Identifying and defining PEPs Why is it important Due to their position and influence it is recognised that many PEPs are in positions that potentially can be abused for the purpose of offences and related to corruption and bribery ID: 812902
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Slide1
Beneficial ownership and Politically Exposed Persons (PEPs): Definitions and asset disclosure requirements
Slide2Identifying and defining PEPs:
Why is it important
Due to their position and influence, it is
recognised
that many PEPs are in positions that potentially can be abused for the purpose of offences and related to corruption and bribery.
Lack of transparency with regards to politically exposed persons and their assets held in the extractive sector poses corruption risks with regard to the award of natural resource concessions.
Does not mean that PEPs should be refused to conduct business within the extractive industry, but that such business relationships should be made transparent to prevent misuse.
Slide3What the EITI Standard says
“The multi-stakeholder group should agree an
appropriate definition of the term beneficial owner. (…) The definition should also specify reporting obligations for politically exposed persons”(#2.5.f.ii).
“Information about the identity of the beneficial owner should include the name of the beneficial owner, the nationality, and the country of residence,
as well as identifying any politically exposed persons
. It is also recommended that the national identity number, date of birth, residential or service address, and means of contact are disclosed.” (2.5.d)
BO
disclosures
to identify PEPs
BO
definition to refer to PEP obligations
Slide4Who are PEPs?
A politically exposed person (PEP) is an individual
who is or has been entrusted with a prominent public function
. Could include close family members and associates.
Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned enterprises, or important political party officials.
Also former officials, if they still have influential roles.
Family members by blood, marriage or other civil partnership, can stretch beyond immediate family.
Associates can be both personal social and professional.
Slide5PEP definitions: International examples
United Nations Convention against Corruption
Individuals who are, or have been, entrusted with prominent public functions, and their family members
and close associates.” https://www.unodc.org/documents/brussels/UN_Convention_Against_Corruption.pdf
Slide6PEP definitions: International examples
Financial Action Task Force (FATF):
An individual who is or has been entrusted with a prominent public function.
Distinguishes between foreign and domestic PEPsAlso persons with prominent functions entrusted by international organisations
Not intended to cover middle ranking or more junior
individuals
http://www.fatf-gafi.org/media/fatf/documents/recommendations/Guidance-PEP-Rec12-22.pdf
PEP definitions: International examples
EU Anti-Money Laundering Directive
:(a) heads of State, heads of government, ministers and deputy or assistant ministers;
(b) members of parliament or of similar legislative bodies;(c) members of the governing bodies of political parties;(d) members of supreme courts, of constitutional courts or of other high-level judicial bodies
, the decisions of which are not subject to further appeal, except in exceptional circumstances;
(e)
members of courts of auditors
or of the boards of central banks;(f) ambassadors, chargés d'affaires and high-ranking officers in the armed forces;(g) members of the administrative, management or supervisory bodies of State-owned enterprises;(h) directors, deputy directors and members of the board or equivalent function of an international organisation.http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32015L0849&from=EN
Slide8PEP reporting
obligations
Slide9PEP reporting obligations: Examples from countries
Honduras:
The Mining Law prevents public office holders from obtaining extractive licenses due to potential conflicts of interest.
However, the concept of beneficial ownership is not recognised and there is thus no law that explicitly prevents PEPs from holding ownership interests in extractive companies.
There are no declaration systems in place that would reveal such practice.
Slide10PEP reporting obligations: Examples from countries
Ghana:
Public Office Holders Act requires PEPs to declare all assets owned and liabilities owed either directly or indirectly to the Auditor General.
However, the reporting is not always enforced and the information not publicly available.
Slide11Beneficial ownership and PEPs: Thresholds for reporting
Some countries set thresholds for BO disclosures determining the number of owners companies will be requested to report (e.g. beneficial owners with >25% of shares or control of a company)
The MSG may consider requiring
disclosure of all PEPs who are beneficial owners, regardless of any threshold, or setting specific thresholds for PEPs
.
