Professional Practice issues (Rules of Conduct, 2021) Flashcards
What is the key legislation under Gifts, Bribery and corruption?
The Bribery Act 2010 and the Proceeds of Crime Act 2002
Hospitality, promotional or other ‘low value’ business expenditure whwich seeks to genuinely promote and improve the image of the firm is acceptable and key part of doing business and registered, if required, by the Firm in accordance with their anti-bribery procedures
What is a Bribe and what is the Bribery Act 2010 and what are its aims?
It aims to reduce bribery in UK and abroad
A bribe can be the giving, offering, promising or receiving of an advantage such as payment, gift or a service for an action which is illegal or a breach of trust
What are the principles that the Bribery Act 2010 are based on?
- Proportionality
- Top level commitment
- Risk assessment
- Due diligence
- Communication
- Monitoring and review
The four offences are:
1. Bribing
2. Receiving a bribe
3. Bribing a foreign public official
4. Failing to prevent bribery
Are companies responsible for their employee’s corrupt acts?
Companies are responsible for their employees’ corrupt acts unless they can show that they had adequate policies and procedures in place to combat bribery
What are the rules on hospitality?
Lavish corporate entertainment - government guidance states that hospitality is not prohibited by the Act.
It states that offering a client reasonable and proportionate hospitality will not constitute as an offence, such as tickets to a major sporting event and taking clients for meals, as long as this accurately recorded in a gift/hospitality register
Under the guidance, companies must meet criteria to prove they have taken steps to prevent bribery to include the identification of potential risks, staff training, provision of clear policies and regular reviews
There is a defence if you can show that adequate procedures put into place to prevent bribery
What are the penalties for Bribery?
The Bribery Act is policed by the Serious Fraud Office
If this Act is breached, there is a maximum penalty of 10 years imprionment and/or an unlimited fine for individuals; companies face an unlimited fine
What is Money Laundering and the Regulations on it?
Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations, 2017 (as amended in 2019)
- 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
What are the key provisions of the Money Laundering, Terrorist Financing and Transfer of Funds Regulations, 2017?
- A requirement to have a written money laundering and terrorist financing risk assessment
- Implement systems, policies and controls and procedures to address money laundering and terrorist financing risks and meet the requirements under the regulations
- Adopt appropriate internal controls
- Provide staff training
- Comply with new customer, enhanced, and simplified due diligence requirements
- Comply with the requirements relating to politically exposed pensions (PEPs)
- Ensure appropriate record keeping, policies and procedures
- 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.
- 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.
What are Estate agents’ legal obligations?
The Money Laundering, Terrorist Financing and Transfer of Funds Regulations were amended w/ effect from 10 Jannuary 2020 by the Money Laundering and Terrorist Financing to require letting agents to register with HMRC within 12 months of May 2020 if they let individual properties for more than the equivalent of 10,000 euros a month
The Government guidance ‘Estate agency business guidance for moneylaundering supervision’ was updated in June 2021 which 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)
Firms must have policies to identify and scrutinise transactions which are:
- Complex or unusually large
- Contain unusual patterns or transactions
- Are without apparent economic or legal purpose
Firm must have group-wide procedures to share relevant information, and to train anyone capable of identifying or preventing money laundering or terrorist financial risks
RICS provides guidance in ‘Anti-money laundering-sanctions update, March 2022’ which provides a reminder about sanctions and estate agents’ role in enforcing these,
including:
- considering the risks a business as part of your AML procedure, noting that the sactions 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 client is a possible match on the sactions list, including contacting the Office of Financial Sanctions Implementation (OFSI) for assistance
What are the Levels of DD checks?
- Customer Due Diligence (CDD)
- 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
What is the EDD?
> 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. 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 invovlement 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
What are the other key requirements of the Money Laundering, Terrorist Financing and Transfer of Funds Regulations, 2017? (‘Regulations’)
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 are 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
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
What are the penalites for the failure to comply with the regulations?
- 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
What are the ‘red flags’ associated with potential money laundering?
- 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
What are the Proceeds of the Crime Act 2002?
- It 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
- Arrangements: if a person enters into or becomes concerned in an arrangement which they know or suspect facilitates the acquisition, retention, use of control of criminal property by or on behalf of another person
- Acquisition use and posession: if a person acquires, uses or has possession of criminal property
