Fin Crime Exam 3
embezzlement
"The unlawful misappropriation or misapplication by an offender to his/her own use or purpose of money, property, or some other thing of value entrusted to his/her care, custody, or control." Originally, there was no crime of embezzlement under the common law. It is a statutory crime that evolved from larceny.
To convict a defendant under RICO, the government must prove beyond a reasonable doubt:
(1) that a criminal enterprise existed; (2) that the enterprise affected interstate commerce; (3) that the defendant was associated with or employed by the enterprise; (4) that the defendant engaged in a pattern of racketeering activity; and (5) that the defendant conducted or participated in the conduct of the enterprise through that pattern of racketeering activity through the commission of at least two acts of racketeering activity as set forth in an indictment. The law has been used to prosecute members of the mafia, the Hells Angels motorcycle gang, among many others.
"banned hazardous substance"
(A) any toy, or other article intended for use by children, which is a hazardous substance, or which bears or contains a hazardous substance in such manner as to be susceptible of access by a child to whom such toy or other article is entrusted; or (B) any hazardous substance intended, or packaged in a form suitable, for use in the household, which the Commission ... classifies as a "banned hazardous substance" on the basis of a finding that, notwithstanding such cautionary labeling as is ..., the degree or nature of the hazard involved in the presence or use of such substance in households is such that the objective of the protection of the public health and safety can be adequately served only by keeping such substance, when so intended or packaged, out of the channels of interstate commerce
warning signs of embezzlement:
-An employee who refuses to take vacation time can occur because they are afraid that theft will be detected while they are absent -An employee who continually works overtime An employee who wants to take work home -Excessive personal spending, like a new car or trips, by an employee whose income cannot support this kind of spending -Petty cash disappearing quickly Extravagant expenses during employee travel Employees with personal vendor relationships (Keep watch for employees who often lunch with vendors, or who are related to hired contractors) Depleting office supplies at unusual rate
Consumer Crime
-Anyone who purchases goods, pays for services, rents a home or other type of property, makes purchases on credit, keeps money in a bank, or engages in any of the nearly infinite other types of commercial activity in our society is a "consumer." -Storing credit and banking information in the cloud is more risky than driving without a seat belt, according to recent research.. -Consumers globally lost $158 billion to cyber crime in the past year. -In the U.S. alone, the figure is nearly $30 billion. Director of the FBI called the Internet, "the most dangerous parking lot imaginable," and warned people to be just as aware of scams, compromised websites, malware and other threats as they would be of a physical theft. -A vast body of consumer law has developed at the state and federal levels to protect consumers from fraud and other deceptive practices.
Bribery Basics
-Bribery requires a showing that something of value was corruptly given, offered, or promised to a public official (as to the giver) or corruptly demanded, sought, received, accepted, or agreed to be received or accepted by a public official (as to the recipient) with intent, inter alia, 'to influence any official act' (giver) or in return for 'being influenced in the performance of any official act' (recipient). -Bribery requires intent 'to influence' an official act or 'to be influenced' in an official act. -For bribery there must be a quid pro quo: a specific intent to give or receive something of value in exchange for an official act.
General Remediation Strategies for the Top Cybercrimes
-SECURITY AUDITS AND CONTROLS -BUSINESS INSURANCE -INCIDENT RESPONSE PLAN
prosecuting Public officials
18 U.S.C. § 201 prohibits bribery of public officials and witnesses. Applies to the giver (usually a private individual or company) and recipient (US official). -GIVER: In order to find a defendant-GIVER guilty, the government must prove the following three elements beyond a reasonable doubt: 1. The defendant (GIVER) gave, offered, or promised something of value 2. to a public official 3. corruptly with the intent to influence an official act. I.e., defendant intended to give something of value in exchange for an official act
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act)
Criminalized the financing of terrorism and augmented the existing BSA framework by strengthening customer identification procedures Required financial institutions to have due diligence procedures (and enhanced due diligence procedures for foreign correspondent and private banking accounts) Improved information sharing between financial institutions and the U.S. government by requiring government-institution information sharing and voluntary information sharing among financial institutions Expanded the anti-money laundering program requirements to all financial institutions Increased civil and criminal penalties for money laundering Provided the Secretary of the Treasury with the authority to impose "special measures" on jurisdictions, institutions, or transactions that are of "primary money laundering concern" Facilitated records access and required banks to respond to regulatory requests for information within 120 hours
Cybercrime: Background
Cybercriminals rarely are in close physical contact with/geographic proximity to their targets. However, their distance and anonymity diminish neither the incidents of their crimes nor the damage they can inflict. Quite the contrary, it is their very remoteness that helps them commit crimes that can be of equal or greater magnitude than traditional crimes, and hide their behavior and crimes from their victims and members of law enforcement. Cybercrimes also share a number of common characteristics: Cybercriminals usually are located internationally, making finding and extraditing them difficult. Cybercrimes often are directed and targeted toward a specific person(s) or entity. Cyberattacks are multifaceted in terms of their tools, vectors and type, and at times, can lead to a cybercrime that is actually a combination of crimes. Cybercrime is more prevalent, more damaging and more sophisticated than ever before.