Example 1: Kyrgyz Republic
“A beneficial owners is a natural person who has the title to property, influences transactions, obtains a certain benefit from transactions, and who has an ownership stake of at least 5%.
If the beneficial owner is a politically exposed person their stake must be disclosed irrespective of the size of the stake.”
Slide12Beneficial ownership and PEPs: Level of detail
In addition to PEP’s name, MSG can consider disclosing:
Position, role
and dates in office
Time
at which the PEP
acquired
its beneficial interest in the extractive asset
Slide13Identifying PEPs in BO disclosures EITI
model
beneficial ownership declaration
form
Slide14Identifying PEPs in BO disclosures
Example: DRC 2012 EITI Report
The report shows that the mining company
Bolfast
is 100% owned by
Bokonda
Balela Faustin and notes that
Mr Faustin
has been a Member of Parliament since 2011.
The 2012 report does not provide any information on when
Mr
Faustin
acquired ownership of
Bolfast
.
Slide15Identifying PEPs in BO
disclosures
The MSG might consider using existing asset declaration practices to help identify cases where PEPs are beneficial owners of extractive assets
Example: Burkina Faso
In Burkina Faso, the authority receiving declaration of assets held by politicians might be able provide the declaration of any form of property that politicians hold in the extractive companies
Slide16Case study:
Ukraine
Slide17Case study:
Ukraine
The register includes the following information on domestic PEPs:
Full name
Type of PEP (PEP, close associate, family member, etc.)
Date and place of birth
All officially confirmed places of residence including abroad
CitizenshipAll officially confirmed places of work (full name of the agency, official website, position, year of appointment and dismissal)Financial statementList of related individuals (close associates, family members)List of related legal entities (full name, type of connection)Where relevant, the register also includes extended information including about the business reputation of the PEP, such as international sanctions, criminal proceedings, criminal records, involvement in corrupt practices, business connections with other PEPs.
Slide18Case study:
UK
Definition:
UK EITI has adopted the EU's definition of PEP as described in the new EU Fourth Money Laundering Directive.
Ownership Threshold:
Reporting entities should disclose information in relation to any PEP owners, where these hold a share in the reporting entity of more than 5%.
Due Diligence:
The disclosures in relation to PEPs should reflect the information available to the reporting entity in the ordinary course of business. It is not required to perform incremental due diligence. Data timeliness: The disclosures should be based on knowledge held when the report information is supplied to the independent administrator.
Slide19Case study:
UK
Companies with owners defined as PEPs that are above the ownership threshold are requested to report:
Name
Month and year of birth
Nationality
Country of residence
Date when beneficial interest was acquired Service address Name of public office holder Public office position and role Date when office was assumed Date when office was left, if applicable If the PEP beneficial owner is not the public office holder, the PEP beneficial owner’s connection with the public office holder
Slide20PEP definitions and asset disclosure requirements:
Discussion
Is there a national PEP definition in your country? Consult company law, anti-money laundering act, Code of Conduct, etc.
Assess the definition:Does the definition cover most persons in your country with “prominent public functions”?
Is it clear from the definition who is a PEP?
This should be considered from the perspective of those who will be required to report information on beneficial ownership to the authorities
Is the definition legally enforceable?
2. Are there existing national reporting obligations for PEPs? If yes,Who collects the information?What details are requested?Is the information publically available?Study the international examples in the handout. Underline the elements that you like about these definitions, and would like to see included in your country’s definition.Based on the assessment of any existing PEP definitions and your discussion of international examples, what would be the key components related to PEPs in your country’s BO definition? Note that in accordance with the EITI Standard, this should be referred to.
Slide21Email:
drogan@eiti.org
- Telephone:
+47 22 20 08 00
Address:
EITI International Secretariat,
Ruseløkkveien 26, 0251 Oslo, Norway
Author:
Dyveke
RoganDate:
January 2017