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Ethics > Bribery and corruption, money laundering and terrorist financing > Flashcards

Bribery and corruption, money laundering and terrorist financing Flashcards

1
Q

Define Adequate knowledge

A

An appropriate understanding of the issues and responses connected to bribery, corruption, money laundering and terrorist financing so that the individual can apply the requirements of this professional statement to their role.

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2
Q

Define Applicable laws

A

The local and global laws and regulations that apply to firms and individuals. These may depend on the main place of business, where the alleged corrupt act or bribe was paid or received, or the country in which a parent company is registered.

The Proceeds of Crime Act 2002

The Money Laundering Act 2017

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3
Q

Define Beneficial ownership/owner

A

an individual who owns or controls 25% or more of the shares or profits of a legal entity.

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4
Q

Define Bribery

A

The offer, promise, giving, demanding or acceptance of an advantage as an inducement for an action that is illegal, unethical or a breach of trust.

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5
Q

Define Corruption

A

The misuse of public office or power for private gain, or

misuse of private power in relation to business practice and performance.

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6
Q

Define Customer due diligence (CDD)/know your customer (KYC)

A

Taking the appropriate steps to ascertain who the customer or client is and, if relevant, their ultimate beneficial owner is and counterparty.

A legal and regulatory requirement in many countries

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7
Q

Define ‘Facilitation payment’

A

A payment made to a government official with the purpose of speeding up a routine administrative action. Such payments are customary and legal in some countries, but in many jurisdictions they are criminalised.

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8
Q

Define Money laundering

A

Concealing the source of the proceeds of criminal activity to disguise their illegal origin.

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9
Q

Define Person of Significant Control (PSC)

A

Individuals or legal entities who have significant control or influence over a company

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10
Q

Define Politically exposed person (PEP)

A

Individuals and the family members of such individuals, entrusted with prominent public functions by any country or international organisation.

PEPs who relinquish office
or their relatives who cease being family members (e.g. through divorce) are no longer treated as PEPs 12 months after this occurs.

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11
Q

Define Price-fixing monopoly-cartel

A

A group of formally independent producers of goods or services whose goal is to increase their collective profits by pushing the price of a product as high as possible (or perhaps fix, peg, discount or stabilise prices), generally leading to profits for all sellers.

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12
Q

Define Professional money launderers

A

Those that specialise in enabling criminals to evade anti-money laundering and counter-terrorist financing safeguards and sanctions. They perform this function for a fee or commission. For instance, tax advisers,
lawyers or accountants who act as professional facilitators for criminals.

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13
Q

Define Red flags

A

Common characteristics that either individually or in combination might indicate potential misuse of the real estate sector for money laundering or terrorist financing purposes.

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14
Q

Define Reliance

A

The extent to which the required checks on individuals or companies have been undertaken satisfactorily by a third party, meaning that these checks do not need to be duplicated.

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15
Q

Define Reporting

A

Taking the appropriate action to draw attention to known or suspected activity involving money laundering, bribery or corruption issues and/or terrorist financing. The action of reporting may take the form of internal or external processes, and should as a minimum comply with the applicable laws as defined.

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16
Q

Define Scheme

A

A specific operation or case of money laundering or terrorist financing that combines various techniques, mechanisms and instruments into a single structure.

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17
Q

Define Terrorism

A

The use or threat of violence to pursue ideological objectives committed by governments, non-state actors, or undercover personnel serving on behalf of governments

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18
Q

Define Terrorist financing

A

The solicitation, collection or provision of funds with the intention that they may be used to support terrorist acts or organisations.

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19
Q

Define Triggering event

A

An event that necessitates a firm re-evaluating the risk level of a customer, client, partner, third party provider or employee, and possibly conducting enhanced due diligence.

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20
Q

In relation to bribery and corruption RICS-regulated firms must:

A
  • not offer or accept a bribe
  • have plans in place to comply with the applicable laws governing bribery and corruption and ensure these are followed
  • report any activity that they are aware of that breaches anti-bribery and corruption to the relevant authorities
  • act with due diligence to perform periodic written evaluations of the risks that face the firm
  • retain information detailing how the firm has met the requirements of this professional statement
  • prepare a written policy covering anti-bribery and corruption including a risk assessment detailing the nature and impact of risk affecting the business – this policy should be reviewed and updated periodically as appropriate
  • encourage transparency within the organisation by implementing a register
  • appoint a contactable person within the company or local office to discuss compliance and ethics matters; the largest regulated firms may decide to formally appoint a local compliance and ethics champion, which is best practice for the largest regulated firms
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21
Q

How would a firm determine the level of due diligence to take when countering bribery and corruption?