Prevention of Embezzlement
Deposit loose cash daily and reconcile bank statements monthly. Keep track of petty cash. Give employees separate financial duties otherwise known as "checks and balances" For example, the employee who writes the checks should not be the employee who reconciles the bank statement or cashes the check. Manage by walking around: let employees know that you are keeping an eye on things around the company. Do not go searching through employee lockers or personal items; just be watchful for changes or unusual activity. Make sure that employee travel is supported by appropriate paperwork.
Embezzlement vs Larceny
Embezzlement is technically a form of larceny. Whereas larceny requires a taking of property at the outset, embezzlement is a wrongful appropriation subsequent to an originally lawful access. What distinguishes embezzlement from other types of theft is the violation of financial trust between the owner of the property and the offender.
Embezzlement Is connected to workplace deviant behavior
Employee theft does not occur in a vacuum, but is often found in conjunction with high rates of other workplace deviant behavior. The financial impacts of workplace deviant behavior, when coupled with the indirect costs of higher levels of stress, increased absenteeism, higher turnover, raised insurance premiums, increased number of lawsuits, and lower morale make workplace deviance a problem for businesses of all sizes that can reach an annual price tag hovering in the billions of dollars.
Money Laundering control Act (1986)
Established money laundering as a federal crime Prohibited structuring transactions to evade CTR filings Introduced civil and criminal forfeiture for BSA violations Directed banks to establish and maintain procedures to ensure and monitor compliance with the reporting and recordkeeping requirements of the BSA
Bank Secrecy Act (1970)
Established requirements for recordkeeping and reporting by private individuals, banks and other financial institutions Designed to help identify the source, volume, and movement of currency and other monetary instruments transported or transmitted into or out of the United States or deposited in financial institutions Required banks to (1) report cash transactions over $10,000 using the Currency Transaction Report (CTR); (2) properly identify persons conducting transactions; and (3) maintain a paper trail by keeping appropriate records of financial transactions
Four Elements of Domestic Money Laundering
Four Elements of § 1956(a) 1. Financial Transaction involving 2. Proceeds of a Specified Unlawful Activity 3. Knowledge that money is dirty 4. Intending to: - -Promote the SUA, § 1956(a)(1)(A)(i) -Evade Taxes, § 1956(a)(1)(A)(ii) -Conceal or Disguise the money, § 1956(a)(1)(B)(i) -Avoid Transaction Reporting Requirements, § 1956(a)(1)(B)(ii)
Cybercrime Examples
Identity Theft—occurs when someone unlawfully obtains another's personal information and uses it to commit theft or fraud. Tax-Refund Fraud Corporate Account Takeover -- surreptitiously obtaining an entity's financial banking credentials, using software to hijack one of its computers remotely and stealing funds from the entity's bank account Theft of Sensitive Data -- Sensitive data include unencrypted credit card information stored by a business, personally identifiable information, trade secrets, source code, customer information and employee records Theft of Intellectual Property
Top Categories of Consumer Complaints
In 2009, the top fifteen categories of consumer complaints were: 1 Identity Theft 2 Third Party and Creditor Debt Collection 3 Internet Services 4 Shop-at-Home and Catalog Sales 5 Foreign Money Offers and Counterfeit Check Scams 6 Internet Auction 7 Credit Cards 8 Prizes, Sweepstakes and Lotteries 9 Advance-Fee Loans and Credit Protection/Repair 10 Banks and Lenders
Criminal Violation of the Consumer Safety Protection Act: 15 U.S. Code § 2068
It shall be unlawful for any person to— (1) sell, offer for sale, manufacture for sale, distribute in commerce, or import into the United States any consumer product ... that is not in conformity with an applicable consumer product safety rule ...; (2) sell, offer for sale, manufacture for sale, distribute in commerce, or import into the United States any consumer product, or other product or substance that is— subject to voluntary corrective action taken by the manufacturer, in consultation with the Commission, of which action the Commission has notified the public or if the seller, distributor, or manufacturer knew or should have known of such voluntary corrective action; or a banned hazardous substance
Money laundering: Basics
Money is the prime reason for engaging in almost any type of criminal activity. Money-laundering is the method by which criminals disguise the illegal origins of their wealth and protect their asset bases, so as to avoid the suspicion of law enforcement agencies and prevent leaving a trail of incriminating evidence. Money-laundering is the process that disguises illegal profits without compromising the criminals who wish to benefit from the proceeds. There are two reasons why criminals - whether drug traffickers, corporate embezzlers or corrupt public officials - have to launder money: the money trail is evidence of their crime and the money itself is vulnerable to seizure and has to be protected.
