AF315 Final Examination Revision

Semester 1 2023
Question 1
Why do we take security for an obligation? Why might a bank require a mortgage over a
valuable asset (whether from the debtor or some third party) begore agreeing to an overdraft
facility? One general answer is: because being secure is a good thing. In life it is generally
better to be more secure than less secure.
We can, however, be more precise than this. Legally speaking, what is accomplished when we
obtain a security interest (mortgage/charge/pledge/lien) over an asset?
Suggest three advantages obtained by a creditor who receives a security interest to secure
an indebtedness.
Hint: use Banking Act 1995.

Question 2
“A” had established a network of companies/firms (corporate entities) to facilitate money
transfer and use the network as cover. Controlled / operated bank accounts in various
jurisdictions through these companies/firms. His family members and close associates handled
these accounts and were in various jurisdictions.

Source of this money was Narcotic Drug Trafficking, Tax Evasion, Commercial Fraud and
Smuggling. “A” and his associates devised trade mechanisms for laundering the proceeds of
crime. “A” and his associates utilized the services of banks, cash couriers, Money Service
Bureaus (MSBs), alternative remitters (hawala operators) and various trade finance
mechanisms to move funds.

Global network for “A” is situated in Europe, Spain, UK, Italy, India, Hong Kong, South
Africa, Fiji, USA and Cook Islands.

“A” was charged in 1995 for smuggling of Silver & Gold by Indian Customs. He and his
companies in India were also charged for fraudulent exports of chalk powder in the guise of
Naproxen (a bulk drug). He was also investigated for export of pulses by forgery of documents
(violation of Customs Act). The suppliers as well as buyers were controlled by “A”. He
illegally fled to Dubai in 1995 & remained there till 2009. On the basis of information received
from Italy about his involvement in a case of laundering of money of narcotics trafficking and
further investigations, he was arrested by Dubai Police in February 2007 and was in jail for
about six months.

He was convicted in Dubai for 3 years imprisonment, while he was on bail. He then escaped
clandestinely to India via Nepal in 2009. A sum of US $ 4.3 million lying in the account of
 “A” was frozen by the US Authorities in May 2007 on the charges of Laundering of Narcotic
Drug Money. This money was confiscated by the US Authorities in June 2009.

Intelligence about the illegal activities of “A” and his Associates was received in Enforcement
Directorate from various internal and external sources. It has been estimated that he was
laundering crime money to the extent of approx USD 1.5 billion per annum globally & USD
2.5 million impacting India.

Required
Discuss the mechanism of the offense by using the stages of Money Laundering.

Question 3

The Fiji Financial Intelligence Unit found a woman who managed to open two bank accounts in
Fiji for foreign nationals who were not in Fiji, using fraudulent documents in an alleged money
laundering case involving $7.5 million.

This is stated in the Fiji FIU 2021 annual report presented in Parliament on Monday.

The three foreign nationals had received $300,000 each in their bank accounts when they were
reported to FIU.
“Mr A, Mr B and Mr C are nationals of Country 2 who also hold Country 3 passports, and are
sole shareholders and directors of Company A, Company B and Company C respectively,” states
the FIU.

“Mr A, Mr B and Mr C use the same Suva residential address.

“Fiji FIU analysis established no travel records to Fiji for Mr A, Mr B and Mr C, however, their
bank account information noted that they were physically present to open the bank accounts.
“Company A, Company B and Company C have the same registered business address and phone
number.

“Ms D allegedly assisted with the creation of companies and bank accounts using identification
documents of individuals not present in Fiji and believed to be fraudulent.
“Fiji FIU analysis also established that Company A, Company B and Company C each pay Ms D
salary expenses of $30,000 per month.”
FIU said the case was forwarded to the Fiji Police Force with possible offences of money
laundering, provision of false or misleading information and economic fugitive involved in the
case.
Do you think bank failed its responsibilities? If so, EXPLAIN?

