APC - Valuation Competencies (Hannahs) > Ethics L3 > Flashcards

Ethics L3 Flashcards

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1
Q

What are the RICS Rules of Conduct?

A

Support positive change by enforcing the highest ethical standards in valuation.

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2
Q

When did the Rules of Conduct come into force?

A

February 2022

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3
Q

Who do the Rules of Conduct apply to?

A

All members and firms regulated by RICS.

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4
Q

What is Rule 1 of the Rules of Conduct?

A

Members and firms must be honest, act with integrity and comply with their professional obligations, including obligations to RICS.

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5
Q

What is Rule 2 of the Rules of Conduct?

A

Members and firms must maintain their professional competence and ensure that services are provided by competent individuals who have the necessary expertise.

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6
Q

What is Rule 3 of the Rules of Conduct?

A

Members and firms must provide good quality and diligent service.

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7
Q

What is Rule 4 of the Rules of Conduct?

A

Members and firms must treat each other with respect and encourage diversity and inclusion.

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8
Q

What is Rule 5 of the Rules of Conduct?

A

Members and firms must act in the public interest, take responsibility for their actions and act to prevent harm and maintain public confidence in the profession.

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9
Q

How many core obligations are their for members and can you give some examples?

A

3 - e.g.:
Members must comply with CPD requirements set by RICS.
Members must cooperate with RICS.
Members must promptly provide all information reasonably requested by the Standards and Regulation Board, or those exercising delegated authority on its behalf.

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10
Q

How many core obligations are there for firms and can you give some examples?

A

7 - e.g.:
Firms must publish a complaints handling procedure, which includes an ADR provider approved by RICS and maintain a complaints log.
Firms must ensure that all previous and current work is covered by appropriate PII cover that meets the standards approved by RICS.
Firms with a sole principle must make arrangements for their professional work to continue in the event of their incapacity, death, absence or inability to work.
Firms must cooperate with RICS.
Firms must promptly provide all information reasonably requested by the Standards and Regulation Board.
Firms must display on their business literature, in accordance with RICS’ published policy on designations, a designation to denote that they are regulated by RICS.
Firms must report to RICS any matter that they are required to report under the Rules of Registration for Firms.

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11
Q

What is the RICS Guidance on Bribery?

A

Countering Bribery and Corruption, Money Laundering and Terrorist Financing which took effect September 2019.

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12
Q

How is the Bribery Professional Standard laid out?

A

Three parts: Mandatory Requirements, Guidance and Supplementary Guidance.

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13
Q

How would you control and monitor for bribery and corruption?

A

This will typically involve monitoring the activities of your own organisation.

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14
Q

How would you mitigate for money laundering and terrorist financing?

A

Involve being vigilant of the actions of outside parties that RICS members and firms do business with. I.e. clients and third party introducers.

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15
Q

What takes precedent, the professional standard or local legislation?

A

ALWAYS local legislation

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16
Q

What is Bribery?

A

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

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17
Q

What is Corruption?

A

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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18
Q

What is Money Laundering?

A

Concealing the source of the proceeds of criminal activity to disguise their illegal origin.
May take place through hiding, transferring or recycling illicit money or other currency through one or more transactions, or converting criminal proceeds into seemingly legitimate property.

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19
Q

What is terrorist financing?

A

solicitation, collection or provision of funds with the intention that they may be used to support terrorist acts or organisations.
Funds appropriate directly or indirectly for this purpose constitute terrorist funding.

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20
Q

What are some of the mandatory requirements firms must adhere to in terms of bribery and corruption?

A
  1. Not offer or accept directly, or indirectly anything that could constitute a bribe.
  2. Have plans in place to comply with laws governing bribery and corruption and ensure there adhered to.
  3. Report any activity they are aware of that breaches laws to the relevant authorities (or reported to senior manager).
  4. Act with due diligence to perform periodic written evaluations and risks that may lead to bribery/corruption.
  5. Retain information detailing how the firm has met the requirements of this PS.
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21
Q

What are some of the mandatory requirements that RICS members must comply with regarding bribery and corruption?

A
  1. Not offer or accept, directly or indirectly, anything that could constitute a bribe.
  2. Ensure they have adequate knowledge and training on bribery and corruption to be able to comply with requirements of PS.
  3. report any activity they are aware of that breaches applicable anti-bribery and corruption laws to the relevant authorities (or senior manager).
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22
Q

What are the mandatory requirements for firms in terms of money laundering and terrorist financing?

