Conduct/Ethics - Bribery / Money Laundering / Terrorist Financing

Question 1

What statute in place for Bribery?

Answer 1

Bribery Act 2010

Question 2

What can you tell me about the Bribery Act 2010?

Answer 2

• Came into force July 2011
• Carries robust penalties
• Previous laws dated back to 1889
• Law delayed due to disagreement on whether “fair and proportionate” corpoorate hospitality could be deemed bribery. (agreed in favour of companies who offer on a genuine basis).

Question 3

How would you define a Bribe?

Answer 3

• Act defines as: “giving or receiving a financial or other advantage” in connection with the “improper peformance in a position of trust”
• RICS Professional Statement defines as: “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”.

The Bribee can be guilt of the offence just as is with the Briber.

Question 4

What are the offences under the Act? what constitutes a bribe?

Answer 4

• Bribing another person
• Being bribed by another person
• Bribing a foreign/public official
• Failing to prevent bribery (not having systems in place to prevent)

Question 5

What does the RICS publish on Bribery?

Answer 5

Professional Statement: Countering bribery and corruption, money laundering and terrorist financing (2019).
- Effective 01 Sept 2019.

Question 6

What is corruption?

Answer 6

The misuse of public office or power for private gain, or misuse of private power in relation to business practice and performance.

Question 7

What are the penalties under the Act?

Answer 7

• Unlimited fines
• Up to 10 years imprisonment.

Question 8

What procedures can companies put in place to prevent bribery on their behalf?

Answer 8

There are six principles of prevention companies should put in place:-

• Due Diligence
• Top Level Commitment
• Monitoring and Review
• Communication
• Proportionate Procedures
• Risk Assessments.& contactable person

Question 9

18. Under the Bribery Act, under what circumstance is a facilitation payment permitted?

Answer 9

The only circumstance in which it is OK to make a facilitation payment is when you are under duress.
* For example if there is a real and present risk or danger to “life, limb or liberty”.
* If you or your companions are under immediate physical threat.
* You should put safety first, make the payment and report the matter immediately.
* Or as soon as is practicable to your manager or your ethics compliance contact.

Question 10

What Must a regulated firm to in relation to bribery and corruption?

Answer 10

(1.3 of Professional Statement)

• Not offer or accept, directly or indirectly anything constituting a bribe
• Have plans in place to comply with law and ensur rules are followed
• Report activity tantamount to breaching anit-bribery and corruption laws, or record if no access to local legislation/contact
• Act with due diligence and perform periodic evaluations which business could face as a risk
• Retain information how business has met with requirements of the professional statement.

Question 11

What Must members do for Bribery?

Answer 11

(1.3 of prof statement)

• Not offer or accept, directly or indirectly anything constituting a bribe
• ensure that they have adequate knowledge of bribery and corruption to be able to
  comply with the requirements of this professional statement
• report any activity they are aware of that breaches applicable anti-bribery and
  corruption laws to the relevant authorities (as specified in local legislation); where
  there is no local legislation the activity should be recorded and, if possible, reported
  to a senior manager.

Question 12

What should regulated firms do in relation to bribery and corruption?

Answer 12

(2.1 Prof Statement)

• Written policy/risk assessment
• Appropriate governance/systems in place
• Encourage transparency
• Clear guidance to staff
• Appoint a contactable person to discuss/address matters
• Publish a code of behaviour
• due diligence on third party suppliers to ensure acting appropriately.

Question 13

What should you do as a member on the matter of bribery and corruption?

Answer 13

• Declare where necessary to my employer
• Attend relevant training
• Familiarity and compliance with employer’s policy and processes
• If a senior manager, take leadership role in ensuring employer has appropriate regime in place.

Question 14

What is money laundering?

Answer 14

(defined in: Professional statement on Countering bribery and corruption, money laundering and terrorist financing.)

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

• Can be through hiding, transferring, and/or recycling illicit money. Converting criminal proceeds into seemingly legitimate property.

Question 15

What is terrorist financing?

Answer 15

The solicitation, collection or provision of funds intended to support terrorist acts or organisations.

(defined in: Professional statement on Countering bribery and corruption, money laundering and terrorist financing.)

Question 16

What regulations are in place for AML?

Answer 16

The Money Laundering, Terrorist Financing and Transfer of Funds (information of payer) Regulations 2017

Question 17

Who is the supervisory body for AML?

Answer 17

HMRC

Question 18

Why firms need to register for AML?

Answer 18

o Estate Agents
o Letting Agents rent exc $10k euros per month
o High value dealers (auctioneers/art dealers) deal in transactions of at least $10k euros in either one or series of linked transactions

Question 19

What systems have to be in place as per the The Money Laundering, Terrorist Financing and Transfer of Funds (information of payer) Regulations 2017

Answer 19

 Reg 8 – Relevant persons to register with supervisory body and follow AML laundering regs
 Reg 21 – Relevant persons appoint money laundering reporting officer (MLRO) responsible AML compliance
 Reg 18 – Firms must identify and assess the risk of ML and TF in business. Risk Assessment must be provided
 Reg 19 – Firms must establish and maintain policies, controls and procedures to mitigate ML/TF risks
 Reg 24 – provide training on how to recognise and deal with potential ML activities
 Reg 27 – Customer due diligence (CDD) to establish and verify identity of customer and nature of transaction (SDD/EDD).

Question 20

What obligations do you have regarding modern slavery?

Answer 20

Rule 4 (4.4) - Firms must check that supply chain does not engage in modern slavery or other abuses of workforce.

• Section 52 on the modern-day slavery states you have a duty to report it.

Question 21

What is an MLRO / MLCO.