Question 4
Dodgy Practices by Central Finance Limited – A Worry
Credit institutions like Central Finance Limited (CFL) needs to be strictly monitored and taken to
task by relevant authorities for continuously hoodwinking consumers. The Council is alarmed at
the blatant disregard for consumer rights shown by CFL and believes that this is a serious issue
that needs urgent attention as people continue to be cheated. The Council has previously raised
concerns about such credit providers who operate freely without being subject to any regulatory
controls unlike those that comes under the ambit of Reserve bank of Fiji. The absence of
supervision and regulations not only denies consumers their right but also have an unfair advantage
over the licensed credit institutions that have to bear the costs of regulation.
Consumers currently dealing with or are thinking of dealing with CFL need to be careful as several
complaints have surfaced against this unethical business in the last few years. From 2019 to date,
the Council has received 22 complaints from aggrieved consumers. This is just the tip of the
iceberg as there may be consumers who may not have reported the injustice done to them. CFL
provides personal loans and hire purchase on electronic goods, but has frequently engaged in
unethical behaviour. In a recent case handled by the Council, a consumer applied for a $600 loan
however, the payable sum was overstated by $1000. The consumer therefore, was paying $80 extra
per pay on his loan repayments due to CFL’s error. He only came to know about the overpayments
when he received his payslip.
When the Council intervened, CFL acknowledged their error, however the reimbursement remains
pending since December 2019. Another complainant applied for a personal loan and had arranged
for direct deduction payments to be made to CFL. Unfortunately, the loan was denied. Despite
refusing the complainant’s loan; CFL commenced deductions from the consumer’s bank account.
Upon seeking a refund for the deduction made, CFL advised the complainant to wait for another
15 days to process the refund. Further follow ups by the complainant proved futile. Thus, the
complainant had no option but to resort to the Council in an attempt to seek a refund. Despite the
Council raising the matter with CFL, the refund remains pending.
There are also instances whereby CFL commenced with loan deductions without disbursing the
loan sum into the consumer’s account. Additionally, what startles the Council the most, is the way
consumers are treated when seeking refund for over deductions. They are asked to pay an extra
$10 as refund processing fee for wrongful deductions. In others words, consumers were forced to
pay for what Central Finance owes them.
These issues raise the need for proper monitoring mechanisms for financial institutions. A lack
of policing will continue to let the issue fester and it is consumers who are at the losing end.
The Council urges relevant authorities to look into the issue to ensure consumer concerns are
looked into and dealt with appropriately.

The Council is gravely concerned that more consumers may be affected by the dealings of this
company but are reluctant to come forward with their complaints. As such, consumers who
have faced similar experiences with CFL are encouraged to lodge formal complaints with the
Council or call the toll-free National Consumer Helpline on 155.

Required
Using relevant legislation and acts, state the breaches by CFL.

Question 5
Vodafone has been fined £4.6m by Ofcom for “serious and sustained” breaches of consumer
protection rules.
It is the second-largest fine ever handed out by the regulator, after a £5.7m penalty imposed on
ITV in 2008 over the “abuse” of premium-rate phone lines in a number of hit shows.
Ofcom carried out two investigations into the telecoms company. Vodafone was fined £3.7m for
taking pay-as-you go customers’ money without providing a service in return; and £925,000 for
flaws in its complaints handling processes. The penalties have to be paid to Ofcom within 20
working days. The money will be passed on to the Treasury.
Lindsey Fussell, Ofcom’s consumer group director, said: “Vodafone’s failings were serious and
unacceptable, and these fines send a clear warning to all telecoms companies. Phone services are
a vital part of people’s lives, and we expect all customers to be treated fairly and in good faith. We
will not hesitate to investigate and fine those who break the rules.”
Vodafone apologised for its failings and said it had reimbursed all but 30 pay-as-you-go customers
who could not be identified. The company made a donation of £100,000 to charity. The average
refund per customer was £14.35.
“We deeply regret these system and process failures,” the company said. “This has been an
unhappy episode for all of us at Vodafone: we know we let our customers down. We are
determined to put everything right … We offer our profound apologies to anyone affected by these
errors.”
One Ofcom investigation found 10,452 pay-as-you-go customers lost out when Vodafone failed
to credit their accounts after they paid to top up their mobile phone credit, after the company
introduced a new billing system. Affected customers lost a combined £150,000 over a 17-month
period between late 2013 and early 2015.
Ofcom said Vodafone took action only after the regulator intervened. The billing chaos left many
mobile users disconnected and out of pocket. Complaints about Vodafone’s monthly contracts
more than doubled last year, according to figures from Ombudsman Services, and are triple the
industry average.
Vodafone said the IT project was the largest it had undertaken and involved moving more than
28.5m customer accounts from seven billing platforms to the new system.
A second investigation found that Vodafone failed to comply with rules on handling customer
complaints. Ofcom said Vodafone’s customer service agents were not given clear guidance on
what constituted a complaint, while its processes were insufficient to ensure that all complaints
were appropriately escalated or dealt with in a fair, timely manner.
Vodafone also failed to ensure that customers were told, in writing, of their right to take an
unresolved complaint to a third-party resolution scheme after eight weeks.
The consumer organisation Which? said it was “right that Ofcom has hit Vodafone with a hefty
fine for such poor behaviour”. Alex Neill, managing director of home and legal at the group, said:
“It must swiftly address the issues repeatedly highlighted by its customers and the regulator, and
introduce a complaints system that actually works.”
Required
Treat this case under Fiji’s scenario. Discuss what appropriate approaches the Court may
take in this scenario. Use appropriate legislations or acts to support your answer.

Question 6
Mr John Fong, an MPaisa customer for Vodafone was not provided a clearly explanation of the
MPaisa terms and conditions of electronic funds transfers.
Do you think Vodafone have breached the National Payment Systems Act 2021? Use an example
to support your views.

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