The EU PEP list - more clarity, but new detailed questions

On 10 November 2023, the time had come: the European Commission published a list of job titles for politically exposed persons in the Official Journal of the European Union. Those subject to the German Money Laundering Act could also hope for clarification on many questions. But does the new regulation really bring light into the darkness everywhere?

Politically exposed persons and enhanced due diligence obligations

A politically exposed person (PEP) is a person who holds or has held a high-ranking important public office at international, European or national level (as legally defined in Section 1 para. 12 sentence 1 GwG). Due to their influence and position, these persons harbour an increased risk of committing money laundering or corresponding predicate offences. If the examination of an obliged entity reveals that the contractual partner or beneficial owner is a PEP, enhanced due diligence obligations must be applied. These enhanced due diligence obligations must also be applied if the contracting partner or beneficial owner is a family member (e.g. spouse, parents or children) or a person known to be close to a PEP.

The Anti-Money Laundering Act already contains a list of functions that in particular justify PEP status (Section 1 (12) sentence 2 no. 1 GwG). However, this has so far left much room for interpretation and did not clearly clarify which positions are considered PEPs. On 10 November 2023, the European Commission therefore published a list specifying those functions that are to be classified as important public functions under the respective national law of the member states ("PEP list").

It is therefore important for obliged entities that if a contracting party or beneficial owner performs a function of a member state included in the list, they must be treated as a PEP (Section 1 para. 12 sentence 2 no. 2 AMLA). The list must therefore be taken into account.

More clarity for certain functions

The European Commission's new list sheds some light on some areas. For Germany, for example, it explicitly clarifies who is considered to be a member of supreme courts whose decisions can generally no longer be appealed (e.g. judges of the supreme federal courts, but not those of the higher regional courts).

The list also restricts PEP status with regard to members of the administrative, management and supervisory bodies of state-owned companies in Germany. These now qualify as PEPs if the company regularly employs more than 2,000 employees or has a balance sheet total of more than 3 billion euros.

Differences between the Member States

In addition, the PEP list now regulates which functions in other member states at least qualify as PEP. This reveals differences between the member states. For example, mayors of certain Italian cities are categorised as PEPs - while this does not apply to mayors of German cities.

It is important to note that all of these functions on the PEP list are mandatory for obliged entities under the Money Laundering Act.

Nevertheless, some uncertainties remain

However, some circumstances remain unclear. At German level, for example, it is not clear whether federal executive committees of small political parties should also be categorised as PEPs.

The differences between the member states also harbour new application difficulties. It is not clearly regulated whether a person is to be classified as a PEP if they hold a position in another Member State that is not on the PEP list but falls under a category of Section 1 para. 12 sentence 2 no. 1 AMLA. This applies, for example, to a board member of the Dutch state railway company: this function is not included on the PEP list, but could nevertheless fall under Section 1 para. 12 sentence 2 no. 1 AMLA.

The PEP list will therefore continue to require case-by-case reviews.

The further implications of the European Commission's list and where it reaches its limits can be read in detail in the article "The new European PEP list and its significance for the Money Laundering Act" by Dr Lars Haffke, Money Laundering & Law (GWuR) 2024, from page 5.