Korean Financial Institutions Urged to Enhance Anti-Money Laundering Measures Following FATF Update

Introduction

The Democratic People’s Republic of Korea (DPRK) has been identified as a High-Risk Jurisdiction Subject to a Call for Action by the Financial Action Task Force (FATF), an intergovernmental body that sets international standards for anti-money laundering, countering the financing of terrorism, and combating proliferation of weapons of mass destruction.

FATF’s Latest Update

The FATF’s latest update, released following its plenary meeting in June, has prompted U.S. financial institutions to review their obligations and risk-based policies, procedures, and practices when dealing with foreign financial institutions from jurisdictions identified as having strategic deficiencies in their anti-money laundering (AML) regimes.

Key Points:

• The FATF has called on all member countries to apply enhanced due diligence and, in some cases, impose counter-measures to protect the international financial system.
• Korean financial institutions are urged to enhance their AML measures to prevent money laundering, terrorist financing, and proliferation financing risks emanating from the DPRK.

U.S. Department of the Treasury’s Guidance

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a statement emphasizing that Korean financial institutions must comply with existing regulations, including those related to correspondent accounts for foreign financial institutions from high-risk jurisdictions.

Key Points:

• FinCEN stresses that Korean financial institutions should ensure their due diligence programs include policies, procedures, and controls reasonably designed to detect and report known or suspected money laundering activity conducted through or involving any correspondent account established in the United States.
• Any suspicious activity related to money laundering, terrorist financing, or other illicit activities should be reported promptly.

Implications for Korean Financial Institutions

In light of this update, Korean financial institutions are advised to review their existing relationships with foreign counterparties from high-risk jurisdictions and ensure they have adequate policies and procedures in place to mitigate potential risks.

Key Actions:

• Review existing relationships with foreign counterparties from high-risk jurisdictions
• Ensure adequate policies and procedures are in place to mitigate potential risks
• Report any suspicious activity related to money laundering, terrorist financing, or other illicit activities promptly