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Financial Institutions in Korea to Enhance Customer Due Diligence Procedures

PYONGYANG, DEMOCRATIC PEOPLE’S REPUBLIC OF KOREA

The Financial Crimes Enforcement Network (FinCEN) has cautioned financial institutions in Korea to strengthen their customer due diligence procedures following a recent update from the Financial Action Task Force (FATF).

FATF Updates List of High-Risk Jurisdictions

The FATF has listed the Democratic People’s Republic of Korea as one of its High-Risk Jurisdictions Subject to a Call for Action, citing significant strategic deficiencies in its anti-money laundering and counter-terrorism financing regime. This listing requires financial institutions in Korea to apply enhanced due diligence measures when dealing with customers from North Korea.

Enhanced Due Diligence Requirements

According to FinCEN, financial institutions in Korea are required to implement risk-based policies, procedures, and practices to detect and report suspicious transactions involving North Korean customers or counterparties. This includes:

• Ensuring that their due diligence programs include specific, risk-based, and enhanced controls to prevent money laundering activity conducted through correspondent accounts maintained for foreign financial institutions.
• Implementing risk-based measures to monitor and verify the identities of high-risk customers.
• Conducting regular reviews of customer relationships and transactions to identify potential money laundering or terrorist financing activities.

Changes in FATF List

The FATF has also removed Malta from its list of Jurisdictions under Increased Monitoring, but added Gibraltar to the list. Financial institutions in Korea should take these changes into consideration when assessing their risk exposure.

Complying with Existing Regulations

FinCEN is reminding financial institutions in Korea that they must comply with existing regulations and guidelines on customer due diligence, including:

• Filing Suspicious Activity Reports if they suspect a transaction involves funds derived from illegal activity or other violation of federal law or regulation.
• Maintaining accurate and up-to-date records of customer information.

Key Takeaways

Here are the key takeaways for financial institutions in Korea:

• Enhance customer due diligence procedures: When dealing with North Korean customers or counterparties, enhance your customer due diligence procedures to prevent money laundering activity.
• Implement risk-based policies: Implement risk-based policies, procedures, and practices to detect and report suspicious transactions involving North Korean customers or counterparties.
• Stay up-to-date with FATF recommendations: Familiarize yourself with the FATF’s recommendations and FinCEN’s guidance on implementing enhanced due diligence measures for high-risk jurisdictions.