial Privacy Rule and the
Safeguards Rule of the GLBA.

Businesses Outside the Financial and Health
Care Industries
•In addition to the federal laws summarized above, specific state laws
may regulate the collection and use of personal information by
businesses in the private sector. During the past few years, states have
been aggressive in creating protections for personal information, and
these protections typically apply to a broad set of personal information
and extend to all businesses operating in the state.
State Data
Protection and
Privacy Laws
•In addition to state laws, management must be aware of its industry-specific data
security standards, such as the PCI DSS, one of the most important private-industry data
security standards. All companies that store, process, or transmit credit or debit card
data must comply with this set of standards.
•The PCI DSS framework comprises the following 12 security requirements:
•Install and maintain a firewall configuration to protect cardholder data.
•Do not use vendor-supplied defaults of system passwords and other security
parameters.
Payment Card
Industry Data
Security Standard

The Law Relating to Government
Search and Seizure
Government Search and
Seizure
The law relating to search and seizure is extremely complex.
In many countries, the state’s power of search and seizure is
derived from common law and statutory law, and rights
providing search and seizure protections can even vary
within a country based on the laws of particular state or
province.

Understanding Consent Searches
CONSENT SEARCHES
• Consent is a recognized exception to the
requirement that government agents must
obtain a warrant before they search a
person, location, or vehicle for evidence of
a crime. Individuals are always free to
consent to searches.
EVIDENCE IN PLAIN VIEW
• In many countries with a warrant
requirement, the plain-view doctrine is an
exception to the general rule that the
government must obtain a search warrant
before conducting a search of a person,
location, or vehicle for evidence of a crime.

Understanding Defamation
Many countries have defamation laws that
provide redress against harm to reputation.
Generally, defamation refers to Defamation can
be a crime or a civil violation, and the law varies
by jurisdiction as to whether it is a criminal
offense or a civil wrong. For example, defamation
actions can be brought under the criminal and
the civil law in most Southeast Asian countries.
Elements of Defamation
In general, the the plaintiff must generally
• prove all the following elements:
• The defendant made an untrue statement of fact.
• The statement was communicated (published) to
third parties.
• The statement was made on an unprivileged
occasion.
• The statement damaged the subject’s reputation.

Elements of Defamation
•To be defamatory, a statement must be a
statement of fact (not opinion) and be untrue.
•Truth is an absolute defense to defamation.
Untrue Statement
of Fact
•To be defamatory, a statement must be published, either orally or in writing,
to a third party.
•Defamation does not occur when one accuses another directly and in the
presence of no other parties;
•To be defamatory, a statement must be heard or read by a third party.
Communicated
to Third Parties
•Basically, the law recognizes that there are some circumstances
in which the need to share information is so important that
people will be allowed to make mistakes occasionally without
having to worry about being sued for defamation.
On an Unprivileged
Occasion

Privacy Laws
Privacy
•The legal systems of different countries,
however, perceive privacy issues differently.
For example, U.S. notions of privacy are
different than those held by people in other
parts of the world.
•Specifically, in the United States, the right to
privacy is perceived as part of the concept of
liberty, but in most of the world, privacy is
perceived as a central tenet of human dignity
Two Categories
of Privacy Laws
•There are two categories of privacy laws: general privacy
laws and specific privacy laws.
•General privacy laws are designed to protect the general
privacy of the personal information of individuals.
•Specific privacy laws regulate particular aspects of
particular types of information. Common types of specific
privacy laws are those that concern:
•Online information
•Financial information
•Health information
•Communications
•Privacy at home

Data Privacy
Data Privacy
•Most countries have data privacy laws (also known as
information privacy or data protection laws) that
protect personal information about individuals from
disclosure, unauthorized access, and misuse.
•Typically, data privacy laws address:

How personal information is handled

How personal information is collected

How personal information is used

Who has access to personal information

When personal information is amended, changed, and
deleted
Organization for
Economic Co-operation
and Development
•(OECD) has published Guidelines on the Protection of Privacy
and Trans border Flows of Personal Data (Privacy Guidelines).
•Privacy legislation in most countries impose requirements such
as:

