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Korea, Democratic People’s Republic of: FATF Expresses Concern Over AML/CFT Regime

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The Financial Action Task Force (FATF) has expressed concerns over the Democratic People’s Republic of Korea’s failure to address significant deficiencies in its anti-money laundering and combating the financing of terrorism (AML/CFT) regime. The organization urged the country to immediately and meaningfully address these deficiencies, which pose a threat to the integrity of the international financial system.

Concerns and Recommendations

• The FATF has called upon its members and other jurisdictions to apply countermeasures to protect their financial sectors from money laundering, terrorist financing, and weapons of mass destruction proliferation financing risks emanating from North Korea.
• The organization has also urged all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with North Korean companies, financial institutions, and those acting on their behalf.

FATF’s Position

The FATF remains concerned by the Democratic People’s Republic of Korea’s illicit activities related to the proliferation of weapons of mass destruction and its financing. The organization has:

• Reaffirmed its 2011 call on its members to advise their financial institutions to exercise enhanced scrutiny when dealing with North Korean entities.
• Urged all jurisdictions to apply effective countermeasures and targeted financial sanctions.

Iran: FATF Calls for Increased Supervision and Enhanced Reporting

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The FATF has called upon its members and other jurisdictions to require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran. The organization has also urged all jurisdictions to:

• Introduce enhanced relevant reporting mechanisms or systematic reporting of financial transactions.
• Require increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in Iran.

Disappointment and Expectations

The FATF expressed disappointment that the country’s Action Plan remains outstanding and expects Iran to proceed swiftly in its reform path. The organization will continue to monitor the situation and may fully lift the suspension of countermeasures if the necessary AML/CFT reforms are completed by February 2020. Until then, the FATF will remain concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system.

International Standards

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The FATF has emphasized that countries should be able to apply appropriate countermeasures when called upon to do so by the organization. Countries should also be able to apply countermeasures independently of any call by the FATF, such as in cases where a country is subject to a high level of risk due to the activities of terrorist organizations or other non-compliant entities.

Examples of Countermeasures

The organization has provided examples of countermeasures that could be undertaken by countries, including:

• Increased supervisory examination
• Enhanced relevant reporting mechanisms
• Increased external audit requirements

The FATF will continue to work with jurisdictions to ensure compliance with international standards and protect the integrity of the global financial system.