Chapter 16 B Artika
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  • http://www.youtube.com/watch?v=g6DodL7Ditkhttp://www.youtube.com/watch?v=pGocvqSKi4k
  • This is the process of applying for bankruptcy in New Zealand
  • Petition mills – This scheme revolves around keeping an individual from being evicted from his or her dwelling.Multiple filings – filing for bankruptcy is different states by utilizing true personal identifiersFalse statement - omiting property, debt or income from an official form required in a bankruptcy caseTrustee fraud -
  • Bankruptcy court – bankruptcy judges hear the cases involving debtors and creditors rights and conduct hearing and trials to resolve disputes.U.S Trustee - They are responsible to administer the bankruptcy cases, appoint trustees, examiners and committesCourt-appointed or panel trustee are usually individuals or firms, such as accountants or lawyers, who identify and collect debtors assets and then allocate those assets to creditorsExaminers – generally appointed by a bankruptcy judge to investigate allegations of fraudDebtor – the person or entity who is the subject of the filingCreditors – the one who holds a valid claim against the debtorAdjusters – assist the trustee by performing such duties as securing business facilities and assets.
  • If the perpetrators go off without filing for bankruptcy, the unpaid lenders and suppliers may file an involuntary bankruptcy against the company.In that case, the lenders and suppliers may find few or no assets left in the company with which to pay off the company debts.
  • Here are some of the indicators of bust-out schemes.
  • Here are some indicators of concealment
  • It involves three steps:Placement - the launderer inserts “dirty money” into a legitimate financial insitution. This usually involves making cash deposits to a bank. This is quite risky as large cash deposits raise red flags. Banks are also required to report on details regarding large cash transactions to the government.The Layering stage is the most complex stage. The purpose of this stage is to make the dirty money difficult to trace. This involves conducting various financial transactions to make it difficult to follow the funds.The Integration stage – the money re enters the economy in a form that appears to come from a legal transaction. This involves the sale of other assets bought during the layering stage
  • Here are some red flags that may indicate money laundering.

Transcript

  • 1. By: Artika
  • 2.  Bankruptcy is the legal process that allows a debtor to work out an orderly plan to settle debts or liquidates a debtor’s assets and distributes them to creditors. (Albrecht, Albercht, Albercht & Zimbelman, 2012)
  • 3.  To enter into a bankruptcy an individuals total debt needs to be more than $1000.  The usual term of the for the bankruptcy is three years but has been extended in some cases. (Ministry of Economic Development, 2013)
  • 4.  Section 7 states the nature of the bankruptcy.  Bankruptcy affects the legal status of a person and has important consequences. These include—  (a) the bankrupt's property vests in the Official Assignee:  (b) the bankrupt is limited in the business activities he or she can undertake:  (c) the Official Assignee may be entitled to recover assets that the bankrupt has transferred before bankruptcy
  • 5.  What is bankruptcy fraud?  There are four forms of bankruptcy fraud.  When debtors conceal assets to avoid having to forfeit them.  Individuals intentionally files false or incomplete forms.
  • 6.  Individuals file multiple times using either false information or real information in different states.  It involves bribing a court-appointed trustee. (Legal Information Institue, 2013)
  • 7.  The monies that are defrauded from a bankruptcy never reaches the pockets of deserving creditors and investors.  There is a consequence of bankruptcy fraud.  As it occurs more frequently, creditors and investors lose faith that their interest will be protected.
  • 8.  This loss of faith has a ripple effect in the economy through:  Tightening of credit  Raising interest rate  Subsequent economic reactions
  • 9.  http://www.youtube.com/watch?v=g6DodL7 Ditk
  • 10.  Why do you think the hiding of assets is so common in bankruptcy?
  • 11.  Petition mills  Multiple filings  False statements  Trustee fraud  Attorney fraud  Forged filings  Embezzlement  Credit card fraud  Bust-outs
  • 12.  A debtor who files several bankruptcies in two or more states lists nearly identical assets and liabilities in each filing.  The debtor becomes discharged from the debts.  If the debtor fears of getting caught, then the debtor travels to another state and files for another bankruptcy.
  • 13.  Conceal property of a debtor’s estate from creditors  Make a false oath or account in a bankruptcy case  Make a false declaration, certification, verification or statement – omitting property from an official form required in a bankruptcy case.  Present a false proof of claim against the debtor’s estate
  • 14.  This applies to anyone engaged by a court officer to perform a service for a debtor’s estate.  The statute makes it crime for such persons to ―knowingly and fraudulently appropriate to [their] own use, embezzle, spend, or transfer‖ any property or hide or destroy any documents belonging to the debtor’s estate.