Obtained fairly and lawfully

Used only for the original specified purpose

Adequate, relevant, and not excessive to the specified purpose

Accurate and updated

Accessible to the data subject

Protected by reasonable security safeguards

Destroyed after its purpose is completed

Introduction
Basic Principles of Evidence
• In a legal sense, evidence refers to the testimony, documents,
exhibits, and other tangible objects offered to prove or
disprove the existence of an alleged fact during court
proceedings.
• Every aspect of a legal case —from filing the complaint to the
presentation of witnesses and exhibits—is affected by rules of
evidence.
• In every jurisdiction, the law of evidence governs the
admissibility of evidence in legal proceedings. The law of
evidence, however, varies between countries and legal systems.
• Common law legal systems have separate rules of evidence
that regulate the admission and evaluation of evidence by
courts..
• Civil law legal systems, however, do not have a separate code of
evidence law.
• Rules of evidence vary by jurisdiction, even within the same
country.
• Three Basic Forms of Evidence
• Direct versus Circumstantial Evidence
• Admissibility of Evidence
• Special Rules Concerning the Admission of Evidence in
Adversarial Proceedings
• Chain of Custody
• Impeachment
• Privileges and Protections

Three Basic Forms of Evidence
• There are three basic forms of evidence: testimonial,
real, and demonstrative
1. Testimonial evidence - the oral or written statements
made by witnesses under oath.
• Two types of testimonial witnesses: lay witnesses
and expert witnesses.
• A lay witness (or fact witness) - a nonexpert
witness who must testify from personal
knowledge about a matter at issue.
• An expert witness - a person who, by reason
of education, training, skill, or experience, is
qualified to render an opinion or otherwise
testify in areas relevant to resolution of a legal
dispute.
2. Real evidence - physical objects that played a part in
the issues being litigated. The term includes both
documentary evidence—such as canceled checks,
invoices, ledgers, and letters—and other types of
physical evidence such as printers, and tape
recordings.
3. Demonstrative evidence - a tangible item that
illustrates some material proposition (e.g., a map, a
chart, or a summary). It differs from real evidence in
that demonstrative evidence was not part of the
underlying event; it was created specifically for the
trial. Its purpose is to provide a visual aid for the fact
finder. Nonetheless, demonstrative evidence is
evidence and can be considered by the fact finder in
reaching a verdict.

Direct Versus Circumstantial Evidence
• There are two basic categories of admissible evidence: direct evidence and circumstantial evidence
• Direct evidence: evidence that tends to prove or disprove a fact in issue directly, such as eyewitness
testimony or a confession.
• Circumstantial evidence is evidence that tends to prove or disprove facts in issue indirectly, by inference.
• Many fraud cases are proved entirely by circumstantial evidence, or by a combination of circumstantial and
direct evidence, but seldom by direct evidence alone.
• Fraudulent intent is the most difficult element to prove in many fraud cases and is usually proved
circumstantially because direct proof of the defendant’s state of mind is impossible.
• The distinction between direct and circumstantial evidence, is more significant in common law systems than
in civil law systems.
• In trials held in civil law systems, the court weighs all relevant evidence, regardless of type, to reach its
decision

Admissibility of Evidence
• Not all evidence is admissible. To be admissible, evidence must
normally satisfy certain requirements.
• Common law systems tend to have far more stringent restrictions
on the admission of evidence than civil law systems due to the
extensive use of juries in common law systems.
• In common law systems, limitations on the admission of evidence
are intended to protect jurors from irrelevant evidence and to
ensure that the defendant receives a fair trial.
• In common law systems using adversarial processes questions
involving the admissibility of evidence occur when one party objects
to another party’s offer of evidence. If the judge overrules the
objection, the evidence is admitted and can be considered for fact
finding.
• Admissibility Criteria - Relevant:
• A basic requirement of admissibility in both common and civil law
systems is that evidence must be relevant.
• In common law system admissibility requires evidence being
relevant to material issues in dispute.
• In civil law system, evidence is admitted if the presiding judge
determines it is relevant
• Evidence is relevant if it tends to make some fact that is in dispute
more or less likely than it would be without the evidence.
• In common law systems using adversarial processes, the fact that an
item of evidence is relevant does not automatically mean that it will
be admitted.
• Relevant evidence might be excluded if it is unduly prejudicial,
threatens to confuse or mislead the jury, threatens to cause
unnecessary delay or a waste of time, or is merely cumulative.
• Relevant evidence can be either inculpatory or exculpatory.
• Inculpatory evidence tends to show that an individual is guilty or at
fault.
• Exculpatory evidence tends to clear an individual from fault or guilt.

