Introduction

The Financial Crimes Enforcement Network (FinCEN) has issued an advisory to provide guidance for financial institutions on how to identify and report suspicious transactions that may be related to North Korean financial activities.

Key Points of the Advisory

1. Risk-based approach

Covered financial institutions should take a risk-based approach when deciding what due diligence measures to adopt to guard against the use of their foreign correspondent accounts to process transactions involving North Korean financial institutions or Bank of Dandong.
This means that institutions should assess and manage their risks based on their specific business models, customer base, and other relevant factors.

2. Notification and termination

If a financial institution knows or has reason to believe that a foreign bank’s correspondent account has been or is being used to process transactions involving a North Korean financial institution or Bank of Dandong, it must take all appropriate steps to further investigate and prevent such access.
This may include notification of its correspondent account holder and, where necessary, termination of the correspondent account.

3. Suspicious Activity Reporting (SAR)

Financial institutions should file a SAR if they know, suspect, or have reason to suspect that a transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage.
The presence of certain “red flags” may indicate suspicious activity, but their absence does not necessarily mean that a transaction is legitimate.

4. Red flags

Financial institutions should consider evaluating indicators of potential DPRK-related illicit activity in combination with other red flags and factors before making determinations of suspiciousness.
Some examples of red flags include:
- Transactions involving North Korean financial institutions or Bank of Dandong
- Transactions that are unusually large or complex
- Transactions that involve multiple parties or jurisdictions

Financial institutions may share information with one another, as appropriate, either for the purposes of filing a joint SAR or under Section 314(b) of the USA PATRIOT Act.
This can help to facilitate more effective monitoring and reporting of suspicious activity.

Additional Guidance

The advisory encourages financial institutions to use previous FinCEN advisories and guidance related to the DPRK as a reference when evaluating potential suspicious activity. It also suggests that financial institutions consider the specifics of their own risk profiles and business models when implementing these guidelines.