Types of financial crime exercise

When people think about criminality they normally imagine a certain type of person (someone violent or poor) or a certain environment in which it happens (e.g. an urban ghetto) However, crime happens everywhere in society and many crimes are carried out in both places and by people which wouldn't commonly be associated with criminality. Financial crimes are one such example. These types of crimes are often called "white collar crimes", because they are often committed by professionals (e.g. accountants, business owners, stock brokers etc.') and done more out of greed than need.

In this online exercise you will learn, understand and remember the names of different types of financial crimes. These are the names of the crimes in the "common law" legal system, the system of law which is used in the majority of English-speaking countries.

Do the quiz at the end of the exercise to both ensure you correctly understand the different criminal offences and to help you to remember them in the future.

To learn the names of crimes which are against property or involve other types of theft, do our online exercise on the types of crimes against property or theft.

Exercise: Financial crimes

Read the following conversation between two friends, Peter and Juan, who are talking about different types of financial crimes.

The words in bold are the names of different types of criminal offences. Remember them because at the end of the text there is a quiz to check your understanding.

Peter:'Have you heard that John Green in the finance department has been arrested?'

Juan:'No, I haven't. What has he been arrested for?'

Peter:'Apparently, he's been stealing money for the company for at least a couple of years. He stole over 500,000.'

Juan:'So he's been charged with theft?'

Peter:'No, because of his role he had permission to access the company's money which he stole. If he hadn't, it would be theft. But because he had legal permission to access it, it is called the crime of embezzlement.'

Juan:'How could he get away with it for so long? Surely, someone must have noticed the missing money?'

Peter:'From what I hear he was altering financial statements which he was responsible for creating to make it look like the money he took had been spent elsewhere. So nobody noticed it missing for a while. So in addition to the charge of embezzlement, he will also be charged with committing fraud for the falsification and lying which he did on the financial statements.'

Juan:'I suppose when you embezzle so much money, you have to lie and hide information so as not to get caught.'

Peter:'Since he was caught the company have been doing their own investigation on him and they found out that he never studied at Oxford university as he always claimed he did.'

Juan:'But he had a certificate of his degree from there with his name on it hanging on the wall in his office. I remember talking to him about once when I was in his office.'

Peter:'Well, it must be a forgery, because he never studied there.'

Juan:'It goes to show, you should never trust people. Going back to what fraud is. I am right in thinking it is the act of lying or deceiving someone for your own financial benefit.'

Peter:'Pretty much. And the act is to the detriment of the people being lied to or deceived.'

Juan:'So, if a person doesn't declare all their income to the tax authorities and as a consequence, pay less tax to the government than they should, that is a type of fraud?'

Peter:'In theory yes. But the crime of doing that and paying less money in tax than you are legally obliged to is called tax evasion.'

Juan:'So I suppose criminal organisations are generally guilty of committing tax evasion, as they can't tell the tax authorities about the money they have obtained from their illegal activities.'

Peter:'No, they can't. Because it is not only a criminal offence to commit a crime (like selling illegal drugs), it is also a criminal offence to have money which comes/proceeds from these criminal activities. So they try to make the money that they get from their illegal activities appear to come from legal and legitimate sources. Like their money comes from a legal and legitimate business.'

Juan:'And is it a crime to do that?'

Peter:'Yes, it is. It is a crime called money laundering.'

Juan:'But it is not only criminal organisations who have to launder money, is it?'

Peter:'No, anybody who obtains money through an illegal way may have to do it. Like for example a businessman giving a local politician a large amount of money to ensure they win a contract for their business. They are doing something illegal, so they need to clean it in some way.'

Juan:'And what would that crime be?'

Peter:'Giving a gift or money to a person in a position of authority or power in order to make them do something for you, is called the criminal offence of bribery.'

Juan:'But isn't that called corruption?'

Peter:'It is a form of corruption. But with bribery both the person giving and the person receiving it can be charged with the offence. With the crime of corruption it is only about a person in a position of authority or power and them illegally or unethically using their position for personal gain. So receiving a bribe, forcing somebody to do something or giving friends and family members business contracts which they don't deserve are examples of corruption.'

Juan:'Corruption is basically the abuse of power.'

Peter:'A perfect description.'

Juan:'And can I ask a question about two other financial crimes which I don't understand the difference between?'

Peter:'Sure, go ahead.'

Juan:'On the stock market I hear that people are charged with either insider trading or securities fraud. What is the difference between the two?'

Peter:'If you have access to information which is non-public and then you use that information to buy or sell stock and shares and for your financial benefit, then it is called insider trading.'

Juan:'That makes sense.'

Peter:'Whereas if you spread or tell false information about a company in order to get other investors to buy or sell stock in that company for your own personal benefit, then it is called securities fraud. You see the difference?'

Juan:'The difference between the two is very clear.'

Click to see more legal English exercises

Quiz:

Below is a definition/description of each of the crimes in bold from the above text. Now choose the crime from the question's selection box which you believe answers each question. Only use one crime once. Click on the "Check Answers" button at the bottom of the quiz to check your answers.

