What factors can heighten the risk of money laundering during a transaction?

The selection of high cash volumes and connections to politically exposed persons (PEPs) as factors that heighten the risk of money laundering is justified by the inherent characteristics associated with both elements.

High cash volumes present a significant risk because cash transactions are often harder to trace and can facilitate anonymity in financial activities. Criminals prefer cash to evade the banking system’s monitoring mechanisms, as it makes detecting suspicious activities more challenging. This characteristic can lead to situations where illicit money is integrated into the legitimate economy without detection.

Connections to PEPs also represent a heightened risk for money laundering. PEPs are individuals who hold prominent public positions and are often at a higher risk of being involved in corruption or bribery. These connections can increase the likelihood of illicit financial activities, as PEPs may exploit their positions for personal gain, using various channels to transfer or conceal proceeds of those activities.

Together, the combination of high cash volumes and associations with PEPs creates an environment conducive to money laundering, as both elements introduce complexities that make oversight and investigation more difficult.