Ethics 2

Question 1

If asked about the acceptance of any cash, gift or hospitality in your interview, consider the following:

Answer 1

• Bribery Act 2010
• The RICS Professional Standard
• Your organisation’s procedures
• Professional objectivity, openness and transparency
• Proportionality
• Tax implications
• Sanctions
• Employment contract details

Question 2

Money Laundering - Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations, 2017 (as amended in 2023) - Key Provisions

Answer 2

1. A requirement to have a written money laundering and terrorist financing risk assessment
2. Implement systems, policies and controls and procedures to address money laundering and terrorist financing risks and meet the requirements under the regulations
3. Adopt appropriate internal controls
4. Provide staff training
5. Comply with new customer, enhanced, and simplified due diligence requirements
6. Comply with the requirements relating to politically exposed persons (PEPs)
7. Ensure appropriate record keeping, policies and procedures
8. AML checks must be undertaken to confirm the identity of the proposed purchaser of a property and check the purchaser’s source of funds by the vendor’s agent before contracts are exchanged.
9. To include additional high-risk factors when assessing the need for enhanced due diligence, and seek additional information and monitoring in certain cases, e.g. where there are transactions between parties based in high-risk third countries

Question 3

RICS Professional Standard: Countering bribery, corruption, money laundering and terrorist financing, 2019 - Part 1

Answer 3

PART 1 - Bribery offences

• Bribery: general
  o Not offer or agree to give anything that could constitute a bribe.
  o Have procedures in place to ensure:
  o Receipts can be properly authorised.
  o Any expenditure does not amount to bribery.
• Hospitality and promotional expenditure
  o Not regarded as bribes if complying with the law.
  o Must still fulfil the requirements of this Professional Statement (PS).
• Facilitation payments
  o Not allowed under this policy; must comply with legislation.

Question 4

RICS Professional Standard: Countering bribery, corruption, money laundering and terrorist financing, 2019

Answer 4

• Sets out the mandatory, globally applicable requirements for RICS members and regulated firms in relation to bribery, corruption, money laundering and terrorist financing
  Divided into 3 parts:
• Mandatory requirements for anti-bribery, corruption, anti-money laundering and terrorist financing
• Guidance setting out supporting good practice for the above
• Supplementary guidance on some of the concepts set out in Parts 1 & 2
• There is also a useful glossary

Question 5

AML Red Flags

Answer 5

Property professionals should be aware of the “red flags” associated potential money laundering,
including:
* Inability or unwillingness of parties to provide identity documents
* Changes to parties involved in transactions
* Unusual transaction features, such as unexpected urgency required by parties, potential loss-making or an unusual transaction for a client
* Payment of fees, purchase or rental monies in unusual currencies

Question 6

Bribery Act - Penalties

Answer 6

• The Bribery Act is policed by the Serious Fraud Office
• If this Act is breached, there is a maximum penalty of 10 years imprisonment and /or an unlimited fine for individuals; companies face an unlimited fine.

Question 7

Bribery Act 2010

Answer 7

• It aims to reduce bribery in business in UK and abroad
• A bribe can be the giving, offering, promising or receiving of an advantage such as a payment, gift or a service for an action which is illegal or a breach of trust

Question 8

Bribery Act 2010 - 4 Offences

Answer 8

1) Bribing
2) Receiving a bribe
3) Bribing a foreign officeal
4) Failing to prevent bribery

Question 9

Bribery Act 6 principles

Answer 9

1) Proportionality
2) Top level commitment
3) Risk assessment
4) Due diligence
5) Communication
6) Monitoring and review

Question 10

Gifts and Bribery

Answer 10

• The key legislation to consider is the Bribery Act 2010
• Hospitality, promotional or other ‘low value’ business
  expenditure which seeks to genuinely promote and
  improve the image of a firm is an acceptable and key
  part of doing business and registered, if required, by the Firm in accordance with their anti-bribery procedures

Question 11

If asked about AML, consider the following:

Answer 11

• Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended)
• The RICS Professional Standard: but remember, the law comes first!
• Government guidance for estate agents
• Due diligence procedures
• Professional objectivity, openness and transparency
• “Red Flags”

Question 12

Levels of Due Diligence Checks - 1. Customer Due Diligence (COD)

Answer 12

• Identify the client and verify their identity based on a reliable independent source (e.g. passport, driving licence or electronic identification)
• Make reasonable endeavours to identify the beneficial owners of the client (and to verify the identity of the person responsible for managing it if not able to do so in the Persons of Significant Control register at Companies House)
• For a company, its name, company number and address of the registered office is required
• The names of the directors are required unless the company is listed on a regulated market (such as the London Stock Exchange)
• Obtain information on the purpose and intended nature of the business relationship and proposed funding arrangements as appropriate

Question 13

Levels of Due Diligence Checks - 2. Enhanced Due Diligence (EDD)

Answer 13

• Additional procedures are required for any transaction or business relationship involving a person established in a ‘high risk third country’ or a ‘politically exposed person’ (PEP) or a PEP family member/ business associate. Essentially EDD procedures require additional evidence and monitoring
• A PEP is a term describing someone who has been entrusted with a prominent public function
• A PEP generally presents a higher risk for potential involvement in bribery and corruption by virtue of their position and the influence that they may hold
• More detailed examination of the background and purpose of the transaction and increased monitoring

Question 14

Money Laundering - What are the contents of your employer’s anti-bribery procedures and
gift register requirements as well as AML procedures relevant to your work.

