Who are PEPs in the context of money laundering?

Politically Exposed Persons (PEPs) refer to individuals who hold prominent public positions or roles in government, international organizations, or other public entities. These individuals can present higher risks for involvement in money laundering and corruption due to their ability to influence decisions and access resources. Because of their position and the associated risks, PEPs are subject to enhanced due diligence measures under anti-money laundering (AML) regulations.

The justification for identifying PEPs as a higher risk category stems from their potential exposure to corruption, bribery, and financial crimes. Financial institutions and compliance officers are typically required to implement additional monitoring for transactions involving PEPs to mitigate these risks effectively.

Other options do not accurately reflect the definition of PEPs. Local business owners, private equity partners, and public employees do not inherently carry the same risk profile associated with political influence and potential for corruption that PEPs do.