Admissibility of Evidence
• Admissibility Criteria – Authentic:
• Authentic evidence is evidence that accurately represents the
fact or situation it is offered to prove or disprove.
• In common law systems using adversarial processes, evidence
will not be admissible unless it is established as authentic.
• in civil law systems, authenticity is a factor to be considered by
the fact finder in deciding, given all the evidence presented at
trial, just how much weight to give the evidence.
• An item of evidence deemed relevant and authentic will be
reliable, and, therefore, it can be used by the fact finder to
ascertain the truth.
• Admissibility of Testimonial Evidence
• In civil law jurisdictions, testimonial evidence is admitted if the
presiding judge decides it is relevant.
• To be admissible in common law countries, testimony generally
must be relevant and based on:
• Fact, not speculation or opinion
• Direct knowledge, not hearsay
• witnesses have direct knowledge if they:
 Performed the act or participated in it
 Saw the act being performed
 Heard about the act from the defendant (or in some
circumstances, from a co-conspirator)

Chain of Custody
• The chain of custody is a means of establishing that
there has not been a material change or alteration to a
piece of evidence.
• It is both a process and a document that memorializes
(1) who has had possession of an object and (2) what
they have done with it.
• Establishing the chain of custody for an item of
evidence demonstrates its authenticity, and it shows
that the item has not been altered or changed from the
time it was collected through production in court.
• The goal is to show that access to the evidence was
limited to those who testified in the chain of custody
and thereby demonstrate that the evidence has not
been materially altered.
• In fraud cases, the array of physical evidence, all the
paper documents, audio and video recordings, and
information-processing equipment, such as computers,
demands close monitoring in the chain of custody.
• At a minimum, the following chain of custody
procedures should be followed:
 Identify each item that contains relevant
information.
 Document each item, who it was received from,
who authorized its removal, the location of the
item, and the date and time the item was
received.
 Maintain a continuous record of the item’s
custody as it changes hands.

Impeachment
• Impeachment is the practice of questioning a witness’s
knowledge or credibility.
• Under the evidence rules in adversarial systems, the
adverse party is usually entitled to offer evidence to
impeach the testimony or credibility of a witness.
• There is no cross-examination for inquisitorial processes,
therefore impeachment is not an issue for civil law systems
using inquisitorial processes.
• The most common ways an attorney might impeach a
witness include efforts to show that the witness:
 Is influenced by bias or self-interest
 Has an impaired ability to observe
 Made prior inconsistent statements
 Has been convicted of a felony or equivalent crime
 Has a reputation for untruthfulness
 Another way to impeach witnesses is to show that their
ability to observe (i.e. see, hear, smell, or feel some item in
question) was impaired.
 In some common law systems, a witness’s credibility may
be challenged, though not automatically impeached, by
showing that the person has been convicted of a felony
crime.
 Impeachment is complete when a witness admits the
impeaching matter; if the witness does not admit it, then
opposing counsel is usually required to prove the
impeachment.
 CFEs should keep in mind that the impeachment methods
may be used not only on the defendant and defense
witnesses, but also on witnesses for the prosecution.

Privileges and Protections
• There are evidentiary privileges and protections that prevent
certain types of evidence from being discovered or produced
during trial.
• If a privilege applies to information, the court and the parties
seeking the information are denied access to it, and judges and
juries must disregard any evidence they do actually hear if it is
deemed privileged afterward.
• Civil law jurisdictions have doctrines that serve the same
function as privileges and protections in common law
jurisdictions (i.e., doctrines that exclude relevant evidence from
being discovered or produced during trial) even if such
doctrines are not classified as privileges.
• Legal professional privileges: are rules of evidence that
preclude disclosure of confidential communications between
professional legal advisors (e.g., solicitor, barrister, or attorney)
and their clients. Legal professional privileges, are not absolute
because they are subject to waiver.
• The legal professional privilege can be waived in various ways,
including:
 The client testifies about confidential communications.
 The attorney testifies about confidential
communications at the client’s command or request.
 The client puts confidential communications in question.
 The client, the attorney, or a third party carelessly or
inadvertently discloses confidential communications to
an outside party (which sometimes results in waiver).
• To be protected under the attorney-client privileges, a
communication must be made to obtain legal advice.
• Many common law jurisdictions have a litigation privilege that
protects materials prepared in anticipation of litigation.