Organizational Crime goals and examples
OC groups' primary goal is economic gain and they will employ an array of lawful and illicit schemes to generate profit. Crimes such as drug trafficking, migrant smuggling, human trafficking, money laundering, firearms trafficking, illegal gambling, extortion, counterfeit goods, wildlife and cultural property smuggling, and cyber crime are keystones within TOC enterprises. The vast sums of money involved can compromise legitimate economies and have a direct impact on governments through the corruption of public officials. OC groups, however, are able to target victims and execute their schemes from anywhere in the world; thus, the extent of their presence within a particular area does not necessarily reflect the degree of the threat they pose.
Occupational crime
Occupational crime describes criminal offenses that arise through opportunity created through one's employment. Embezzlement/employee theft of company property, misuse of company information (e.g., selling company trade secrets), and vandalism of company property all fall under the umbrella of occupational crime.
Organizational Crime
Organized crime groups are self-perpetuating associations of individuals who operate, wholly or in part, by illegal means. They constantly seek to obtain power, influence, and monetary gains. There is no single structure under which TOC groups function—they vary from hierarchies to clans, networks, and cells, and may evolve into other structures. These groups are typically insular and protect their activities through corruption, violence, international commerce, complex communication mechanisms, and a hierarchical organizational structure.
Racketeer Influenced and Corrupt Organizations Act (RICO)
Passed in 1970, the Racketeer Influenced and Corrupt Organizations Act (RICO) is a federal law designed to combat organized crime in the United States. It allows prosecution and civil penalties for racketeering activity performed as part of an ongoing criminal enterprise. Such activity may include illegal gambling, bribery, kidnapping, murder, money laundering, counterfeiting, embezzlement, drug trafficking, slavery, and a host of other unsavory business practices.
Money laundering: Process
Placement, moving the funds from direct association with the crime; Layering, disguising the trail to foil pursuit; and, Integration, making the money available to the criminal, once again, with its occupational and geographic origins hidden from view. These three stages are usually referred to as placement, layering and integration.
Group embezzlement
Since partners in crime can increase opportunities for conflict or capture, many offenders act alone; however, the influence of co-workers on theft behavior can have an enormous impact on such deviant behavior. Research shows that the behavior of theft in the workplace can become an accepted practice within any group, and shows how a group can work together to create a system of theft that is beneficial.
Annunzio-Wylie Anti-Money Laundering Act (1992)
Strengthened the sanctions for BSA violations Required Suspicious Activity Reports (SARs) Required verification and recordkeeping for wire transfers
Dodd-Frank Act on Consumer Protection
The Dodd-Frank Wall Street Reform and Consumer Protection Act contains a provision, entitled the "Consumer Financial Protection Act of 2010" which established an independent entity within the Federal Reserve System, the Bureau of Consumer Financial Protection: The Bureau is charged with: Conducting financial education programs; collecting, investigating, and responding to consumer complaints; collecting, researching monitoring, and publishing information relevant to the functioning of markets for consumer financial products and services to identify risks to consumers and the proper functioning of such markets; supervising covered persons for compliance with Federal consumer financial law; and issuing rules, orders, and guidance implementing Federal consumer financial law.
History of Protections Against Consumer Crime
The history of consumer protection in the United States is the story of specific formal legal responses to crises and emergencies that generate great public outrage and require a public response. This pattern began against the background of the 19th century common law, which emphasized freedom of contract and caveat emptor (let the buyer beware). American consumers are protected from unsafe products, fraud, deceptive advertising, and unfair business practices through a mixture of national, state, and local governmental laws and the existence of many private rights of actions.
Bribery
The offering, giving, receiving, or soliciting of something of value for the purpose of influencing the action of an official in the discharge of his or her public or legal duties. -The expectation of a particular voluntary action in return is what makes the difference between a bribe and a private demonstration of goodwill. -Regardless of who initiates the deal, either party to an act of bribery can be found guilty of the crime independently of the other. -A bribe can consist of immediate cash or of personal favors, a promise of later payment, or anything else the recipient views as valuable.