Question 15

Money Laundering - Due Diligence Checks - Other key requirements of the regulations include:

Answer 15

• There is a limit of 10,000 Euros for the acceptance of cash
• The on-going business relationship with client should be monitored
• Detailed record keeping of the procedures undertaken is required
• A senior member of staff / Board member must be appointed to take responsibility for all compliance
• A nominated person (the Money Laundering Reporting Officer) must be appointed to report any suspicions with a Suspicious Activity Report (SAR) to the National Crime Agency who decide what appropriate steps and actions are required
• A Firm to maintain records for minimum of 5 years and to report to Companies House any discrepancies between the information the firm holds on their customers compared with the information held in the Companies House Register

Question 16

Money Laundering - Firms must have policies to identify and scrutinise transactions which are:

Answer 16

• Complex or unusually large, or
• contain unusual patterns of transactions, or
• are without apparent economic or legal purpose

Question 17

Money Laundering - how you would undertake due diligence prior to and during instructions

Question 18

Money Laundering - Economic Crime (Transparency & Enforcement) Act 2022

Answer 18

• This includes measures for a beneficial ownership register of overseas entities owning property in the UK
• It strengthens the investigation powers regarding unexplained wealth orders (UWOs)
• It allows the easier prosecution of those involved in sanctions-busting Inability or unwillingness of parties to provide identity documents

Question 19

Money Laundering - Estate agents’ legal obligations

Answer 19

• The regulations require letting agents to register with HMRC if they let individual properties for more than the equivalent of €10,000/month
• Government guidance ‘Estate agency business guidance for money laundering supervision’ was updated in June 2021 which also includes requirements for sales agents as well
• Individuals and businesses need to be approved and remain registered by HMRC in order to trade
• CDD checks on vendors, purchasers, landlords and tenants will have to be undertaken on new sales and any letting or reletting as above
• EDD checks will need to be undertaken if red flags occur (e.g. involving high risk countries or non face-to-face business relationships)

Question 20

Money Laundering - Penalties - * Failure to comply with regulations:

Answer 20

• Maximum 14 years prison sentence and/or unlimited fine for assisting with money laundering
• Maximum 5 years prison sentence and/or unlimited fine for tipping off a person by informing them that they are under suspicion for money laundering or for failing to report suspicion

Question 21

Money Laundering - Proceeds of Crime Act 2002

Answer 21

• Provides powers for enforcement authorities in the UK to recover in criminal and civil proceedings money and other assets which are deemed to be the proceeds of crime
• It also creates a set of criminal offences intended to combat money laundering (AML offences)
  THREE main areas of offence:
  1. Concealing criminal property: if a person conceals, disguises, converts or transfers criminal property
  2. Arrangements: if a person enters into or becomes concerned in an arrangement which they know or suspect facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person
  3. Acquisition use and possession: if a person acquires, uses or has possession of criminal property

Question 22

Money Laundering Legislation

Answer 22

• Sanctions and Anti-Money Laundering Act, 2018
• Proceeds of Crime Act 2002
• Economic Crime (Transparency & Enforcement) Act 2022

Question 23

Money Laundering

Answer 23

Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations, 2017 (as amended in 2023)
* Money laundering is when proceeds of criminal activities are disguised or converted and then realised as legitimate assets
* The regulations cover estate agency work and ‘relevant financial business work’ inside and outside the UK by a firm

Question 24

RICS Professional Standard: Countering bribery, corruption, money laundering and terrorist financing, 2019 - Part 2

Answer 24

PART 2 - Risk assessment
Guidance:
Have a written record showing how firms meet the requirements of this Professional Statement (PS).
Evaluate risks in each part:
Report any problems immediately.
Use supplied evidence by third party where…
Take appropriate measures to understand them…
Understand relevance for risks presented by them…

Question 25

RICS Professional Standard: Countering bribery, corruption, money laundering and terrorist financing, 2019 - Part 3

Answer 25

• Provided on a range of issues, including:
  o Establishing a ‘risk-based approach’: Consider the three ‘Ws’ when assessing risks to your business:
   Who you act for
   What you are doing, and
   Why you are being asked to do something
• Dealing with politically-exposed persons (PEPs): They are higher risk as they hold positions of influence and enhanced due diligence is required.
• The need to identify the beneficial ownership of a company, partnership, or trust - such as by requesting a recent Certificate of Incorporation or Annual Return for a company.

Question 26

Sanctions and Anti-Money Laundering Act, 2018

Answer 26

• Under this legislation, wider sanctions have been issued in light of geopolitical activities such as the Ukraine conflict
• HM Treasury’s Office of Financial Sanctions Implementation (OFSI) provides regularly updated guidance regarding financial sanctions against countries, companies and individuals
• RICS provides guidance in RICS Anti-money laundering sanctions update, 2022, which provides a reminder about sanctions and estate agents’ role in enforcing these, including:
• considering the risks to a business as part of your AML procedure, noting that the sanctions lists
  include UK citizens and people who live in the UK
• understanding risk factors and red flags
• using software as part of due diligence if a firm is likely to engage with higher risk clients or assets
• checking individual clients of a higher risk against the HM Treasury’s “consolidated list”
• checking existing clients regularly where they present a higher risk, e.g. by subscribing to HM Treasury’s Sanctions Notices
• what to do if your client is a possible match on the sanctions list, including contacting the Office of Financial Sanctions Implementation (OFSI) for assistance.