Introduction
• A civil action or civil suit arises when
individuals or business entities (such as
corporations or partnerships) disagree on a
legal matter.
• A civil action usually involves a dispute over
something(such as the terms of a contract)
or a claim that one party has violated a legal
duty owed to it by the other party.
• In a fraud case, the victim may be able to
seek compensation from the fraudster in a
civil action based on common law fraud,
breach of fiduciary duty, or
misrepresentation.
• The person who sues is the plaintiff, and
the person being sued is the defendant.
• Procedure in Civil Cases
• Decisions and Remedies in Civil Cases
• Alternative Dispute Resolution

Procedure in Civil Cases: Pleadings
• The terminology describing steps in the civil action process is
not consistent in legal systems throughout the world but
focuses on jurisdictions that follow the three phases of civil
litigation: (1) pleadings, (2) discovery, and (3) the trial itself.
Pleadings
• A civil action begins when the plaintiff files a pleading with the
appropriate court, usually in the jurisdiction in which the
defendant resides or where the claim originated.
• The pleading sets out the complaint against the defendant and
the remedy that the plaintiff is seeking (i.e., a writ summons, a
statement of claim, a complaint, a declaration, a petition, or an
application). This depends on the court where action is
commenced.
• Most jurisdictions require fact pleadings, in which the plaintiff
must identify:
 The grounds for legal relief
 A summary of the evidence
 The specific facts on which the party’s claim relies
 Key items of expected evidence
• Copies of pleading filed is served on the defendant, who must
provide a statement of defense in response to the originating
document. Failure of defendant to respond within the specified
period implies forfeiture of the case. In this case the court
issues a default judgement holding the defendant liable as it
deems fit.
• Liability assigned in a default judgement is limited to the relief
requested in the plaintiff’s complaint.
• Defendant can raise counterclaim (i.e. countersuit) to level a
claim against the plaintiff.
• Defendant’s counter claim and original complaint will be tried
concurrently.
• The final judgement will stipulate a decision on each side’s
claim.

Procedure in Civil Cases: Discovery
Preservation of Evidence
• Most civil litigation concerning fraud involves many documents,
tangible items, or digital information that might serve as
evidence.
• Common law jurisdictions impose a duty on parties in civil
litigation to take affirmative steps to preserve relevant
evidence, and this duty might begin prior to the
commencement of litigation.
• Civil law countries tend to have a narrower scope of what
evidence is required for litigation.
• The court dictates what evidence must be preserved and
produced by the parties or others with relevant information.
• In civil law jurisdiction, court order is required to preserve
evidence prior to a lawsuit being filed. Parties may not be
favoured if any fails to preserve ad produce relevant evidence.
Evidence Gathering
• The evidence gathering process begins after submission of
pleadings by all parties to the court and varies from country to
country along the lines of adversarial processes (common law
systems) and inquisitorial processes (civil law systems).
Common Law Systems’ Discovery Process
• After statements of claim and defense are filed in common law
jurisdictions, each party is entitled to pretrial discovery.
• Discovery refers to the formal process whereby the parties
collect evidence and learn the details of the opposing side’s
case.
• Pretrial discovery is intended to clarify the claim against the
defendant and to permit each side to examine the evidence
that will be used in court by the other side.
• Each party must file an affidavit of documents, or affidavit of
records.

Procedure in Civil Cases: Discovery
• Privileged documents are indicated for judges to examine the
documents and determine if the privilege applies.
• An oral examination for discovery - deposition and a written
examination - an interrogatory.
• A party may be examined or questioned by the other party
either orally or by written questions - examination for
discovery.
• An oral examination may be used to obtain evidence about the
party’s own case or the opponent’s, or it may be used to
preserve testimony for trial.
• The collection of oral or written testimony in the pretrial stage
does not remove the need for such testimony to be presented
during trial. A witness in a pretrial oral examination would also
need to testify at trial, barring some exception to the rules.
Civil Law Systems’ Discovery Process
• In inquisitorial processes of civil law system, instead of the
parties seeking evidence from each other, the judge seeks
evidence from the parties and other sources.
• The evidence is gathered contemporaneously with the trial.
• Civil law legal systems tend to value documentary and written
evidence over oral testimony.
• When witnesses give testimony, the judge orchestrates the
questioning instead of the parties.
• The judge is also responsible for collecting documents and
physical evidence.
• Many civil law systems have professional secrecy obligations
which requires confidentiality of information obtained from
clients in the course of those services.