A
  1. Not facilitate or be complicit in money laundering or terrorist financing activities.
  2. Have systems/training in place to comply with laws and make sure they are followed.
  3. Evaluate risks that prospective and existing business relationships present.
  4. Report suspicions to relevant authorities (or senior manager).
  5. Ensure responses to risks identified are appropriate, including conducting appropriate checks on clients/customers.
  6. Use reliance on third party only where there is a certain level of confidence in the quality of information provided.
  7. Take appropriate measures to understand the client and the purpose of the transaction.
  8. Verify the identity of client by undertaking basic identity checks.
  9. Record/retain information detailing how the firm has met requirements of PS.
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23
Q

What are the mandatory requirements for members in terms of money laundering and terrorist financing?

A
  1. Not facilitate/be complicit in money laundering or terrorist financing activities.
  2. Report any suspicions of money laundering or terrorist financing activities to relevant authorities (or to a senior manager).
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24
Q

What is a nominated officer?

A

Senior individual who’s responsible in ensuring anti-money laundering policies are in place and complied with and any risks acted upon.

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25
Why is a nominated offer important?
Important not to report concerns widely as could lead to tipping off offences or compromise those involved.
26
What is a compliance and ethics champion?
Normally a senior manager with experience and with visibility in the office. Helps embed systems that help detect and counter money laundering and terrorist financing and bribery and corruption.
27
What are the responsibilities of a compliance and ethics champion?
They have an overview of individuals for Customer Due Diligence and ethics in a firm. Help promote good practice on the day-to-day risks and make recommendations on suitable controls. Can manage internal investigations and help lawyers/ compliance professionals.
28
What is a beneficial owner?
Person who owns, or controls a legally defined minimum percentage of the shares or voting rates in an entity.
29
How can you identify the beneficial owner?
Acquire documents like: Certificate of Incorporation Annual Return Written confirmation from lawyer.
30
What is a Politically Exposed Person (PEP)?
Considered high risk to money laundering and corruption because they hold positions of influence (many jurisdictions specifically legislate for this).
31
What is the correct approach for dealing with PEPs?
Policy that enables PEP to be detected on a risk basis. e.g. firms have automated searches for all new clients (and agents/suppliers in high risk countries). smaller firms may search according to a pre-set risk criteria and ask clients directly.
32
What should happen if a client is identified as a PEP?
This should trigger enhanced due diligence, e.g. deeper assessment of: 1. Transaction type 2. Funds being utilised Managers to decide whether or not to proceed. Decision to be well documented.
33
What is the Code of Behaviour?
Normally a formal and short document that enshrines a firms commitment to good ethics and what is expected from those acting for the firm. Set out correct behaviour in certain situations. Not all firms will have a code - depends on size, complexity and location.
34
How many types of due diligence are there?
3: Customer Due Diligence (CDD) Enhanced Due Diligence (EDD) Simplified Due Diligence (SDD)
35
What is Customer Due Diligence?
Under the Money Laundering Regs 2007: a)identify customer and verify identity b) identify beneficial owner (if not customer) c) obtain information on purpose/intent of business relationship. ALWAYS comprises: identify the transacting party verify identification is valid carry out additional checks according to level of risk.
36
What is Simplified Due Diligence (SDD)?
Where there is a situation identified as low risk, a full CDD is not required. Applying basic verification may be appropriate. Internal policy needs to set out when SDD can be applied. Evidence of clients status my suffice: - check on local company register -status of a company - evidence of listing on the stock exchange
37
What is Enhanced Due Diligence (EDD)?
It is applied in situations where under policy/assessment/law, more checking is required to complete the client profile. - requires continued review of client/transaction
38
Give me an example on a situation where you may feel it is warranted to check funds?
The source of wealth is clearly not matching the commercial factors. (Source of funds closely aligned with the money laundering risks inherent in a transaction or from client activity).
39
What information would you collect to analyse funds?
bank statements, trust deeds, evidence of a bonus payment may be needed and in turn, bring about further questioning.
40
What is some of the guidance given to RICS members on bribery and corruption?
1. Declare certain items to an employer, e.g. gifts, hospitality, entertainment, expenses etc 2. Be familiar and act in compliance with employers policy. 3. Take a leadership role if in a senior management position. 4. Attend relevant training.
41
What is some of the guidance given to RICS firms on bribery and corruption?
1. Encourage transparency and implement a gifts register 2. Prepare a written policy 3. Provide clear guidance 4. Appoint a contactable person 5. Publish a code of behaviour 6. Carry out Due Diligence 7. Have controls in place
42
What is some of the guidance given to RICS members on money laundering?
1. Training 2. Policy 3. Keep Reports 4. Take a Leadership Role
43
What is some of the guidance given to RICS members on money laundering?
1. Training 2. Controls 3. Reports 4. Appoint Responsibility 5. Written Policy 6. Identify client involved in transaction
44
What is reliance from third parties?
