A PEP declaration is a statement made by a customer indicating whether they are a politically exposed person, or PEP (Politically Exposed Person). Such a declaration may be encountered, among other things, when using the services of a bank, payment institution, currency exchange office, insurer or another entity subject to AML regulations.
The question about PEP status is part of the KYC process and results from the obligation of an obliged institution to determine whether the customer or their beneficial owner is a politically exposed person. The AML Act allows an obliged institution to obtain a statement from the customer in written or documentary form for this purpose.
Being asked about PEP status does not mean that the customer is suspected of money laundering, corruption or any other offence. However, PEP status requires the institution to apply additional measures provided for under AML regulations.
What is a PEP declaration?
PEP stands for Politically Exposed Person. Under the Polish AML Act, this term refers to a person holding a prominent political position, meaning a person holding a prominent public position or performing a prominent public function. A PEP declaration is therefore information provided by the customer in which they indicate whether they have such status. In practice, the form may include, for example, the following statement:
“I am / I am not a politically exposed person (PEP).”
The declaration does not have to take the form of a separate paper document entitled “PEP Declaration”. It may form part of a KYC form, an application to enter into an agreement or an electronic onboarding process.
The regulations allow declarations to be made in both written and documentary form. GIIF indicates that, in the case of documentary form, it is important to be able to identify the person making the declaration, while UKNF also permits solutions such as selecting an appropriate checkbox in remote communication, provided that the identity of the person can be clearly established.
Why is a PEP declaration made?
Obliged institutions must have procedures in place that allow them to determine whether a customer or their beneficial owner is a politically exposed person. A customer declaration is one of the ways of obtaining such information.
Example: a person opens an account with a financial institution. The KYC form includes a question asking whether they hold a prominent political position. The customer’s response may be one of the elements used by the institution to determine their PEP status.
However, this does not mean that an obliged institution may base the entire process solely on the customer’s response. GIIF emphasises that responsibility for correctly determining PEP status remains with the obliged institution.
Who should indicate PEP status in the declaration?
If the customer is a natural person, the declaration may relate directly to their status. PEPs may include, among others, persons performing certain prominent public functions, such as members of government, parliamentarians, ambassadors, members of central bank boards or other persons specified in PEP regulations.
If, however, the customer is a company or another legal entity, the company itself cannot be a PEP. PEP status applies to natural persons. The obliged institution should nevertheless determine whether the customer’s beneficial owner is a PEP. Article 46 of the AML Act expressly requires the status of both the customer and their beneficial owner to be determined.
Example: the customer is a limited liability company whose beneficial owner is a person serving as a minister. It is the beneficial owner’s status that is relevant to how the customer should subsequently be handled.
Forms may also contain questions about whether the customer is a family member of a PEP or a person known to be a close associate of a PEP. This is because the rules concerning PEPs also apply accordingly to such persons. However, a family member or close associate should not be equated with the PEP themselves. These are separate categories to which the regulations provide for the corresponding application of special rules.
What should a PEP declaration contain?
There is no single universal official template for a PEP declaration that must be used by all obliged institutions. The structure of the form may therefore vary depending on the AML procedure adopted and the manner in which the KYC process is carried out. GIIF indicates that the specific solutions used to determine PEP status are left to obliged institutions and may differ between them.
A typical declaration may nevertheless include:
- data allowing the person making the declaration to be identified,
- a declaration as to whether the person is a PEP,
- information about the position held or function performed if the answer is affirmative,
- information about a family or business relationship with a PEP if the form also includes such questions,
- the date on which the declaration is made,
- a signature or other confirmation allowing the declaration to be attributed to a specific person,
- the clause concerning criminal liability required by law.
In the case of a declaration obtained under Article 46(1) of the AML Act, the person making the declaration is required to include the following clause:
“I am aware of the criminal liability for making a false statement.”
This clause replaces the instruction concerning criminal liability for making a false statement.
How to complete a PEP declaration?
The exact form depends on the institution, but completing it usually involves several basic elements.
1. Provide identification details
If the form contains a separate identification section, the required details should be provided in accordance with the document and the institution’s instructions. In an electronic KYC process, some of the data may already have been completed based on information provided during registration.