The Federal Trade Commission
The principal consumer protection agency at the federal level is the United States Federal Trade Commission ("FTC"). The FTC has two principal goals: 1. to protect consumers by preventing fraud, deception, and unfair business practices in the marketplace and 2. to maintain competition by preventing anticompetitive business practices.
embezzlement as a specific intent crime.
The requirement that the defendant act with the intent to deprive the owner of his property makes embezzlement a specific intent crime. -The intent required to violate the law is not an intent to deprive another of his/her property permanently. **Even if an individual intends to return the property, his/her actions are still illegal. -Restoration of the property illegally taken is no defense to embezzlement. -The most common embezzlement is by employees, but others with fiduciary responsibility can also be charged with embezzlement. -Accounting embezzlement is the manipulation of accounting records to hide theft of funds.
Embezzlement with technology: Costs and Statistics with
The widespread infusion of technology in the workplace has dramatically increased costs for embezzlement. Technology can facilitate larger embezzlement activity, and when coupled with poor controls, technology can also be manipulated to make detection much more difficult. Furthermore, the types of theft in the workplace appear to be changing. In addition to cash, materials, and merchandise, employees are increasingly finding value in company-owned software and intellectual property. For example, borrowing software from work for personal use, accounts for some of the $33 billion lost to software piracy worldwide.
How does embezzlement happen?
Theft by employees ranks high for the most prevalent and costly problems faced by today's business organizations, either private or public. The crime includes, but is not limited to, "the removal of products, supplies, materials, funds, data, information, or intellectual property." The methods utilized by an employee to embezzle depends on a number of factors such as the type of money or properties entrusted to the individual, and the access to company funds accessible by the position. For example, the duties of a cashier require honest management of the register, recording accurate purchases, and securing inventory in receiving areas or storage rooms; all of which present opportunities for crime. Other employees with companywide responsibilities might cheat on expense accounts, or misappropriate funds through billing, inventory, or payroll schemes.
Convicting Embezzlement as a criminal offense
To convict a defendant for embezzlement, the prosecutor must prove the following elements beyond a reasonable doubt: -There must be a fiduciary relationship between the two parties (defendant and victim); that is, there must be a relationship of trust, a responsibility for taking care of the responsibility (money or property, for example), and a reliance by one party on the other. -The defendant must have acquired the property through the fiduciary relationship, rather than in some other manner. -The defendant must have taken ownership of the property (a fraudulent conversion) or transferred the property to someone else (called conveyance). -The defendant acted with intent to deprive the owner of the use of the property.
Racketeering
Under its traditional definition, a racket is a fraudulent service that is offered to solve a problem, such as for a problem that does not exist, that will not be put into effect, or that would not otherwise exist if the racket did not exist. The potential problem may be caused by the same person who offers to solve it, although that fact may be concealed, with the specific intent to engender dependence from the victim. The most common example of a racket is the "protection racket." The racket itself promises to protect the target business or person from dangerous individuals in the neighborhood; then either collects their money or causes damage to the business until the owner pays. The racket exists as both the problem and its solution and is used as a method of extortion. Modern definition: a racket is dishonest and fraudulent business dealings. Conducting a racket is racketeering.
Embezzlement: Costs and Statistics
While many think of the workplace as insulated from the criminal behavior found elsewhere in society, the statistics on embezzlement show otherwise. In 2013, it is estimated that global losses due to employee theft totals to about $3.7 trillion. Many corporate security experts estimate that as many as 25-40 percent of all employees steal from their employers. This makes theft by employees two to three times more costly than all of the nation's Type I index crimes combined, and accounts for approximately 30 to 50 percent of all business failures. In addition, it is estimated that as many as three-quarters of all employees steal from their employers at least once, and some employees may engage in theft on a regular basis.
RICO: Enterprise
is defined as including any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity. "Pattern of racketeering activity" requires at least two acts of racketeering activity committed within ten years of each other.
Violation of Consumer Safety Protection Act: 15 U.S. Code § 2068
punishable by Imprisonment for not more than 5 years for a knowing and willful violation of that section; a fine, or both Any individual director, officer, or agent of a corporation who knowingly and willfully authorizes, orders, or performs any of the acts or practices constituting in whole or in part a violation of [this law] shall be subject to penalties under this section without regard to any penalties to which that corporation may be subject under subsection (a). In addition to the above penalties, further penalties may include the forfeiture of assets associated with the violation.
statutes to Criminalizes Domestic and International Money Laundering
§ 1956(a)(1): Basic/Domestic Money Laundering statute - cannot conduct financial transactions involving proceeds of a SUA (specified unlawful activity) if you have certain specific intent. § 1956 (a)(2): International Money Laundering Statute - cannot transport money IN or OUT of the U. S. if you have certain specific intent.
