In the context of enhanced due diligence, which population group must be closely monitored?

Enhanced due diligence (EDD) is a critical process used in the financial industry to mitigate risks associated with money laundering and terrorist financing, especially when dealing with customers or transactions that pose a higher risk. Among the various population groups, politically exposed persons (PEPs) require close monitoring due to their position and influence, which may make them more susceptible to engaging in corrupt practices or being exploited for illicit financial activities.

PEPs are individuals who hold prominent public positions, such as government officials, judges, or high-ranking military officers, as well as their family members and close associates. Their access to resources and ability to make decisions can create vulnerabilities to corruption and abuse of power. This heightened risk is why enhanced due diligence measures, including thorough background checks, ongoing monitoring of transactions, and scrutiny of their financial activities, are essential when dealing with this group.

Small business owners, local residents, and freelancers, while potentially having varying degrees of risk, do not inherently carry the same level of scrutiny as PEPs in the context of EDD. Therefore, the emphasis on PEPs stems from the increased risk associated with their public roles and the potential for their involvement in financial misconduct.