PEP Screening under the GwG: Who is Politically Exposed?
Politically exposed persons (PEPs) are subject to special due diligence obligations under § 1 Abs. 12 GwG. Ignoring this puts you at risk of fines and personal liability. This guide shows who counts as part of the PEP group and how to implement screening in a legally compliant way.
Who is politically exposed?
Under § 1 Abs. 12 GwG, PEPs are persons who hold, or have held within the last 12 months, an 'important public office at international, European, or national level'.
The PEP group includes:
National and international politicians
Heads of state and government
Ministers, state secretaries, parliamentary state secretaries
Members of the Bundestag, state parliaments, and the European Parliament
Senior judges (Federal Constitutional Court, Federal Court of Justice, CJEU)
Senior military officers (from brigadier general / rear admiral upward)
Members of the administrative, management, and supervisory bodies of state-owned companies
International officials
Senior officials of international organizations (UN, European Commission, World Bank, IMF)
Ambassadors and chargés d'affaires
Family members of PEPs
Spouses or comparable life partners
Children and their spouses
Parents
Known close associates
Business partners (especially in an economic joint venture)
Other persons with a close business or personal relationship
Who must conduct PEP screening?
Under § 2 GwG, the following companies are required to do so:
Credit institutions and financial institutions
Insurance companies (life insurance)
Asset management companies
Payment institutions, e-money institutions
Financial investment intermediaries, fee-based financial investment advisers
Real estate agents (for transactions from €10,000)
Lawyers, tax advisers, auditors (for certain engagements)
Dealers in goods (for cash transactions from €10,000)
Art dealers, art intermediaries (from €10,000)
What are the enhanced due diligence obligations?
For PEPs and their family members / close associates, enhanced due diligence obligations under § 15 GwG apply:
Approval by management: The business relationship must be approved by management or a senior executive appointed by management
Clarify the source of funds: Appropriate measures must be taken to determine the origin of the assets
Enhanced ongoing monitoring: The business relationship must be monitored more closely
How often must checks be performed?
Before entering into a business relationship: Identify the person as a PEP and complete the approval process
Before hiring (for pre-employment screening): Integrate this into the background check process
Ongoing: At least quarterly, preferably monthly. Reason: PEP status can change (a person is elected to office)
Why manual PEP checks do not scale
PEP databases are updated continuously. Worldwide, there are hundreds of thousands of PEPs, family members, and close associates. Manual research via Google is not enough:
Not all PEPs have Wikipedia entries
Family members are difficult to identify
Name variants and alias names are almost impossible to capture manually
Ongoing monitoring is unthinkable without automation
Commercial PEP databases
Professional PEP databases contain:
Current global PEP entries
Family members (partners, children, parents)
Known close associates
Historical data (PEP status over the last 12 months)
Fuzzy matching for name variants
Leading providers: Moody's, LexisNexis WorldCompliance, Refinitiv World-Check, Dow Jones Risk & Compliance.
PEP screening in Switzerland, Austria, and across the EU
Switzerland — GwG and FINMA circulars
Switzerland has its own Anti-Money Laundering Act (GwG, SR 955.0). The PEP definition in Art. 2a GwG covers foreign PEPs, domestic PEPs, and PEPs of international organizations. For financial intermediaries, FINMA Circular 2016/7 (or the current version) applies, with detailed due diligence obligations. A key distinction in Switzerland is between foreign PEPs (generally considered "higher risk") and domestic PEPs (risk-based).
Austria — FM-GwG + BWG
In Austria, the Financial Market Anti-Money Laundering Act (FM-GwG) applies, with § 2 Z 6 as the central PEP definition. For banks, § 40 BWG applies in addition. Supervisory authority: FMA. Austria's implementation is more closely aligned with EU directives, which makes harmonization easier for multinational institutions.
Across the EU — AMLD + AMLR
The current 6th Anti-Money Laundering Directive (6AMLD) will be replaced in 2027 by the directly applicable Anti-Money-Laundering Regulation (AMLR). Together with the new AMLA (Anti-Money Laundering Authority) in Frankfurt, this creates an EU-wide supervisory system. As a result, PEP lists will be harmonized and the obligation for ongoing monitoring will become stricter.
Indicium PEP screening in practice
Indicium uses integrated PEP databases and automatically checks:
Candidate against global PEP list
Family members (when data is available)
Close associates (through cross-references)
Ongoing monitoring after hiring (configurable weekly or monthly)
Result: audit-proof documentation for BaFin audits, FIU inquiries, and internal audit.
What to do when there is a PEP hit?
Do not reject automatically — PEP status is not, by itself, a reason for rejection
Review: What role does the person play? Are they a foreign PEP or a domestic PEP (different levels of scrutiny)?
Obtain approval: Management must approve the business relationship
Document the source of funds: Obtain supporting evidence and document it
Intensify monitoring: Monitor PEP-related transactions closely
Common mistakes
Only checking national PEPs
Many companies only check German PEPs. But foreign PEPs, EU commissioners, and UN officials are also covered.
Overlooking family members
The spouse of a PEP is themselves a PEP under the GwG. Children, parents, and partners must also be checked.
One-time screening
PEP status can change at any time. Ongoing monitoring is mandatory.
No documentation
If the FIU (Financial Intelligence Unit) asks, you must be able to prove when, who, and against which list was checked.
Conclusion
PEP screening is technically demanding and legally mandatory for many industries. Manual checks do not scale. Automated, ongoing monitoring with audit-proof documentation is the only practical approach.
Book a demo and see how Indicium integrates PEP screening into your hiring process.
Nabil El Berr