  • 15.  Bankruptcy Court  U.S Trustee  Court-appointed or panel trustee  Examiners  Debtors  Creditors  Adjusters
  • 16.  Bust-Out
  • 17.  It involves intentionally obtaining loans or purchasing inventory on a credit basis and concealing the proceeds from the loan or sale of inventory.  Insolvency is declared and bankruptcy is filed.  The creditors are unable to find assets which can be used to pay them.
  • 18.  If the scam works the perpetrators retain the cash proceeds but escape the liability for the unpaid debt.  A bust-out may involve setting up a new company.  Fraud perpetrators set up and operate the new company legitimately for a while in order to establish credibility.  The new company may take a name similar of an existing company due to the reputation of that company.
  • 19.  The scam company may also submit intentionally misstated financial statements to the suppliers or the creditors.  This is to inflates its financial position and profitability.
  • 20.  The second type of bust-out:  The perpetrators quietly buy an established company that already has a good reputation and credit rating.  The perpetrators rely on the established credit rating to get credit from suppliers and loans from bank.  The perpetrators buy large amounts of inventory on credit from numerous suppliers
  • 21.  At first, the perpetrators pay the suppliers promptly in order to build up their credit rating.  Then, the perpetrators buy larger and larger amounts of inventory on credit and eventually stop paying creditors.  They stock-pile the inventory.  They either conceal the inventory for a sale in another location or secretly liquidate it at bargain prices.
  • 22.  The perpetrators can either claim insolvency and file for bankruptcy or simply close up the shop without filing for bankruptcy.  The company will appear to be insolvent because the sales of inventory at bargain or liquidation prices reduced profits and cash flow.
  • 23.  The intent is to make a company insolvent and to file bankruptcy in a scheme to defraud creditors.  A bust-out is difficult to detect.  If a company claims insolvency and files for bankruptcy, creditors may find it difficult to determine that insolvency was deliberately taken for the purpose of perpetuating fraud.
  • 24.  A company’s only listed address and phone number are a post office box and an answering service.  A new company is owned and managed by persons from another state.  A sudden change is made in a company’s management especially if the change is made without public notice.  The inventory is suddenly deleted, without explanation
  • 25.  Some ways in which assets or income can be fraudulently concealed:  Payments may be made to fictitious individuals or vendors and the amounts are diverted to the debtor.  Sales may not be reported in the debtor company’s books, instead the sales proceeds are diverted.
  • 26.  Inventory may be shipped to an off-site location or sold to a related party.  Cash received in payment of receivables may be diverted to another entity.  Assets or income may be shifted to another entity controlled by the debtor.
  • 27.  Transfers of property or large payments to related parties or individuals.  Unusual or rapid reductions in assets.  Missing, inaccurate, or damage records.  Unusually large and unexplainable payments to vendors
  • 28.  The phrase ―money laundering‖ implies that money which is ―dirty‖ because it was generated illegally is ―laundered‖, or made to appear that it came from legitimate sources. (Albrecht, Albercht, Albercht & Zimbelman, 2012)
  • 29.  http://www.youtube.com/watch?v=pGocvqS Ki4k
  • 30.  Purchasing large assets or paying periodic expenses with cash.  Using a post office box or general delivery address instead of a home address when dealing with contracts.  Owning expensive assets without legitimate means of being able to afford them.
  • 31.  This Act came into force on 30 June 2013  The Act places obligations on New Zealand’s financial institutions and casinos to detect and deter money laundering and terrorism financing.  The Act will ensure that businesses take appropriate measures to guard against money laundering and terrorism financing. (Department of Internal affairs, 2013)
  • 32.  The agencies that will supervise the new AML/CFT are:  The Reserve Bank - supervises banks, life insurers, and non-bank deposit takers.  The FMA - supervises issuers of securities, trustee companies, futures dealers, collective investment schemes, brokers, and financial advisers.
  • 33.  The Department of Internal Affairs - supervises casinos, non-deposit taking lenders, money changers, money remitters, payroll remitters, debt collectors, factors, financial lessors.  The Ministry of Justice - responsible for drafting and administering the AML/CFT Act and regulations. (Department of Internal affairs, 2013)