Politically Exposed Persons: Preventive Measures for the Banking Sector
BOX 2.3
The Use of Asset and Income Declarations for Identifying PEPs
Asset and Income Declarations Approximately 114 jurisdictions require their public officials to file declarations or disclosures of their assets and income with an ethics office, anticorruption body, or other government department.a The declarations usually contain information on the assets and income of public officials, including the sources of wealth and current business activities. The required information can also extend to a spouse or partner and children, and may include supporting documentation.b Some jurisdictions mandate that the forms be made available to the public; others do not. UNCAC, Article 52(5) requires that States Parties consider establishing financial disclosure systems for appropriate public officials and appropriate sanctions for noncompliance. At the same time, the declarations and their uses vary across the jurisdictions. Key issues include the accuracy of the information, particularly because many countries do not yet perform strong verification of these declarations. However, the declarations usually include information that can be useful in customer profiling. When they are used by banks, confidentiality of the information must be a priority. Some Uses for Asset and Income Declarations • Publication of the list of those who file asset and income declarations would provide banks with another search tool in efforts to identify PEPs. • Elements relevant to the determination of source of wealth and source of funds. • Regulatory authorities can provide guidance as to the availability and use of the declarations and, even if not required by legislation or regulation, can ask banks if they use the declarations. This inquiry will help in assessing how the bank is managing its PEP risk. • FIUs can use the information in asset and income declarations to improve their analysis of suspicious transaction reports and national information can be shared through the Egmont Group of financial intelligence units. a. Simeon Djankov, Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Schleifer, “Disclosure by Politicians,” (National Bureau of Economic Research, Cambridge, MA, 2009) lists 109 countries that require members of parliament (MPs) to file asset and income declarations. Since publication of the paper, Dominica, Haiti, Iceland, the Seychelles, and Sierra Leone have added asset and income disclosure requirements for MPs. The paper is available at http://www.nber.org/papers/w14703. b. For more information on asset and income declarations, see Ruxandra Burdescu, Gary Reid, Stuart Gilman, and Stephanie Trapnell, “Income and Asset Declarations: Tools and Trade-offs,” (World Bank, Conference Edition released November 2009).
and whether this fits with the customer profile. Together this information may help to identify a close associate or distant family member. It would be helpful in this regard if regulatory authorities or financial intelligence units (FIUs) could develop “red flags” to guide banks in identifying close associates. Some jurisdictions will permit reliance on intermediaries, such as accountants, lawyers, or trust and company services providers, with little or no information being disclosed. In these jurisdictions, it is important to limit this exemption in the case of
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