What type of entities does a Phase II designation primarily exempt?

The correct answer is Non-listed businesses and payroll members because Phase II designations, under the Bank Secrecy Act (BSA), typically focus on certain exempt entities that have lower risk profiles regarding money laundering and other financial crimes. Non-listed businesses, which are not publicly traded, often have limited financial operations compared to larger corporations or financial institutions, making them less of a target for illicit activities. Therefore, they can be treated differently under BSA compliance measures.

Payroll members, referring to employees of businesses that meet certain criteria, are also distinguished under this designation. This exemption acknowledges that these payroll entities, based on their operations and substantive business activity, carry a minimal risk for BSA violations and do not pose the same level of threat as entities involved in extensive financial transactions or public trading, which generally do face stricter scrutiny.

Conversely, options referring to government agencies and banks or large corporations traded publicly fall outside the scope of Phase II exemptions as these entities operate under different compliance frameworks and risk assessments due to their size, transaction volume, and regulatory obligations. Private families and individuals do not fit into the broad classifications typically subject to this phase of exemption under BSA requirements, as the focus is more on business operations rather than personal financial activities.