1. BACKGROUND

You are a professional accountant in business1 and have recently been appointed financial director of PropertyInvest Ltd, a company listed on the Johannesburg Stock Exchange (JSE). PropertyInvest Ltd was founded by the current CEO, Mr Nooks. The company began its business buying and selling real estate in Gauteng, South Africa. Over time, the company increased its service offerings and now provides a comprehensive range of property services. PropertyInvest Ltd has formed alliances with property companies worldwide, enabling the company to assist interested parties with property sales and residency in several countries locally and internationally. The company is a trusted brand in the property industry and often provides services to high-profile individuals such as celebrities and politically exposed persons (PEPs). At the time of your appointment, you declared to the board of directors and the recruitment agency that assisted you with the appointment process that you have not had much experience in the property industry. However, both the directors and the recruitment agency believe you to be a fast learner and able to learn the ins and outs of the business without trouble. They were confident in appointing you because of your knowledge of the JSE listing requirements regarding corporate reporting and other necessary disclosures. The board also assured you that the company would be willing to send you on any necessary training that you may require. There seemed to be no other reason not to take up the position and you were excited about the opportunity presented. During your review of the next months revenue budget (revenue transactions are categorised according to value) you came across a transaction that PropertyInvest Ltd is conducting on behalf of Mr Robert Caesar, the son of a well-known politician in South Africa. Mr Caesar approached PropertyInvest Ltd to assist him in purchasing a home in one of Cape Towns premier suburbs. PropertyInvest Ltd negotiated the deal on behalf of Mr Caesar. The owner of the home, worth R14 500 000, duly accepted the offer of purchase from Mr Caesar. Negotiating deals on behalf of high-profile people is not something new to PropertyInvest Ltds business, hence the deal did not surprise you. However, this transaction caught your attention because you had read a recent newspaper article in which it was reported that Mr Robert Caesar was under investigation for allegedly embezzling funds belonging to the South African government through a tender process. Consequently, you decided to ensure that the transaction was done in line with policy and practice so that the company is not associated with any wrongdoing. You obtained the transaction file for the property sale and discovered that the due diligence test that was supposed to have been done on the client was incomplete. The due diligence test had not determined the source of Mr Caesars funding for the property purchase, in line with the FIC Act.2 You thought back to the first training you attended, after your appointment to PropertyInvest Ltd, on the regulations affecting the property industry and recalled that the importance of performing due diligence tests on company 1 Either a CA(SA) or CIMA depending on the qualification you are registered for. 2 The FIC Act introduces a regulatory framework of measures requiring certain categories of business to take steps regarding client identification, record-keeping, reporting of information and internal compliance structures. The Act obliges all businesses to report to the FIC various suspicious and certain other transactions. The FIC uses this financial data and available data to develop financial intelligence, which it is able to make available to the competent authorities and supervisory bodies for follow-up investigations or administrative action. clients was emphasised. The training referred you to the FIC Act, which stated that PropertyInvest Ltd is obliged to determine the source of a property buyers funding to ensure that the company is not caught up in any illegal schemes of the buyer such as money laundering amongst other fraudulent schemes. PropertyInvest Ltds company policy is in line with the FIC Act and emphasises the importance of due diligence testing. Upon further investigation, it was revealed to you that the CEO, Mr Nooks, had authorised the transfer of the property to the buyer despite the incomplete due diligence. However, the file also showed that the property transfer has not yet been concluded and that the due diligence test could therefore still be completed. On the basis of the information gathered you decide to approach the CEO to inform him of the investigation against Mr Caesar. You explain to Mr Nooks that upon the review of the following months revenue budget you came across the impending transfer of the property to Mr Caesar. The transaction revealed that he, Mr Nooks, had authorised the sales transaction on Mr Caesars behalf, perhaps unaware of the investigation given that the due diligence tests were still incomplete. Mr Nooks replies, Oh yes, I read about the Caesar investigation. I thought it is not our problem, so I decided to override the system and bypass the due diligence test prior to the property transfer. You go on to tell Mr Nooks that PropertyInvest Ltd has a duty under the FIC Act to find out where the buyers money is sourced from. Furthermore, the company could be subjected to scrutiny if the investigation confirms money laundering on Mr Caesars part. This information could affect PropertyInvest Ltds reputation, by association, and consequently its share price. Mr Nooks just smiles and goes on: I appreciate your enthusiasm. We are not fraud investigators but real estate agents. Its not your job to investigate this matter, and my advice is that you leave it alone. The transaction is near conclusion, and the money will be good. Dont worry, you are new and will learn that these things are part of the nature of the business. You leave the CEOs office confused. Is this really the way things are done around here and in the industry? He is right: you are new, and he has more experience. Yet, the whole episode has left you unsettled.

You are required to:

1. Identify and explain the business and professional ethical dilemmas evident from the scenario presented?

2. As the financial director of the company, you can decide to take further action and complete the due diligence test OR you can leave the matter as is, as instructed. Compare the two decisions available to you including the consequences of each decision (example - such as disciplinary action may follow unethical behaviour). Your answer should: Identify and apply all relevant ethical and legal requirements. Consider the consequences relevant to both you and the company.

3. Indicate 3 stakeholders affected by or you might take into account in your decision and why?