A
  • a firm may consider the type of business activities they engage in and the environment in which they operate
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22
Q

In relation to bribery and corruption RICS members must

A
  • not offer or accept a bribe
  • ensure they have the adequate knowledge of bribery and corruption to comply with the requirements of their company’s policy and the RICS PS
  • report any activity they are aware of that breaches applicable anti bribery and corruption laws to the relevant authorities
  • declare certain items to their employer
  • Attend relevant training from company / RICS
  • If in a senior management position, take a leadership role
23
Q

In relation to money laundering and terrorist financing RICS-regulated firms must:

A
  • not facilitate or be complicit in money laundering or terrorist financing activities
  • have systems and training in place
  • report any suspicions to relevant authorities
  • evaluate and review the risks periodically
  • Carry out the appropriate checks on clients and customers
  • Take appropriate measures to understand the client and the purpose of the transaction
  • Use reliance only when there is an appropriate level of confidence in the quality of information provided
  • verify the identity of the client by undertaking basic identify checks
  • record and retain information relating to how the firm has met the requirements of the RICS PS
  • have a written policy addressing money laundering and terrorist financing risks
  • Identify the beneficial owner of a company / client involved with a transaction
  • Appoint a senior member to be responsible for these matters
  • Keep records of suspicions of ML and TF
24
Q

In relation to money laundering and terrorist financing RICS members must:

A

not facilitate or be complicit in money laundering or terrorist financing activities

report any suspicions of money laundering or terrorist financing activities to the relevant authorities

where there is no local legislation the activity should be recorded and, if possible, reported to a senior manager.

Ensure you keep up to date with company / RICS guidance and training

Comply with company / RICS policies

If a senior member, take responsibility

25
Q

What could your company have a register in place to record?

A 
– gifts
– hospitality, entertainment and expenses
– customer travel and hospitality
– political contributions
– charitable donations and sponsorships
– potential conflicts of interest
26
Q

What should a company’s written policy on money laundering and terrorist financing cover?

A
  • Wtifhere enhanced due diligence is required
  • Identifying PEPs, PSCs, and an potential breaches of sanctions
  • The process to be followed for customer due diligence
  • Which form of due diligence is required and when
27
Q

Under what circumstances may the risks for B, C, ML and TR be higher?

A
  • depending on sector and country
  • Varying levels of controls in place
  • Where business is being done in countries or sectors with a higher risk, have a plan to deal with the issues this creates
28
Q

Where could you go to understand the levels of risk a country has?

A

Transparency International’s Corruption Perceptions Index and lists of high-risk countries published by FATF

29
Q

What is the first step you would take in combating ML and TR?

A

Knowing who you are doing business with is a significant first step in countering money laundering and terrorist financing. Know your client (KYC) or customer due diligence (CDD) requirements are now common, and in many countries a legal and regulatory requirement

30
Q

Explain the relationship between reliance and data protection?

A

There may also be specific data protection requirements that need to be considered
depending on the territory/region, such as the period of time for which a third party is required, or entitled, to hold the data being relied on.

31
Q

Define departure?

A

A ‘departure’ is a circumstance where specific legislative, regulatory or court order needs to be followed that differ from some of the requirements of this professional statement. RICS members and firms are expected to record such conflict(s) in writing between applicable laws and this professional statement, the deviation(s) taken from this professional statement because of the conflict(s), and any additional reporting or controls implemented based on applicable laws.

32
Q

What is the RICS risk-based approach? What are the 3 Ws?

A

For a risk-based approach a useful starting point may be to consider ‘the three Ws’
when assessing risks to your business.

  • who you act for
  • what you are doing
  • why you are being asked to do something

Within a risk-based approach a greater level of resource is devoted to higher risk areas, which will have been identified using a risk assessment.

A risk-based approach will involve planning to use resources in a proportionate way to target the risks in a firm. This involves assessing bribery, corruption, money laundering and terrorist financing risks before forming the plan accordingly.

33
Q

What are the requirements when carrying out CDD?

A

Requirements to carry out CDD vary from country to country, but always comprise the following elements:
• identify the transacting party/parties
• verify the identification is valid and
• carry out additional checks where necessary, according to certain risk factors.

34
Q

Define Simplified Due Diligence (SDD)

A
  • Means a full CDD is not needed
  • Applying basic verification may be appropriate
  • Internal policies and procedures need to set out (subject to local laws) when SDD can be applied
  • Evidence of the client’s status may suffice, such as a check on the local company register, the status of a company, or evidence of listing on the stock exchange.
35
Q

Define Enhanced Due Diligence (EDD)

A

will need to be applied in situations (see 3.9 for the example of PEPs) where under your policies and assessments, or the applicable laws, more checking and monitoring is required to complete the client profile, requiring continued review of the client or the transaction.

36
Q

Would you need to carry out CDD once?

A

Professionals need to also be mindful of the need to refresh CDD on their existing clients or customers from time to time and are expected to have a policy on this. Revisiting the information every three years may be appropriate in many situations

The risk is then that the firm does not elevate its due diligence because the client has already passed internal, lower-threshold checks. It would be best practice to gather up-to-date identification documentation at the commencement of each new transaction, or at regular, frequent intervals

37
Q

Who is responsible for ethics in your firm?

A

Appointing a compliance and ethics champion is potentially a very effective way to help embed systems that help detect and counter money laundering and terrorist financing, bribery and corruption. Typically, this role will be allocated to a senior manager with experience of how the business works and with visibility of a department or office.

