PEP Screening: Identify Politically Exposed Persons

Politically exposed persons (PEPs) are considered a higher risk for money laundering and corruption. The German Money Laundering Act (GwG) requires companies — especially in the financial sector — to identify PEPs and apply enhanced due diligence.

But who qualifies as a PEP? And how can screening be implemented efficiently?

Who is a PEP?

A politically exposed person is someone who holds or has held an important public office. The EU Anti-Money Laundering Directive defines three categories:

• Domestic PEPs: Heads of state and government, ministers, members of parliament, judges of supreme courts, ambassadors, senior military officers

• Foreign PEPs: The same roles in other countries — automatically classified as higher risk

• International PEPs: Senior executives of international organizations (EU, UN, NATO, etc.)

Important: Family members and close associates (RCAs — Relatives and Close Associates) of PEPs are also subject to enhanced due diligence.

Why PEP screening is mandatory

The GwG requires obliged entities (banks, insurers, payment service providers and others) to:

1. Determine whether a customer or beneficial owner has PEP status

2. Apply enhanced due diligence when PEP status is confirmed

3. Obtain management approval for the business relationship

4. Clarify the source of wealth

5. Intensify ongoing monitoring

Violations are punished severely — fines in the millions are not uncommon.

The challenge: PEP status changes

A person who is not a PEP today may become one tomorrow — and vice versa. A minister steps down, a business partner is appointed to public office. One-time checks are therefore not enough.

How Indicium automates PEP screening

• Global PEP databases: Matching against comprehensive international PEP lists with daily updates

• RCA detection: Automatic identification of family members and close associates

• Ongoing monitoring: Status changes are automatically detected and reported

• Risk assessment: Not every PEP carries the same level of risk — Indicium provides context-based risk assessments

• Audit trail: Complete documentation for auditors and supervisory authorities

The result: you meet your GwG obligations efficiently and can always demonstrate compliance.

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