2. Indicate whether you are a PEP
The question concerning whether you hold a prominent political position should be answered in accordance with the actual circumstances. If the form provides a list of example PEP functions, it is worth checking whether the position held falls within one of these categories. If a person is unsure whether a particular function results in PEP status, they should not rely solely on the everyday understanding of the word “politician”. The scope of PEP is broader and also covers certain other prominent public functions.
3. Indicate the function or nature of the relationship
If the answer concerning PEP status is affirmative, the form may require additional information, such as the name of the position, the function performed or the country or organisation with which the function is associated. If the question concerns a family member or close associate of a PEP, the form may require the nature of that relationship to be specified.
4. Check the criminal liability clause
A declaration made under Article 46 of the AML Act is made under pain of criminal liability for providing false information and should contain the clause required by law. Therefore, the answers provided in the form should reflect the actual status of the person making the declaration.
5. Sign or confirm the declaration
A signature may be required in the case of a paper form. In electronic processes, the method of confirmation depends on the solution adopted. A declaration may also be made in documentary form, provided that the manner in which it is submitted makes it possible to identify the person from whom it originates.
PEP declaration template – what can it look like?
The AML Act does not introduce a uniform PEP declaration template. The example below therefore shows only one possible structure of such a form and is not an official document template.
PEP STATUS DECLARATION
I declare that:
☐ I am a politically exposed person (PEP)
☐ I am not a politically exposed person (PEP)If the answer is affirmative:
Function / position held: ____________________☐ I am a family member of a PEP
☐ I am a person known to be a close associate of a PEP
☐ none of the above applies to meAdditional information concerning the relationship: ____________________
“I am aware of the criminal liability for making a false statement.”
Date: __________
Signature / confirmation: __________
The scope of the specific fields should correspond to the procedure applied by the relevant institution. A form used by a bank may therefore differ from one used by an accounting firm, payment institution or real estate intermediary.
Is a PEP declaration mandatory?
Two issues should be distinguished here. An obliged institution is required to determine whether the customer or their beneficial owner has PEP status. However, this does not mean that the AML Act requires every institution to obtain an identical form entitled “PEP Declaration” from every customer.
Article 46(1) provides that obliged institutions implement risk-based procedures and may obtain a declaration from the customer concerning their status. GIIF additionally explains that obtaining such declarations is not mandatory and that an institution may also use other methods to determine PEP status.
A particular institution may nevertheless decide in its KYC procedure that the declaration will be a standard element of customer onboarding. From the customer’s perspective, this means that they may be asked to submit it as part of the process of establishing or continuing a relationship.
What happens if I indicate that I am a PEP?
Declaring PEP status does not automatically mean that an agreement will be refused, an account will be closed or the customer will be considered suspicious of criminal activity. It does, however, mean that the obliged institution must apply the measures required for relationships with PEPs.
In the case of business relationships with a PEP, the obliged institution, among other things:
- obtains approval from senior management to establish or continue the relationship,
- takes appropriate measures to establish the source of the customer’s wealth and the source of funds,
- intensifies ongoing monitoring of the business relationship.
Example: a customer opening an account indicates that they perform a function that results in PEP status. The answer “yes” alone does not mean that the institution will refuse to provide services. However, it should initiate the procedure for dealing with PEPs provided for in its internal procedures.
Providing accurate information about PEP status is therefore also important for the proper course of subsequent customer verification.
Is a PEP declaration alone sufficient for verification?
It should not be treated as the entire process of determining PEP status. Obliged institutions are required to implement risk-based procedures. GIIF indicates that, in addition to customer declarations, institutions may take into account, among other things, the national list of public positions and functions considered prominent political positions, external databases and information obtained from other reliable sources.
UKNF also emphasises that obtaining a declaration is not the only method of fulfilling the obligation to determine PEP status and that the manner in which the status is verified should be specified in the institution’s AML/CFT procedure.
Example: the customer indicates that they are not a PEP. During verification, however, the institution establishes from reliable sources that the person has recently assumed a function included in the list of PEP positions. In such a situation, the institution should not end its analysis solely on the basis of the information provided in the form.
A PEP declaration is therefore a source of information in the KYC process, not a substitute for the entire verification process. The same principle applies to other information collected from a customer: an obliged institution should not only obtain it, but also apply measures appropriate to the identified risk and be able to demonstrate how it determined the customer’s status.