Procedure in Civil Cases: Common Law Trial
• The judge orchestrates the proceedings by calling witnesses
and eliciting testimony.
• The trial record consists of the judge’s summaries of evidence.
Civil Trials in Common Law Jurisdictions
• Trial Process in common law jurisdictions are divided into (a)
the pretrial stage and (b) the trial stage. Pre-trail outcome
determines the trial stage process.
• Civil cases often involve pretrial motions in which the parties
ask the court to rule on a number of issues that relate to how
the trial will be conducted such as motion for summary
judgement asking the court to decide the case without a trial.
• Motion generally not favoured by the court as they terminate
the proceedings before trial and the moving party bears a
heavy burden to demonstrate that there are indeed no
circumstances, factually or legally, under which the opposing
party could possibly be entitled to relief.
• If the motion is granted all the issues between the parties are
disposed of and the case ends, but the opposing party may
appeal. If the motion is denied, then the case proceeds to trial.
• During the pretrial stage, parties may also seek provisional
remedies. Provisional remedies are prejudgment court orders
designed to preserve the status quo until the court issues a
final judgment.
• Plaintiffs in fraud cases can seek a court order to prevent the
defendant or a third party from disposing of, spending,
damaging, transferring, or concealing assets or property while
the lawsuit is pending. These court orders are generally known
as prejudgment attachments, freezing order, precautionary
attachment or a preventative injunction.

Procedure in Civil Cases: Common Law Trial
• The purpose of a civil trial is to determine whether there is some
basis upon which the plaintiff is entitled to a remedy from the
defendant and, if so, what the appropriate remedy might be.
• To achieve this purpose, the jury (or in cases tried without a jury,
the judge) must listen to both sides and determine the facts of the
case.
• When juries are used for civil trials in common law jurisdictions,
the requirements are typically less stringent than in criminal trials
such as lower number of jurors and unanimous jury verdict less
likely than criminal trials.
• In a civil suit in a common law jurisdiction, the plaintiff must prove
that it is more probable than not that the defendant is liable. This
is referred to as the preponderance of the evidence.
• In the adversarial process present in common law jurisdictions,
the trial begins with the plaintiff presenting the evidence against
the defendant.
• The defendant may then cross-examine the plaintiff’s witnesses to
test their evidence. Once the plaintiff has presented their case, the
defendant can present their own evidence, which may include
calling witnesses, and the plaintiff can cross-examine the
defendant’s witnesses.
• Expert testimony is another common facet of trials—especially for
technical cases like white-collar crimes.
• Fraud examiners and accountants may be used as experts in
cases to compute and testify to damages.
• Because jurors generally have a difficult time understanding and
evaluating expert testimony—such testimony may have little
effect on the outcome of the trial.
• Throughout the trial, the judge must ensure that all of the
evidence presented and, in adversarial proceedings, that all of the
questions asked are relevant to the case.
• At the conclusion of the trial, both the plaintiff and the defendant
present a summary of their arguments, and the judge or jury
must then consider the evidence presented and make a decision
that is based on what the evidence shows to be most probable.

Procedure in Civil Cases: Civil Law Trial
Civil Trials in Civil Law Jurisdictions
• Civil cases in civil law jurisdictions vary considerably from
common law civil cases. The most obvious difference is that
civil law trials are a continual series of meetings and written
correspondences, rather than a single event, as in common law
systems.
• Throughout the process, evidence is introduced and evaluated
by the court, and motions are submitted and decided on by the
judge. The division between pretrial and trial stages found in
common law civil trials, therefore, does not apply in the typical
civil law setting.
• The standard of proof in civil law jurisdictions typically does not
change in criminal and civil trials; it is often described as the
inner conviction of the judge, and sometimes called the
conviction intime standard. This standard requires stronger
evidence than the common law preponderance of the
evidence standard used in civil trials but not as much as the
common law beyond a reasonable doubt standard used in
criminal trials.
• The judge chooses an expert (usually only one per issue) to
give testimony on a subject and make expert findings on behalf
of the court.
• Throughout the trial, the judge evaluates evidence and records
it in the trial record.
• At the final proceeding, which resembles the trial stage in
common law jurisdictions, the judge rules on the admissibility
and relevance of the evidence in the record and presents it.
• After presenting the evidence in court, the judge, jury, or judge
panel (depending on the jurisdiction and type of case) rules on
the issues in the case.

