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Hot Topic Highlight - Countering bribery and corruption, money laundering and terrorist financing



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What is today's blog about?


This week, we will be looking at RICS Professional Statement Countering bribery and corruption, money laundering and terrorist financing. Essential reading for AssocRICS and RICS APC candidates.


You can also listen to our CPD podcast on Anchor for more free AssocRICS and RICS APC training and support.


What's new and from when?


The new RICS Professional Statement Countering bribery and corruption, money laundering and terrorist financing (1st Edition, February 2019) becomes effective from 1 September 2019.


How is the guidance structured?


It is split into 3 parts:


  • Mandatory requirements

  • Good practice guidance

  • Supplementary guidance on parts 1 and 2, relating to bribery and corruption mitigation controls (i.e. monitoring the activities of your own organisation) and effective management of money laundering and terrorist financing risks (i.e. being vigilant of the actions of outside parties you do business with)


What definitions are provided by the Professional Statement?


The Professional Statement defines a wide variety of terms. Some of the key ones are as follows:


  • 'Bribery - 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

  • Corruption - the misuse of public office or power for private gain, or misuse of private power in relation to business practice and performance

  • Customer Due Diligence (CDD)/Know Your Customer (KYC) - taking the appropriate steps to ascertain who the customer or client is and, if relevant, their ultimate beneficial owner is and counterparty. These can be relatively simple checks to verify the identity of the customer/client or may entail deeper investigations. This is a legal and regulatory requirement in many countries

  • Facilitation payment - 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

  • Money laundering - concealing the source of the proceeds of criminal activity to disguise their illegal origin. This may take place through hiding, transferring and/or recycling illicit money or other currency through one or more transactions, or converting criminal proceeds into seemingly legitimate property

  • Red flags - common characteristics that either individually or in combination might indicate potential misuse of the real estate sector for money laundering or terrorist financing purposes'


What does Part 1 say?


In relation to bribery and corruption, RICS Regulated Firms must:


  • 'Not offer or accept, directly or indirectly, anything that could constitute a bribe

  • Have plans in place to comply with applicable laws governing bribery and corruption, and ensure that these are followed

  • Report any activity they are aware of that breaches 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

  • Act with due diligence to perform periodic written evaluations of the risks that face the firm and that may lead to the facilitation of bribery or corruption; in determining the appropriate level of due diligence, the firm may consider the type of business activities they engage in and the environment in which they operate

  • Retain information detailing how the firm has met the requirements of this professional statement'


RICS members must:


  • 'Not offer or accept, directly or indirectly, anything that could constitute 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'


In relation to money laundering and terrorist financing, RICS Regulated Firms must:


  • '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'


RICS members must:


  • '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'


What does Part 2 say?


In relation to bribery and corruption, RICS Regulated Firms should:


  • '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

  • Have appropriate governance and systems controls in place, proportionate to the type of work the firm does

  • Encourage transparency within the organisation by implementing a register including but not limited to: gifts, hospitality, entertainment and expenses customer travel and hospitality, political contributions charitable donations and sponsorships potential conflicts of interest

  • Provide clear guidance for staff so that they understand their role in preventing bribery and corruption and are aware that the following will not be tolerated: so-called ‘facilitation payments’; although such payments may not be illegal in the local country where the payment is made, no such payments should be made without explicit authorisation from the head office, bribes, price-fixing to create a monopoly or cartel arrangement failure to declare a conflict of interest

  • 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; smaller firms may still elect to make such an appointment, depending on resource implications

  • Publish a code of behaviour and provide this to staff

  • Carry out appropriate due diligence on third-party suppliers to ensure they are acting appropriately; if present in local bribery and corruption legislation then in line with their requirements'


RICS members should:


  • 'Declare certain items to their employer, including but not limited to: gifts, hospitality, entertainment and expenses, customer travel and hospitality, charitable donations and sponsorships

  • Attend relevant training provided by their employer or a regulator addressing bribery and corruption

  • Be familiar and act in compliance with their employer’s policy, process and code of behaviour relating to bribery and corruption

  • 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 bribery and corruption risks'


In relation to money laundering and terrorist financing, RICS Regulated Firms should:


  • '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'


RICS members should:


  • '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 confidentialIf 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'


What does Part 3 say?

Part 3 provides extensive supplementary guidance on Parts 1 and 2, relating to bribery, corruption, money laundering and terrorist financing.


Examples include:


  • Taking a risk based approach - knowing the 3 ws, i.e. who you act for, what are you doing and why are you being asked to do something

  • Customer Due Diligence (CDD) - ensuring you hold identification for the transacting party/parties and verify that the information is valid, undertaking additional checks where necessary

  • Standard Due Diligence (SDD) - this is only appropriate where there is low risk and only basic verification of identify is needed, e.g. checking on a company register, company status or evidence of a stock exchange listing

  • Enhanced Due Diligence (EDD) - this is appropriate where there is high risk. Checking and monitoring identity will be continually required as a consequence


The Appendices to the Professional Statement include a wide variety of templates, which candidates will find useful to review. We also recommend reviewing and ensuring you understand your firm's policy and procedures.


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Stay tuned for our next blog post to help build a better you


N.b. Nothing in this article constitutes legal or financial advice.