Answer 21

• Money Laundering Reporting Office (senior manager/director)
• Money Laundering Compliance Officer (required if size and scope of business requires)

Question 22

What does the RICS publish on the matter of AML?

Answer 22

Professional statement: countering bribery and corruption, money laundering and terrorist financing (2019)

Question 23

What Must firms do regarding AML/TF

Answer 23

• not facilitate or be complicit in money laundering or terrorist financing activities
• have systems and training in place to comply with these laws, and ensure these are
  followed
• report any suspicions of money laundering or terrorist financing activities to the
  relevant authorities (as specified in local legislation); where there is no local legislation
  the activity should be recorded and, if possible, reported to a senior manager
• evaluate and review periodically the risks that prospective and existing business
  relationships present in terms of money laundering or terrorist financing offences
  taking place
• ensure that their responses to the risks identified are appropriate, including
  conducting appropriate checks on clients and customers
• use reliance only where there is an appropriate level of confidence in the quality of
  the information provided by the third party – reliance should only be taken from third
  parties with standards conforming to the legal requirements, that provide the obliged
  market participant with a complete exchange of all legally required AML information
  regarding the identified party and only by confirming the identity and verification
  of identity of the client or counterparty in question; ultimate responsibility for the
  assessment of risk and actions taken based on this remain with the member or
  regulated firm
• take appropriate measures to understand the client and the purpose of the
  transaction
• verify the identity of their client by undertaking basic identity checks
• record and retain information detailing how the firm has met the requirements of this
  professional statement.

Question 24

What Must members do regarding AML/TF (part 1 mandatory requirements)

Answer 24

• 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 (as specified in local legislation); where there is no local legislation
  the activity should be recorded and, if possible, reported to a senior manager

Question 25

What Should firms do regarding AML/TF (part 2 guidance)

Answer 25

• have a written policy addressing money laundering and terrorist financing risks that
  covers the following issues:

– in high risk situations where enhanced due diligence is required, understanding the
source of funds in a transaction
– identifying PEPs, PSCs and any potential breaches of sanctions
– the process to be followed for customer due diligence
– the situations in which simplified due diligence, standard/ordinary due diligence, or
enhanced due diligence will be appropriate (see 3.6)

• have appropriate governance and systems controls in place, proportionate to the
  type of work the firm does
• provide appropriate, recurring training for staff, to ensure they are familiar with the
  risks associated with money laundering and terrorist financing and the firm’s systems
  to counter these risks
• keep reports of suspicion of money laundering and terrorist financing activity
  confidential (for guidance surrounding whistleblowing see 3.11)
• identify the beneficial owner of a company/client involved within a transaction
• appoint a senior person to be responsible for ensuring anti-money laundering and
  counter-terrorist financing policies are in place and complied with.

Question 26

What Should members do regarding AML/TF (part 2 guidance)

Answer 26

• keep abreast of current training/regulation offered to them either by their employer or
  by a regulator addressing money laundering or terrorist financing
• comply with their employer’s policy and process relating to money laundering and
  terrorist financing
• keep reports of suspicion of money laundering and terrorist financing activity
  confidential
• if in a senior management position, take a leadership role in attempting to ensure that
  their employer has an appropriate regime in place for addressing money laundering
  and terrorist financing risks.

Question 27

What is a Red Flag regarding AML/TF?

Answer 27

Common characteristics that either individually or in combination may indicate potential misuse of real estate sector for ML/TF purposes.

Question 28

What is a Trigger Event?

Answer 28

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.

• PEP could be a trigger.

Question 29

Talk to me about Risk Assessments for ML/TF?

Answer 29

Required under Regulation 18 of the Regs
Ever evolving process / cornerstone of ML/TF management
- Type and number customers
- Geographical business locations
- Types of product
- Value and Type of transactions
- Potential Conflicts of Interest where MLRO/MLCO maybe fee earners.

Question 30

What are Departures in the AML/TF matter?

Answer 30

• circumstance where specific legislative, regulatory or court order differs from some of the requirements of this professional statement

Question 31

What do you do regarding Departures?

Answer 31

record such conflict(s) in writing and any additional reporting or controls implemented to achieve Departure.

Question 32

What is a risk based approach? (3.5 Prof Statement)

Answer 32

Consider the 3 Ws:
- Who do I act for
- What am I doing for them
- Why am I being asked to do it.

Question 33

What is Customer due diligence (CDD):

Answer 33

AKA - Know your customer (KYC)

• Taking appropriate steps to know who the customer is.
• Required under Regulation 27 of The Money Laundering, Terrorist Financing, and Transfer of Funds (information of payer) Regulations 2017.

Question 34

How would you carry out CDD?

Answer 34

• identify the transacting party/parties
• verify the identification is valid and
• carry out additional checks where necessary, according to certain risk factors.

Question 35

What is a PEP?

Answer 35

Politically Exposed Person

Question 36

What is a Facilitation Payment?

Answer 36

A payment to a government official to expediate an administrative process. In some countries it is not illegal.

Question 37

What is SDD and EDD and when would it be used?

Answer 37

Simplified Due Diligence
- basic CDD requirements

Enhanced due diligence
- if rules or regs require
- Example would be if PEP involved due to their position of influence.

Question 38

What statute is in place?

Answer 38

Proceeds of Crime Act (2002)

• Part 7/s330 requires firms to submit suspicious activity report (SAR) to the National Crime Agency (NCA)
• Concealment / Arranging / Aquisition/use/possession / 3rd party offence (tipping off)
• NCA will respond to grant or reject permission for the transaction to proceed
• Part7/s333 - makes it offence for firms/staff to advise their clients/customers that their activity has been reported to an MLRO or the NCA (“tipping off”)
• Failure to disclose criminal offence or “Tipping-off” can result in fines or prison sentence.