Financial Crime World

Title: FATF Report: South Korea’s Anti-Money Laundering and Counter-Terrorist Financing Measures Evaluated

Overview

The Financial Action Task Force (FATF) recently released the Fourth Round Mutual Evaluation Report on South Korea’s anti-money laundering (AML) and counter-terrorist financing (CTF) measures (1). This assessment, conducted between June 30 and July 18, 2019, evaluates the effectiveness, efficiency, and legal and regulatory framework of South Korea’s AML/CTF system.

South Korea’s Money Laundering Risks

South Korea faces diverse AML risks due to its large international trade flows, an open economy, and the emergence of virtual assets as a popular money laundering instrument [(2)]. Specific risks include tax crimes, market manipulation, trade-based money laundering, embezzlement, and corruption.

strengths and weaknesses of the AML/CTF Framework

South Korea’s robust financial system and strong policy measures are commendable [(3)]. However, the report identified some weaknesses, such as:

  • Lack of a cohesive government-wide plan to address AML risks
  • Insufficient regulatory and supervisory oversight over non-financial businesses and professions (DNFBPs) other than casinos
  • Inadequate use of financial intelligence

Effective investigations, Prosecutions, and confiscation

In spite of these weaknesses, South Korea’s AML/CTF system demonstrates notable strengths [(4)]:

  • Effective use of financial intelligence and pursuit of ML investigations and prosecutions
  • Robust asset recovery process
  • Successful confiscation of virtual assets

priority actions for South Korea

The report recommended several steps for South Korea to strengthen its AML/CTF system [(5)]:

  • Expanding the AML/CTF framework to cover all DNFBPs
  • Designating a supervisor for these sectors
  • Amending the law to include more tax crimes as predicate offenses
  • Extending AML obligations to cover domestic PEPs and PEPs of international organizations.

actions taken by South Korea

South Korea is already making progress in addressing these recommendations [(6)]:

  • Issuing regulations for enhanced customer due diligence when dealing with virtual assets
  • Strengthening its ML and TF offenses and confiscation regime.

References: [1] http://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-korea-2020.html [2] The evaluation report, FATF (2020) [3] ibid [4] ibid [5] ibid [6] ibid.