Where client has instructed or already passed checks by a regulated entity in appropriate country e.g. law firm - acceptable to reply on their checks of the client. Ultimate responsibility still remains with the firm.
45
What is departure?
Where specific legislative, regulatory or court order requires to be followed and differs from some of the requirements of the Professional Standard. RICS members expected to record conflicts in writing.
46
What does the level of risk normally depend on in terms of bribery and corruption?
1. Country in which business is done 2.Extent to which national controls are available and enforced. Some countries higher risk than others.
47
What can be classed as low-risk?
Firms that have determined their activities give risk to very low risks and require fewer controls. - extensive procedure not necessarily needed.
48
What is best practice for those situations deemed high risk?
- Appoint a person/team to be responsible for assessing the risk before designing/testing controls that can be put in place to mitigate against them. - Periodic review necessary to ensure risks/controls are still in line with the assessment.
49
How are funds usually identified in money laundering?
Usually layered via single or series of payments or transactions so that proceeds can be hidden and used later.
50
Can you give some examples of money laundering?
Proceeds of crime to purchase legal asset, i.e. real estate held in name of individual and at a later date sold for lifestyle purposes or converted into cash.
51
What are KYC and CDD?
Know your client and Customer Due Diligence - who is the client? who is the ultimate beneficial owner? is there a counterparty?
52
Can the responsibility for risk assessment of a client and actions be outsourced to another party?
NO
53
What is a good risk based approach?
3 W's Who What Why
54
What are some of the key pieces of legislation?
Proceeds of Crime Act 2002 The Terrorism Act 2000 The Money Laundering Regulations 2007 Criminal Finance Bill Finance Act 2016 The Money Laundering Regulations 2017
55
Can you name some of the implementations of the Money Laundering Directive 2017?
- HMRC: Real estate business that fall within scope of regs must register with HMRC and criminal offence to act as beneficial owner/officer/manager of an estate agent without being approved by HMRC. - Overseas subsidies: parent undertakings ensure they establish policies that apply to all subsidiaries including those outside of the UK. - CDD - all estate agents have to carry out CDD on customers and beneficial owners of customers prior to entering into business relationship. - SDD fails to be automatic - have to consider all risk factors. LOW RISK - EDD - applied on risk sensitive basis in any situation which presents higher risk. - PEPs - include domestic as well as foreign. Also risk assessment on family members of PEPs.
56
What is a Suspicious Activity Report (SAR)
Regulated sectors under 2000 and 2002 Acts are required to submit a SAR if suspect money laundering or terrorist financing. Failure to do so is a crime - can face imprisonment.
57
How long should CDD be held unless national law states otherwise?
5 years
58
What act lists offences in terms of criminal property?
Proceeds of Crime Act 2002 - can commit a crime punishable of up to 14 years in prison -conceal, disguise, transfer, acquire, retain use or control criminal property
59
What are some Red Flags?
Choice of Lawyer: instruction at distance with no legitimate reason, no expertise in large complex transactions, etc Client: evasive/secret, identity issues, business entity not on the internet Nature of Retainer: transaction unusual, frequent changes in legal structures or managers. complicated ownership structures. Source of funds: large proportion of private funding, source unusual, large financial transactions by recently created companies.
60
What is PII?
Professional Indemnity Insurance
61
What are the 5 key offences laid out in the anti-bribery act?
Failure of a commercial organisation to prevent bribery Bribery of foreign public officials 'Active' Bribery - offering or giving a bribe 'Passive' Bribery - requesting or accepting a bribe consent or connivance by director or senior company officer in bribery by a company.
62
What is the appropriate professional standard regarding clients money?
RICS Handling Clients Money 1st edition - effective Jan 2020
63
What other than the professional standard should be followed? And which takes precedence?
The RICS Client Money Protection Scheme Rules - 2nd edition effective from June 2025.
64
What is client money?
cash, cheque or electronic transfer which a RICS regulated firm holds for or receives on behalf of another person. - includes money held by a regulated firm as a stakeholder and is not immediately due and payable on demand to the RICS-regulated firm for its own account. - excludes fees paid in advance for professional work agreed to be performed, and clearly identifiable as such, unless fees undertaken by a property agent described in Client Money Protection Scheme for Property Agents.
65
What are some examples of client money?
Payment on account of general costs Rent Service charges Interest credited to a client account Arbitration fees Money held but due to be paid to contractors.
66
What is office money?
fees disbursements interest on general client accounts whereby client agrees interest will not acrue to them. Money paid in advance of an agreed fee for surveying services. (not property agent work in England).
67
What are the objectives of the handling client money professional standard?
Keep client money safe. to ensure it is only used for the appropriate purposes. To ensure RICS registered firms have the appropriate controls and procedures in place to safeguard client money.
68
What is the limit amount per claim regarding client money and what are the time limits?
£50,000 and 12 months
69
How are unidentifed funds dealt with regarding client money?
If money has remained unidentified for over three years it is donated to charity.
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