Contracting Party

Contracting Party

Definition

A „Contracting Party“ according to the German GwG is any natural or legal person with whom a long-term business relationship is established.

A Contracting Party is any natural or legal person who, in the case of a single transaction outside an existing business relationship, becomes a contracting party to the underlying contract or business agency relationship.

The decisive factor for assessment is the understanding in terms of contractual rights and obligations. Therefore, it is necessary to examine the contractual relationship underlying the business connection with the obligated entity or the individual transaction conducted outside an existing business relationship.

For example, if cash is deposited within an already existing business relationship by the customer themselves or by a messenger or representative, the customer is considered the Contracting Party of the financial institution.

However, if a third party carries out a cash deposit into an account due to an independent contractual or business agency relationship, this does not occur within the existing business relationship between the financial institution and the account holder; the third party is to be identified as the Contracting Party.

Business Relationship

Business Relationship
Business Relationship

Transaction

Transaction
Transaction

Customer

The term „customer“ refers to the contracting party in the context of a long-term business relationship. It specifically denotes the natural or legal person who is engaged in an ongoing and established business relationship with another entity.

This definition distinguishes the customer from „occasional customers,“ who are the contracting parties involved in occasional transactions conducted outside of a long-term business relationship.

Practical Examples

Contracting Party

  • Contracting Party in the checking account contract
  • Contracting Party in the savings account contract
  • Principal (i.e., account holder) in a wire transfer
  • Principal in a letter of credit transaction
  • Principal in an aval credit transaction

NON-Contracting Party

  • Legal Representative
  • Authorized Signatory
  • Messenger
  • Beneficiary (i.e., recipient) of a wire transfer
  • Beneficiary in a letter of credit transaction
  • Beneficiary in an aval credit transaction

Sources:

  • Die Deutsche Kreditwirtschaft (DK), Auslegungs- und Anwendungshinweise der DK zur Verhinderung von Geldwäsche, Terrorismusfinanzierung und „sonstigen strafbaren Handlungen“, DK-Hinweise (Stand 1. Februar 2014), No. 5, https://die-dk.de/kontofuehrung/geldwaescheverhinderung/