STEP Ethical Standards & Professional Conduct 3 — Questions and Answers
Question 1: Under STEP ethics, which scenario most clearly triggers a duty to report suspicions of money laundering?
- A client asks for their trust accounts to be summarised quarterly
- A client wishes to settle a large international trust using funds from an undisclosed source (Correct answer)
- A beneficiary requests early distribution for a home purchase
- A client changes their nominated executor without explanation
Correct answer: A client wishes to settle a large international trust using funds from an undisclosed source
Large settlements involving funds from undisclosed sources constitute a classic red flag requiring the member to consider a Suspicious Activity Report under AML obligations.
Question 2: A STEP practitioner suspects their own firm may be facilitating tax evasion. What does professional ethics require?
- Raise concerns through internal whistleblowing channels and, if unresolved, consider external reporting (Correct answer)
- Stay silent to protect client confidentiality
- Alert the client that the firm is under suspicion
- Resign immediately without taking further action
Correct answer: Raise concerns through internal whistleblowing channels and, if unresolved, consider external reporting
STEP ethics and applicable law require members to raise concerns internally first, then consider external reporting if the internal process fails to address serious wrongdoing.
Question 3: Which best describes the ethical duty of 'confidentiality' under STEP principles?
- An absolute duty that can never be overridden
- A duty that survives the end of the client relationship but may yield to legal obligations (Correct answer)
- A duty limited to the duration of the active engagement
- A duty owed only to living clients, not deceased estates
Correct answer: A duty that survives the end of the client relationship but may yield to legal obligations
Confidentiality is a continuing duty that persists after an engagement ends but may be overridden by law, court order, or regulatory requirements.
Question 4: A STEP member is approached by the press for comment on a client's estate dispute. The most ethically correct response is to:
- Provide a brief factual statement to avoid misleading reporting
- Decline to comment and confirm or deny any details about the client (Correct answer)
- Refer all queries to the client directly
- Issue a press release explaining the firm's position
Correct answer: Decline to comment and confirm or deny any details about the client
Confidentiality requires a STEP member to decline to confirm or deny any information about a client's affairs to unauthorised third parties, including the press.
Question 5: Which of the following actions by a trustee-practitioner would constitute a breach of the duty of loyalty?
- Investing trust assets in a fund that also holds the practitioner's personal investments (Correct answer)
- Charging agreed trustee fees for administration work
- Delegating investment decisions to a qualified investment manager
- Distributing income to beneficiaries in accordance with trust terms
Correct answer: Investing trust assets in a fund that also holds the practitioner's personal investments
Investing in a fund where the practitioner also holds personal interests creates a conflict of interest that breaches the duty of loyalty owed to trust beneficiaries.
Question 6: STEP's ethical framework requires practitioners to act with 'diligence.' In practice, this primarily means:
- Completing work faster than competitors
- Attending all client meetings in person
- Progressing matters promptly and with appropriate thoroughness (Correct answer)
- Billing clients only for hours actually worked
Correct answer: Progressing matters promptly and with appropriate thoroughness
Diligence under STEP standards means progressing client matters without undue delay and with the thoroughness each matter demands.
Question 7: A beneficiary contacts a STEP member acting as trustee and asks to see all trust correspondence. What governs the trustee's obligation?
- The beneficiary has an absolute right to all trust documents on request
- The trustee must exercise a discretionary balancing exercise, considering the type of document and potential harm (Correct answer)
- Correspondence is always privileged and need not be disclosed
- Only the settlor can authorise disclosure of trust documents
Correct answer: The trustee must exercise a discretionary balancing exercise, considering the type of document and potential harm
Trustees have a discretionary duty to consider beneficiary requests, balancing transparency obligations against factors such as confidential third-party communications or potential prejudice.
STEP Ethical Standards & Professional Conduct 3
Under STEP ethics, which scenario most clearly triggers a duty to report suspicions of money laundering?