Champion is responsible for:

  • overseeing CDD
  • risk assessment
  • Internal investigations
38
Q

What is a code of behaviour?

A

A code of behaviour is a formal and typically short document that enshrines a firm’s commitment to good ethics and what is expected by those acting for the firm. Such documents can set out the correct behaviour in certain situations, or who to contact in the event of an issue.

39
Q

How does your firm deal with PEPs?

A

A correct approach to dealing with a PEP is to have a policy that enables a PEP to be detected on a risk basis. Many firms have automated searches for all new clients (and suppliers and agents in high risk countries) which will pick up if someone is a PEP. Smaller firms may search according to pre-set risk criteria and ask the clients directly if they are PEPs.

If it is determined that a customer or client is a PEP then EDD should be carried out

Same applies if a beneficial owner is a PEP

40
Q

How can you identify a beneficial owner?

A

The beneficial owner of a client organisation can be identified by requiring helpful document types to be provided, such as a recent Certificate of Incorporation or Annual Return for a company, or written confirmation from a lawyer stating who the beneficial owner(s) are for a trust.

41
Q

What is a whistleblowing policy?

A

Depending on their size, it may be appropriate for RICS-regulated firms to have a formal whistleblowing policy covering when and how employees should report concerns, and how such reports will be treated.

If relevant this policy should provide guidance for whistle-blowers who face compelling local reasons (such as war, political instability and natural disasters) not to make a report through the usual channels, indicating alternative safe channels for reporting.

42
Q

What are some red flag indicators?

A
  • RICS provide guidance on this

Examples include:
- If the client is secretive about who they are / the beneficial owner / source of funds / reason for transaction

  • avoids personal contact without good reason
  • Is a PEP or subject to sanctions
  • If the source of funds is in large cash payments
  • unexplained payments from third parties
  • clients income doesnt match amount of payment
  • unusual transaction (size, frequency
43
Q

What would you refer to for guidance on bribery, corruption, terrorist financing or money laundering?

A
  • RICS Professional Statement on Bribery, corruption, money laundering and terrorist financing
  • RICS website / contact the RICS to seek guidance
44
Q

What types of bribes are you aware of?

A
  • Bribing another person
  • Bribing of a foreign official
  • Taking a bribe

It is a Corporate offence in failure to prevent bribery

45
Q

What is the Bribery Act 2010?

A 
What does the Bribery Act say? 
It is an offence to: 
- Bribe another person 
- Be bribed 
- Improper performance relating to a bribe 
- Failure to prevent a bribe 
- Bribing a foreign public official 
- Lists the penalties and prosecution
46
Q

What does the anti-bribery act cover? What are the penalties?

A
  • The Act covers both private and public companies

- The penalties are 10 years imprisonment / maximum fine for individuals, and unlimited fine for organisation

47
Q

Does the Bribery Act cover UK only?

A

The scope of the Act is wide, with implications not only for individuals / commercial organisations resident in the UK but also for those located elsewhere. Individuals / commercial organisations (wherever located in the world) can be prosecuted in the UK courts if any part of the offence is committed in the UK.

48
Q

What are the 6 anti-bribery steps? (PTR DCM)

A
  • Proportionate procedures
  • Top level commitment
  • Risk Assessment
  • Due Diligence
  • Communication
  • Monitoring and reviewing
49
Q

What Act governs money laundering?

A
  • The Proceeds of Crime Act 2002

provides for the confiscation or civil recovery of the proceeds from crime and contains the principal money laundering legislation in the UK.

The maximum sentence for this offence is 14 years’ imprisonment on indictment or a fine or both and six months’ imprisonment or a fine or both summarily

50
Q

What would you do if your friend wanted to pay you £20k up front in cash for QS services?

A
  • I would tell them that the payment would not be possible as this breaks the Money Laundering Terrorist Financing and Transfer Funds Regulations 2017. The current limit on a cash transaction is €10,000 (currently £8,600) per transaction or ‘series of transaction
  • I would set up a meeting with my friend (client) and my director to run through scope and terms of engagement
  • Sort out resource, fees, time frames, drivers etc.
  • Set up Purchase Order / Invoicing
51
Q

What is Mace’s gifts and hospitality policy?

A
  • Approval needed for gifts over £200
  • Cant be cash or cash equivalents

Gifts as a result of a tender process should be dealt with carefully

  • Complete a gifts and hospitality form to issue to ethics champion
  • Ask for reciepts to maintain record
  • Proactively consider whether the gift should be accepted
  • Do not create a COI by accepting, do not accept if it could be seen as a bribe
52
Q

What happens if a client wants to pay you in cash?

A

Do not accept, there is no audit trail for the cash

Money Laundering Act 1996 – if you cannot confirm where the money is coming from you may be in breach of the act.

53
Q

What should be considered in regards to gifts?

A
  • What is the value of the gift – Mace policy to report/log anything over the value of £25
  • Is the gift for one person or range of people?
  • Is the gift reasonable and proportionate? IE, a company pen or a music concert…
  • Is it for genuine business purposes
  • The timing of the gift – IE during a tender, or final account would not be appropriate

Ethics (12 decks)

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