Guidelines for Financial Institutions on Politically Exposed Persons

Bank of the Republic of Haiti

GUIDELINES

FOR FINANCIAL INSTITUTIONS

These guidelines aim to indicate the conditions for implementing the vigilance to be applied to politically exposed persons (PEPs).

1. Politically Exposed Persons (PEPs)

A duty of vigilance must be exercised towards PEPs, who are defined by Article 6 of the Decree of April 30, 2023, as persons who hold or have held important public functions in a foreign country or in Haiti or within or for the account of an international organization, as well as the family members of this person, or any other persons who are closely linked or associated with them.

Persons Covered
Financial institutions must exercise enhanced vigilance towards three categories of persons:
a) PEPs; b) family members of PEPs; and c) persons known to be closely linked or associated with PEPs.

1.1. PEPs

PEPs are persons exposed to particular risks due to the important public functions (political, judicial, or administrative) they hold or have held. The notion of PEP thus covers important public functions and not intermediate or lower-level functions.

Financial institutions must rely on the following list of public functions listed in Article 6 of the Decree of April 30, 2023, to establish foreign and national PEPs:

1. Heads of State, heads of government, ministers, deputy ministers, and secretaries of state;
2. members of royal families;
3. parliamentarians (senators, deputies);
4. general directors;
5. members of supreme courts (Court of Cassation), constitutional courts, or other jurisdictions whose decisions are not subject to appeal, except in exceptional circumstances;

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6. members of audit courts (Superior Court of Accounts and Administrative Litigation);
7. members of the boards or management bodies of central banks;
8. ambassadors, chargés d'affaires;
9. senior officers of the armed forces;
10. members of the administration, management, or supervisory bodies of public enterprises;
11. the Ombudsman and their deputy;
12. senior officials of political parties;
13. members of the senior management of an international organization: director, deputy director, members of the board of directors, and all persons exercising equivalent functions.

To determine whether a client, the client's agent, or the client's beneficial owner is a politically exposed person in a foreign country, one must refer solely to the definition formulated in Article 6 of the 2023 Decree.

1.2. Family Members of a PEP

Since the definition of "family members" is not specified in the Decree of April 30, 2023, the following are thus covered:

• the spouse or a person considered equivalent to a spouse;
• children and their spouses, or persons considered equivalent to a spouse;
• parents.

1.3. Persons Known to be Closely Linked or Associated with PEPs

Financial institutions may consider as persons closely linked or associated with PEPs:

• natural persons who are beneficial owners of an entity or legal structure jointly with a PEP, or who are known to have any other close business relationship with such a person;
• natural persons who are the sole beneficial owners of an entity or legal structure known to have been created, in fact, in the interest of a PEP.

1.4. Cessation of a Public Function

In the event of the cessation of an important public function by a PEP, financial institutions must assess the risk that this person continues to present and apply appropriate measures, based on the assessment of this risk, until they no longer present risks specific to PEPs.

The finding that the person no longer presents a risk must result from an individual risk assessment carried out by the financial institution at least twenty-four (24) months after the cessation of the function. Depending on the assessment, the financial institution may cease the application of enhanced vigilance measures. Otherwise, the financial institution must conduct an individual assessment after an additional year.

Pursuant to the provisions of Article 66 of the Decree of April 30, 2023, subject to the application of vigilance measures and risk assessment, financial institutions may not consider a person to be a PEP who has not held an important public function for a period of at least two (2) years.

2. System to Determine if the Client is a PEP

Financial institutions are required, pursuant to Article 30 of the Decree of April 30, 2023, to have adequate risk management systems to determine if the client is a politically exposed person and to implement, where applicable, the specific measures referred to in Article 66 of said Decree, namely:
a) adequate and adapted procedures, based on risk, to determine if the client or a beneficial owner of the client is a PEP; b) obtaining senior management authorization before establishing a business relationship with a PEP; c) implementing any appropriate measures, based on risk, to establish the origin of wealth and the origin of funds; d) enhanced continuous monitoring of the business relationship.

Financial institutions are obligated to put in place an adequate risk management system and adopt written procedures allowing them to detect business relationships in which one or more persons meet the criteria relating to PEPs.

2.1. Detection upon Entry into Relationship

Financial institutions must include in their client acceptance policy the measures to be applied to determine if a client, their agent, or the client's beneficial owner is a PEP.

They must determine, by comparing client data with reliable sources of information, or in any other way, whether they meet the definition of PEP.

2.2. Detection During Business Relationship

Financial institutions must include, as part of updating client information and continuous vigilance towards clients, the measures to be applied in the event that a client becomes a PEP. These measures must enable them to identify all clients who have become PEPs as well as their family members or persons who are closely linked or associated with these PEPs.

When a PEP is identified, financial institutions must include in their procedures the obligation to obtain senior management authorization before continuing the business relationship with this client and applying enhanced vigilance measures.

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3. Enhanced Vigilance Towards PEPs

In terms of enhanced vigilance, financial institutions must:
e) obtain senior management approval to establish or continue the business relationship with the PEP or to carry out an occasional transaction with the PEP; f) take appropriate measures to establish the origin of wealth in the business relationship and the origin of funds involved in the transaction with a PEP; g) exercise continuous monitoring of the business relationship.

To determine the origin of wealth and funds involved in the business relationship with PEPs, financial institutions must obtain information either directly from the client, including evidence justifying the origin of wealth and funds, or by resorting to publicly available information, notably on the internet, which can be considered reliable.

Regarding foreign PEPs, financial institutions must take into account all characteristics of the operation or business relationship, notably its nature and purpose as well as the importance of the sums involved. Furthermore, risk factors associated with geographic areas are of particular importance. Thus, financial institutions must be particularly attentive to notorious cases of corruption or organized crime in the country where the public function is exercised, and to countries where it is a matter of public record, taking into account information published by credible government or non-governmental organizations or by major national or international media, that corruption is widespread.

4. Internal Control Measures

Financial institutions must periodically and permanently ensure the adequacy of the organizational measures put in place to comply with identification and enhanced vigilance obligations regarding PEPs. From this perspective, the internal audit function must pay specific attention to the adequacy of PEP identification measures as well as the effectiveness of enhanced vigilance measures implemented by financial institutions.

5. Repeal and Entry into Force

These guidelines repeal those of November 21, 2022, and enter into force on the date of their signature.

Port-au-Prince, November 21, 2023.

[Signature]
Ronald Gabriel
Governor