RICS professional statement Countering bribery and corruption, money laundering and terrorist financing, 1st edition

Consultation draft

May 2018

Contents 1.0 About us 2.0 Introduction 3.0 About this consultation 4.0 Responding to this consultation 5.0 Consultation questions

1.0 About us

RICS is the largest organisation of its kind for professionals in property, construction, land and related environmental issues. As an independent Chartered organisation, RICS regulates and maintains the professional standards of 125,000 qualified professionals and over 10,000 firms across the globe. Since 1868, we have been committed to setting and upholding standards of excellence and integrity – providing impartial, authoritative advice on key issues affecting businesses and society. With offices covering the major political and financial centres of the world, our market presence means that we are ideally placed to influence policy and embed standards at a national and international level. We work, to provide an environment that will support a safe and vibrant marketplace in land, real estate, construction and infrastructure, for the benefit of all. We are proud of our reputation and we guard it fiercely, so clients who work with our registered professional can have confidence in the quality and ethics of the services they receive.

2.0 Introduction RICS professionals, regulated firms, and others they employ, play a vital role in the provision of surveying-related services to both individual members of the public and businesses. We develop professional statements in instances where we believe additional mandatory requirements are required to supplement our Rules of Conduct. The risks of bribery and corruption and money laundering cut across the profession regardless of geography or industry specialism. According to the Constructing Sector Transparency (CoST) briefing 2016, the value of global construction output is expected to reach $17.5 trillion per annum by 2030, with the report estimating between 10%–30% of that value lost through corruption. Losses in the construction sector, the report notes, are particularly acute as the sector ‘is a vital component of the most pressing global challenges that we face, including eliminating poverty, achieving food security, rebuilding the global economy and dealing with the effects of climate change.’ If these risks arise and are not appropriately identified and managed, the consequences are more far reaching than just the land, property and construction sector. This consultation draft seeks views from the profession, and other stakeholders, on what RICS should set down in mandatory terms for the global profession. Following the introduction of this professional statement, RICS qualified professionals and regulated firms will be subject to regulatory action should they be found to be acting without regard for the professional statement. Please do let us know what you think by responding to this consultation (detailed overleaf). We look forward to hearing your views.

3.0 About this consultation

1. RICS is committed to providing professional standards that respond to the

demands of an evolving market, while at the same time fostering an environment that supports innovative ways of working. This requires a delicate balance between maintaining the consumer and public confidence through appropriate regulatory interventions, while not overburdening firms and reducing their ability to innovate effectively. We consult to ensure that we clearly understand the impacts that our professional standards have on the market and that those standards are clear and effective.

2. This consultation looks at RICS’ global approach to anti-money laundering,

bribery, corruption and terrorist financing. We consider that the potential for bribery, corruption, and money laundering exists across all areas of practice and geographies. This draft professional statement is therefore multidisciplinary in its approach and will apply globally. As such, it is necessarily high-level, and in many cases it will co-exist with local or regional legislation. In due course, we will develop locally applicable guidance on the application of this standard, and local legislative requirements, on this issue.

Existing RICS guidance

3. This professional statement outlines the key principles for combating bribery and corruption, money laundering and terrorist financing. It supports both the International Ethics Standards and RICS Rules of Conduct for members and firms. The global mandatory statement will guide the profession by setting out RICS’ minimum requirements for professionals and firms to ensure that their activities do not involve or enable bribery. The professional statement is a high-level document that focuses on promoting a risk-based approach.

4. RICS Rules of Conduct1 set out, in rule three, an obligation for both RICS

members and regulated firms to always: ‘… avoid any actions or situations that are inconsistent with its professional obligations. The professional statement underpins rule three by setting out RICS’ expectations of how RICS regulated firms and members comply with the Rules of Conduct in relation to anti-bribery and corruption, anti-money laundering and terrorist financing.

Why we are developing this/regulatory risks identified? Bribery and corruption

5. Transparency International2 notes ‘corruption impacts societies in a multitude of ways. In the worst cases, it costs lives’. Corruption hinders the developments of fair market structures and distorts competition, which in turn deters investment.

6. According to the Engineering and Construction Sector analysis of PwC’s 2014 Global Economic Crime Survey ‘the engineering and construction sector has the highest rate of bribery and corruption of any industry.’ Due to the size, nature and complexity of the construction industry, bribery and corruption can

1 https://www.rics.org/uk/regulation1/rules-of-conduct1/ 2 https://www.transparency.org/whoweare/organisation/faqs_on_corruption

occur in many different ways, with potentially fatal consequences. The report notes ‘Substituting inferior materials or failing to meet quality standards…can potentially threaten the stability of the structure, be it a house, office building or bridge. Injuries or even death can be the result.’ In a similar vein, the sector is also vulnerable ‘where the procurement of goods and services and the selection of contractors and suppliers on large-scale projects may be decided or influenced by individuals within an organisation, provides a number of opportunities for corruption and bribery… An environment still exists where individuals can influence the process and outcome’. The potential for bribery and corruption, the same report notes, are seen acutely when looking across borders. ‘64% of engineering and construction executives see bribery and corruption as the highest risk of operating globally. More than one in four (29%) acknowledge that they’ve been asked to pay a bribe. And 35% say they’ve lost an opportunity to a competitor who they suspected paid a bribe.’

