CGA Ethics Standards & Legal Compliance 3 — Questions and Answers
Question 1: A client asks a CGA to appraise their jewelry 'as high as possible' for a divorce settlement. The appraiser should:
- Comply since the client is paying for the service
- Provide an objective appraisal based on market evidence regardless of the client's request (Correct answer)
- Inflate values slightly to maintain the client relationship
- Decline only if the marriage was under five years
Correct answer: Provide an objective appraisal based on market evidence regardless of the client's request
Appraisers must provide objective, impartial valuations regardless of the intended use or the client's desired outcome.
Question 2: Under anti-money laundering (AML) regulations, a jeweler or appraiser in the US is required to file a Currency Transaction Report (CTR) when:
- A client requests an appraisal worth more than $5,000
- A cash transaction exceeds $10,000 (Correct answer)
- A gemstone is identified as having a clarity enhancement
- A client requests anonymity during a purchase
Correct answer: A cash transaction exceeds $10,000
Under the Bank Secrecy Act, businesses must file a CTR for cash transactions exceeding $10,000 to help detect money laundering.
Question 3: What does 'competency' mean in the context of USPAP ethics for gemstone appraisers?
- Having at least ten years of appraisal experience
- Possessing the knowledge and experience necessary to complete the appraisal credibly (Correct answer)
- Holding at minimum one professional certification
- Being licensed by the state where the appraisal is performed
Correct answer: Possessing the knowledge and experience necessary to complete the appraisal credibly
USPAP requires appraisers to have or acquire the knowledge and experience necessary to complete each specific appraisal assignment competently.
Question 4: Which of the following scenarios most likely constitutes insurance fraud involving a gemstone appraiser?
- Appraising a gem at replacement value for insurance purposes
- Knowingly overstating a gem's value to help a client collect a higher insurance payout (Correct answer)
- Using GIA grading reports as reference documents
- Charging a fee that includes follow-up consultation
Correct answer: Knowingly overstating a gem's value to help a client collect a higher insurance payout
Knowingly inflating appraisal values to enable fraudulent insurance claims is a criminal act and a serious ethical violation.
Question 5: The Gemological Institute of America (GIA) code of ethics primarily emphasizes:
- Maximizing profit from gemstone sales
- Integrity, objectivity, and advancing the public's trust in the gem and jewelry industry (Correct answer)
- Prioritizing client satisfaction over accuracy
- Standardizing appraisal fees across all markets
Correct answer: Integrity, objectivity, and advancing the public's trust in the gem and jewelry industry
GIA's code of ethics centers on maintaining integrity, objectivity, and public trust in the gemological profession.
Question 6: A CGA is approached by a client who wants an appraisal of a gemstone suspected to be of conflict origin. The appraiser's ethical duty is to:
- Refuse all appraisals of diamonds regardless of suspected origin
- Appraise the gem and note any relevant concerns or disclosures about origin in the report (Correct answer)
- Immediately report the client to law enforcement
- Destroy the documentation to protect the client
Correct answer: Appraise the gem and note any relevant concerns or disclosures about origin in the report
Appraisers should complete the appraisal while documenting all relevant concerns, including potential origin issues, without making unfounded accusations.
Question 7: Which type of appraisal value is most appropriate when an heir wants to fairly divide jewelry among beneficiaries in an estate?
- Retail replacement value
- Fair market value (Correct answer)
- Liquidation value
- Insurance replacement value
Correct answer: Fair market value
Fair market value reflects what a willing buyer would pay a willing seller in an arm's-length transaction, making it the standard for estate division purposes.
CGA Ethics Standards & Legal Compliance 3
A client asks a CGA to appraise their jewelry 'as high as possible' for a divorce settlement.
The appraiser should: