Politically exposed persons (PEP)

Politically exposed persons are subject to stricter requirements regarding preventive measures to prevent the use of the financial system for the purpose of money laundering and terrorist financing than ordinary citizens. Due to their influential positions, they are subject to a higher risk of corruption and money laundering. The Money Laundering Act (GwG) regulates how financial flows are controlled and whether they are to be judged as criminal acts and punished by the authorities. Money laundering itself is a means of bringing funds from illegal transactions into the legal money circuit and is punishable under Section 1 (1) of the Money Laundering Act in conjunction with Section 261 of the Criminal Code.  

Who counts as a politically exposed person?

§ Section 1 paragraph 12 of the GwG defines Politically Exposed Persons as follows: A politically exposed person within the meaning of this Act is any person who holds or has held a high-ranking important public office at the international, European or national level or who holds or has held a public office below the national level whose political importance is comparable. Politically exposed persons include in particular

  1. Heads of State, Heads of Government, Ministers, Members of the European Commission, Deputy Ministers and Secretaries of State,
  2. Members of Parliament and members of similar legislative bodies,
  3. members of the governing bodies of political parties,
  4. members of supreme courts, constitutional courts or other high courts against whose decisions there is, as a rule, no further right of appeal,
  5. members of the governing bodies of courts of audit,
  6. members of the governing bodies of central banks,
  7. ambassadors, chargés d’affaires and defense attachés,
  8. members of the administrative, management and supervisory bodies of state-owned enterprises,
  9. directors, deputy directors, members of the governing body or other heads with comparable functions in an intergovernmental international or European organization.

Immediate family members such as spouses, children and their spouses or parents (Section 1 (13) GwG) as well as known close associates of Politically Exposed Persons are also subject to these higher requirements. According to Section 1 (14) of the GwG, known related parties are defined as persons who, among other things, maintain close business relationships with politically exposed persons […].
 

Who needs to check for PEPs?

§Section 2 (1) of the German Money Laundering Act (GwG) defines in Nos. 1 – 16 as obligated persons and institutions e.g. credit institutions, agents, self-employed tradesmen, insurance intermediaries, etc., which have to fulfill the general due diligence obligations defined in Section 10 (1) of the German Money Laundering Act (GwG). Pursuant to Section 6 (1) GwG, “Obligated persons shall establish appropriate […] safeguards to mitigate the risks of money laundering and terrorist financing […].” Should this group of persons not be in a position to comply with these due diligence obligations, then according to Section 10 Paragraph 9 Sentence 1 GwG “the business relationship may not be established or continued and no transaction may be carried out.”  

What happens in case of hits?

The Central Office for Financial Transactions, which is the national central office for receiving, collecting and evaluating suspicious transaction reports, offers a hotline for obligated parties. Contact details and further information can be found at the following link on the Customs website: www.zoll.de

The interpretation and application notes on the Money Laundering Act can be downloaded from the website of the German Federal Financial Supervisory Authority (BaFin) at the following link: www.bafin.de

We also address the need for compliance as well as knowing your business partner as far as possible in the article “KYC – Know Your Customer – How well do you know your customer?“. For more information on SANSCREEN, click here

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Martin Bullinger

Nach 10 Jahren bei der Zollverwaltung und mehreren Jahren Tätigkeit in der Industrie in den Bereichen Import, Export, Versand und Präferenzabwicklung unterstützte ich von Oktober 2018 bis Juni 2019 die Kollegen im Support bei der BEX Components AG. Die Beratung der Kunden bei der Anwendung der Produkte AES FOR YOU!, SANSCREEN und EXPERIUM zählten hier zu meinen Aufgaben. Seit Juli 2019 bin ich als Zollbeauftragter in für den Aufbau der Zollprozesse im neuen Global Distribution Center eines weltweit tätigen Unternehmens beschäftigt. Ich hoffe, meine Artikel bringen Sie in Ihrem täglichen Aufgabenfeld weiter. Ihr Martin Bullinger