When the answer is correct, two icons will appear next to the question which you can press/click on. In the first icon, , you can find extra information about the word/phrase (e.g. when, where and how to use etc...). In the second, , is where you can listen to the word/phrase.

1. The buying or selling of certain stocks and shares when you know privileged information which is not publicly known, is called

Insider trading:
(noun) It is the criminal offence of the buying or selling for financial gain of a publicly traded company's stock or other financial securities (such as bonds or commodities) by someone who has non-public information about them which will affect their value. It is illegal because it is seen as unfair to other investors who do not have access to the information.

Insider trading:

2. When you try to make money that you have obtained from criminal activities appear to come from a legal and legitimate source, it is called

Money laundering:
(noun) One of the main problems that a criminal organisation has is being able to use the money they have obtained from illegal activities. "Money laundering" is the criminal offence which involves knowingly converting these proceeds of crime (which is a crime in itself) into financial assets which appear to have a legitimate origin and then can be used. There are numerous methods which are used to launder money derived from illegal activities. An example of money laundering is the setting up of legitimate businesses where this money is then put through as cash sales (which in fact never occurred). The money from profit which these businesses make appears from a legitimate source and then can be used.

Money laundering:

3. When you illegally create or alter an object with the intention to deceive someone with it, you are committing the crime of

Forgery:
(noun) The illegal creation or alteration of an item (like identity documents, legal documents, a work of art, imitating someone's signature) with the intention to deceive someone and make them believe that it is genuine for a specific purpose (often financial but not always). Where information in an important document (like financial reports) is altered to deceive someone, the crime is called "falsifying documents" or "financial statement fraud" instead of forgery. And where bank notes or coins are forged to pass as legal tender, this crime is called "counterfeiting".

Forgery:

4. When a person in a position of power or authority uses that position illegally or unethically for their own benefit, it is called

Corruption:
(noun) It is an umbrella term (i.e. it covers a variety of illegal actions) where a person uses their position of power or authority (e.g. a politician, a civil servant, a senior manager in a company etc...) illegally or inappropriately for some form of personal gain (often financial) at the expense of others through illegal or unethical means. The main type of corruption is bribery, but there are other actions (e.g. extortion and fraud) which would also be considered as corruption if a person of power or authority uses them for personal gain.

Corruption:

5. When you knowingly don't pay to the government all the money you should do from your income or business, it is called

Tax evasion:
(noun) It is a criminal activity and a type of fraud where a person or organisation doesn't declare all their taxable income which they are legally obliged to do so to the tax authorities in order to reduce the amount of money which they have to pay in tax. Where a person or organisation uses legal means to reduce the amount of tax they pay, it is called tax avoidance.

Tax evasion:

6. The general name used to describe all actions where a person intentionally through dishonesty and deception gains at the expense of others, is called

Fraud:
(noun) It is a criminal offence where a person intentionally through dishonesty and deception (through falsification, lying or withholding information which they are legally obliged to give) gains (often financially) at the expense of another person or an organisation. . Many types of financial crimes are types of fraud (e.g. insurance fraud, securities fraud, identity fraud, financial statement fraud etc...). Normally, when people are charged/convicted of these specific types of fraud rather than the criminal offence of fraud itself.

Fraud:

7. When give money or gifts to a person in a position of power or authority in order to influence their actions or decisions on something, it is called

Bribery:
(noun) This is a type of corruption which involves the giving or receiving, or the requesting or offering of something of value (e.g. property, money, objects etc...) in order to influence a person's actions or decisions (e.g. to vote a certain way, accept a certain bid for a contract etc...). In order for an action (like giving a gift) to be seen as bribery, there needs to be evidence that the recipient has directly altered their behaviour as a consequence of the exchange.

Bribery:

8. When you steal a person's or organisation's money which you have legal access to and/or are in control of, it is called

Embezzlement:
(noun) It is a type of financial crime which usually involves the theft of money from a business or employer. It often involves a trusted individual taking advantage of their position to steal funds or assets, most commonly over a period of time. Although it is a type of theft, there is a difference between the crime of theft and embezzlement. With embezzlement you steal money or assets from a person or organisation which you had permission to access and could have been responsible for. Whereas with theft you steal money or assets from a person or organisation which you didn't have permission to access.

Embezzlement:

9. The spreading of false information to make other people buy or sell certain stocks and shares for your own personal benefit, is called

Securities fraud:
(noun) It is a type of crime where a person deceitfully manipulates or provides false information about securities (e.g. shares in a company, government bonds, commodities etc...) in order to deceive investors for personal gain. It can involve making misleading statements, omitting important facts, or engaging in fraudulent activities to manipulate stock prices. It is different to "insider trading" because with "insider trading" the people who are doing it are not deceiving or lying to others, they are just illegally using privileged information for their own benefit.

Securities fraud:

To learn the names of other types of crimes of theft, do our online exercise on the types of crimes against property or theft.

Click to see more legal English exercises

Practice

Now that you understand the new vocabulary, practise it by creating your own sentences with the new words/phrases.

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