Procedure in Civil Cases: Civil Appeals
• Generally, both sides in a civil case may appeal from an
adverse judgment, either as to liability or damages.
Appeal in common law systems:
• The appellate court is largely limited to reviewing the
legal decision of the trial court, rather than the factual
determination of the judge or jury.
• The appeals court may reverse and remand for a new
trial on some or all of the issues; order that a certain
portion of the awarded damages be remitted; or enter
final judgment, if legal grounds are clear, in favor of
either party.
Appeal in civil law systems:
• The civil appellate court may review issues of both law
and fact, meaning it may obtain additional witness
testimony, gather new documentary evidence, and
obtain new expert opinions.
• The appellate court may reverse, affirm, remand for
additional proceedings, and (in some jurisdictions)
modify the trial court’s decision.

Introduction
• Testimonial evidence is evidence presented in the
form of statements made during a legal
proceeding, such as a trial, an administrative
hearing, or a deposition.
• Witness testimony differs in adversarial and
inquisitorial jurisdictions.
• Adversarial systems substantiate testimonial
evidence more than inquisitorial systems, and
cross-examination of witnesses is virtually non-
existent in inquisitorial systems.
• CFEs, accountants, and auditors are often requested
to provide testimony in criminal and civil
prosecutions where their services can be used to
support investigations of matters such as financial
frauds, embezzlements, misapplication of funds,
bankruptcy fraud, improper accounting practices,
and tax fraud.
This session covers:
• Types of testimony
• Considerations for Testifying as a Lay Witness
• Considerations for Testifying as an Expert
• Qualifying to Testify as an Expert Witness
• Preparing to Testify
• Direct Examination & Cross Examination
• Expressing an Opinion on Guilt
• Witness Immunity for Experts

Types of Testimony
• There are two basic kinds of testimony.
• The first is lay testimony (sometimes called factual testimony), where witnesses testify about what
they have experienced firsthand and their factual observations.
• The second kind is expert testimony, where a person who, by reason of education, training, skill, or
experience, is qualified to render an expert opinion regarding certain pertinent issues.
• a fraud examiner who worked on a case will be capable of providing lay testimony based on
observations made during the investigation.
• When a trial involves issues that are complex or unfamiliar to most people, as is common in incidents
of fraud, expert testimony is appropriate to help the fact finder understand these issues.
• The type of testimony provided by the fraud examiner depends on both their role in the case and
whether they are qualified to provide expert testimony.

Testifying as a Lay Witness
• A lay witness (or fact witness) is anyone who provides
nonexpert testimony in a legal proceeding.
• Before testimony begins, fraud examiners serving as fact
witnesses will need to create a solid foundation.
• Witnesses—particularly those involved in an investigative
process—should familiarize themselves with the
differences between information and evidence.
• Information consists of all facts, documents, observations,
statements, or other indications of what happened.
• Evidence is information that is presented at trial, under the
supervision of the judge, to prove or disprove an alleged
fact at issue (i.e., to convince the judge or jury of the truth
or falsity of the fact at issue).
• Permissible sources for factual testimony includes:
 Observations
 Information collected during investigations
 Calculations and summaries
 Research
 Opinions (typically limited in scope)
• Testimony derived from personal involvement in any of the
sources enumerated in this list will generally be more
effective and more easily admitted than all other types.
• A fact witness might be allowed to testify in the form of an
opinion when such opinion is:
1) rationally based on the perception of the witness (i.e.,
one that an average person would form from those
perceptions) and
2) helpful to a clear understanding of the witness’s
testimony or the determination of a fact in issue.

Testifying as an Expert
• Experts can serve one of two roles in the trial process:
testifying expert or consulting expert.
• Testifying expert witnesses give opinion testimony
when specialized knowledge is needed to help the fact
finder understand evidence or determine a fact in
issue.
• Consulting experts typically do not testify at trial but
are hired to provide technical assistance to the attorney
in preparing the case.
• In adversarial processes, both testifying and consulting
experts have ongoing involvement with the litigation
team for both sides.
• In inquisitorial processes, the court hires the expert to
testify on technical issues.
• Four main functions of all expert testimony include:
• Establish the facts
• Interpret the facts
• Comment on the opposing expert’s facts and opinions
• Define the professional standards in the particular
area of your opponent’s expertise
• Depending on the rules of the jurisdiction, the expert
witness may be called by the court (i.e., the judge) or
the parties.
• CFEs acting on behalf of prosecution or plaintiff may
testify to their findings and if acting for the defense or
defendant, might testify based on the opinion
expressed by the other party.

Wishing you a
Successful ACFE
Certification
Exam!

ACFE CERTIFICATION TRAINING ON LAW.pptx

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