Financial Crime World

Korea’s Financial Crimes and Compliance: FATF Evaluation Report Reveals Progress and Challenges

Background

The Financial Action Task Force (FATF), an international organization battling financial crimes, has recently evaluated South Korea’s progress in implementing its Recommendations to combat money laundering, terrorist financing, and other financial crimes.

Assessment of South Korea’s Performance (R.1-R.40)

R.1 - Risk Assessment and Application of Risk-Based Approach

  • South Korea’s risk-based approach to anti-money laundering (AML) and countering the financing of terrorism (CFT) is largely compliant.
  • Improvements in the assessment of higher-risk situations are necessary.

R.2 - National Cooperation and Coordination

  • Satisfactory cooperation between various agencies.
  • Room for improvement in sharing financial intelligence and streamlining communication channels.

R.3 - Money Laundering Offense

  • South Korea is partially compliant since some statutory provisions related to criminal money laundering lack explicitness.

R.4 - Confiscation and Provisional Measures

  • Compliance with requirements, but improvements needed in some areas, e.g., timely execution of confiscation orders and application of related measures against foreign assets.

Other FATF Recommendations (R.5-R.40)

  • Partially Compliant: R.5 (Terrorist Financing), R.12 (Politically Exposed Persons), R.13 (Correspondent Banking), R.22 (Designated Non-Financial Businesses and Professions), R.23 (Designated Non-Financial Businesses and Professions: Other Measures), R.26 (Regulation and Supervision of Financial Institutions), R.28 (Regulation and Supervision of Designated Non-Financial Businesses and Professions), and R.39 (Extradition).
  • Largely Compliant: R.6 (Targeted Financial Sanctions related to terrorism and terrorist financing), R.7 (Targeted Financial Sanctions related to proliferation), R.8 (Non-profit Organizations), R.9 (Financial Institution Secrecy Laws), R.10 (Customer Due Diligence), R.11 (Record Keeping), R.14 (Money or Value Transfer Services), R.15 (New Technologies), R.16 (Wire Transfers), R.17 (Reliance on Third Parties), R.18 (Internal Controls and Foreign Branches and Subsidiaries), R.19 (Higher-risk Countries), R.20 (Reporting of Suspicious Transactions), R.21 (Tipping-off and Confidentiality), R.24 (Transparency and Beneficial Ownership of Legal Persons), R.25 (Transparency and Beneficial Ownership of Legal Arrangements), R.26 (Regulation and Supervision of Financial Institutions), R.27 (Powers of Supervisors), R.30 (Responsibilities of Law Enforcement and Investigative Authorities), R.31 (Powers of Law Enforcement and Investigative Authorities), and R.35 (Sanctions).
  • Compliant: R.32 (Cash Couriers), R.33 (Statistics), R.34 (Guidance and Feedback), R.36 (International Instruments), R.37 (Mutual Legal Assistance), R.38 (Mutual Legal Assistance: Freezing and Confiscation), and R.40 (Other Forms of International Cooperation).

Conclusion

The evaluation report signifies progress in South Korea’s efforts to combat financial crimes but also identifies areas for improvement. South Korea will continue working to strengthen its financial crime prevention measures and address the challenges highlighted in the report.