The risks of bribery and corruption, money laundering and terrorist financing cut across our profession, regardless of geography or industry specialism.
To help the profession identify and manage these risks, we have published a professional statement on Countering Bribery and Corruption, Money Laundering and Terrorist Financing.
This professional statement sets out mandatory requirements for RICS members and RICS-regulated firms in relation to bribery, corruption, money laundering and terrorist financing. This took effect from 1st September 2019.
It is divided into three parts:
This professional statement applies globally and to all RICS members and RICS-regulated firms involved in work where the potential for such activity exists. If the statement contradicts local legislation then the legislation takes precedence.
Research by the International Monetary Fund estimated that the amount of money laundered, globally, in one year could be between 2 to 5% of global GDP, equivalent to $800 billion to $2 trillion US dollars.
The professional statement aims to provide the profession with a clear description of how to manage these risks within the RICS Rules of Conduct.
The purchase of property has the potential to be used by organised criminals to launder the proceeds of criminal activity. This is due to the large number of criminal funds which can be "cleaned" in a single transaction. It is therefore critical that all professionals working in the sector are acutely aware of the issues and appropriately trained to identify and report any suspicions of money laundering.
The profession needs to work with governments, supervisors and law enforcement agencies to ensure our industry is viewed by criminals as a hostile destination for money laundering. As the profession’s regulatory, RICS takes robust action against those who fail to act with integrity, as well as reporting such issues to law enforcement agencies.
This is not only in the interest of the public, but also in the interest of professionals, who want to ensure that the reputation of their profession is maintained. Therefore, it is important that RICS-accredited professionals and firms understand their obligations under Rule 3 of the RICS Code of Conduct and, where applicable, statutory obligations under local legislation, such as 'The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017)' in the UK.
It is also important that the profession takes a leading role in ensuring that business interactions with the built environment are transparent and serve the public good. Unfortunately, real estate is an often-overlooked element of the global responsible business agenda. That is why we have been working with the United Nations Global Compact to identify the most critical issues facing companies with a stake in land, real estate and construction in relation to the 17 Sustainable Development Goals (SDGs).
With our profession impacting – either directly or indirectly – most of the SDGs and with its cross-sectoral reach, we can be a powerful driver for making the SDGs a reality, and contribute to a safe, sustainable and transparent built environment.
All our professionals and firms must be aware of the risks of money laundering and terrorist financing and take steps to ensure that they do not engage in business activities with criminals seeking to launder money or finance terrorism activities, to comply with the Rules of Conduct (see rule three ethical behaviour for individuals and rule three professional behaviour for firms).
Recognising the need to ensure clarity and promote a better understanding of the risks of money laundering and terrorist financing, we are currently developing a globally applicable professional statement, which will outline expectations of our professional in this area in more detail.
There are a number of red flags that property professionals need to be aware of. These can be classed in five main categories:
It is important that professionals understand the factors that may indicate suspicious activity in each of these areas. These are described in a table that can be downloaded on the right-hand side. Our thanks to Alex Ktorides from Gordon Dadds for his assistance in producing this.
When you have assessed the money laundering risks to your business, we recommend that you consider three lines of defence, which are: your front line staff; your policies, systems (eg e-verification of passports) and controls; and senior management and internal specialists and audit functions.
To assist the estate agency sector, last year HMRC recorded a free one-hour webinar training video; we strongly recommend that anyone who needs an awareness of the money laundering regulations watch it. Although this has not been updated to reflect the MLR 2017, much of the content remains highly relevant.
In the UK, it is a statutory requirement for any business that carries out any activity defined as estate agency work under Section 1 of the Estate Agents Act 1979 to register with HMRC. Being an RICS-regulated firm does not exempt you from this requirement. HMRC offer guidance on who may fall within the requirement to register. HMRC’s guidance also includes the application process and fee structure.
The UK Money Laundering Regulations apply to anybody who is in the "Regulated sector", which covers professionals considered to be at high-risk of being used by criminals to launder money. Estate agents are included in this sector although managing agents and letting agents are not.
RICS-regulated firms are required to put systems in place to avoid money laundering and to report suspicious activity and are required to report suspicion of money laundering as soon as possible to the National Crime Agency (NCA) (previously the Serious Organised Crime Agency), regardless of whether they proceed with the transaction.
Firms that are not within the regulated sector may also be required to submit a Suspicious Activity Report (SAR) as well as take steps to protect against the risk of money laundering. You may commit an offence if you have knowledge or suspicion of money laundering activity or criminal property, assist anyone in dealing with it, and then fail to make a SAR. Submitting a SAR may provide a defence against committing a money laundering offence.