Money laundering 7. Money laundering can be described as the processing of criminal proceeds to

disguise their illegal origin. Processing may include hiding, transferring and/or recycling illicit money or other currency through one or more transactions It is estimated by the IMF that the amount of money laundered globally in a year is around 2–5% of global GDP, or between $800bn and $2tr in current USD.

8. Criminals often target the sector using the purchase of property to legitimise

money obtained through bribery and corruption. The property sector is particularly vulnerable to money laundering because of the opportunity it provides to ‘clean’ large amounts of illegally obtained money in a single transaction.

9. According to the Financial Action Task Force (FATF) ‘The integrity of the

banking and financial services marketplace depends heavily on the perception that it functions within a framework of high legal, professional and ethical standards. A reputation for integrity is one of the most valuable assets of a financial institution.’ Money laundering acts directly against this reputation of integrity and “undermines democracy and the rule of the law’.

10. The FATF also notes the social and political costs of money laundering are

serious if it is not adequately dealt with ‘Organised crime can infiltrate financial institutions, acquire control of large sectors of the economy through investment, or offer bribes to public officials and indeed governments. The economic and political influence of criminal organisations can weaken the social fabric, collective ethical standards, and ultimately the democratic institutions of society. In countries transitioning to democratic systems, this criminal influence can undermine the transition. Most fundamentally, money laundering is inextricably linked to the underlying criminal activity that generated it. Laundering enables criminal activity to continue.’

11. It is vital that RICS members and firms act in the public interest to maintain the integrity of the profession.

Developing this professional statement

12. In developing this professional statement, RICS has drawn together a working group of experts, led by Alex Ktorides, Head of Ethics and Risk Management

at legal and professional services firm Gordon Dadds. We have also engaged with others, such as governments and inter-governmental organisations.

13. This professional statement will evolve through this consultation with the public, consumers, practitioners and the wider profession.

Impact assessment

14. The responses from this consultation will help inform us of the impact of releasing this professional statement.

Who should respond to this consultation?

15. We welcome responses from anyone interested in preventing bribery, corruption and money laundering. We are particularly interested in hearing responses from small and large consumers, professionals, regulators, government departments or agencies.

4.0 Responding to this consultation Consultation activity Consultation activity will take a number of forms including cross-industry roundtables, one-to-one meetings and presentations. There are several ways in which you can respond, please logon to RICS iConsult (www.rics.org/amlps) to see the full details. The iConsult platform is open from 16 May 2018 until 31 August 2018. If you have not registered already, you will need to complete the user-friendly registration process, but should you need further support with registration please contact:

Ellie Scott escott@rics.org

Confidentiality Unless you state otherwise, we may decide to publish all or part of your response to this consultation, including your name, professional qualification(s) and any organisation you represent or belong to. Please indicate clearly if your response is confidential.

What happens next? Following the closure of this consultation, the working group will consider the responses received. Following this we will publish a summary of those responses, together with an explanation of how the responses have informed the working group’s final decisions in relation to the professional statement.

5.0 Consultation questions In order to allow a managed review of consultation responses we request that you provide input against the following questions. Should you wish to provide further views, you may do so following these answers:

Respondent information Name of respondent (individual or organisation) Membership number (if appropriate) Nature of respondent:

a) RICS regulated firm (large) b) RICS regulated firm (SME) c) Business consumer of surveying services d) Individual RICS member e) Individual (non RICS member) f) Other

World Region:

a) UK or Ireland b) Rest of Europe c) Middle East and North Africa d) Sub Saharan Africa e) North America f) South/Central America g) Asia h) Oceania Country:

Sector:

a) Property b) Land c) Built environment d) Other

1. Is the professional statement clear and straightforward? (Y/N)

If no, which areas could be clearer and why?

2. Are there any requirements within the professional statement that you do not

agree with? If so, please explain.

3. Do you consider that the introduction of this professional statement could create any adverse impacts?

If yes – please outline below.

4. Do you consider that the introduction of this professional statement would

have any positive impacts? Please outline your answer.

5. What other support, if any, do you think RICS members/RICS regulated firms need to embed this professional statement in addition to this publication?

6. Do you think that the suggested 24-month review period in Section 3.1 of

‘Part 3: Supplementary commentary notes Anti-bribery and corruption’ is appropriate?

If not, please provide the rationale for your answer.

7. Are there any other measures that could be taken to increase public

confidence that you feel are not sufficiently covered by this professional statement?

8. Any other comments?