Financial Crime World

FinCEN Advisory (FIN-2018-A001): Warning Financial Institutions about North Korea-Linked Money Laundering

The Financial Crimes Enforcement Network (FinCEN) issued a critical advisory in November 2018, warning U.S. financial institutions about potential money laundering and illicit finance activities linked to North Korea. This advisory highlights several red flags and provides guidance on regulatory obligations for covered financial institutions.

Red Flags and Warning Signs

  • Lack of Online Presence: Businesses serving as front companies for North Korean illicit activity often do not maintain a website or other online presence despite significant transactions.
  • Prohibition on Use of Correspondent Accounts: FinCEN’s Section 311 actions prohibit covered financial institutions from opening or maintaining correspondent accounts for, or on behalf of, North Korean banking institutions and the Bank of Dandong.
  • Special Due Diligence of Correspondent Accounts: Covered financial institutions must apply special due diligence to their foreign correspondent accounts that are reasonably designed to guard against use by North Korean financial institutions and the Bank of Dandong.

Regulatory Obligations

Financial institutions have a critical role in preventing North Korea-linked money laundering activities. Key obligations include:

  • Suspicious Activity Reporting: Financial institutions should file a Suspicious Activity Report (SAR) if they know, suspect, or have reason to suspect that a transaction has no business or apparent lawful purpose.
  • Information Sharing: Financial institutions are encouraged to 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.

Prevention and Support

The FinCEN advisory emphasizes the importance of financial institutions being vigilant and taking proactive steps to prevent North Korea-linked illicit finance activities. Resources are available for further guidance and support in identifying suspicious activity related to the DPRK.

By understanding these red flags, regulatory obligations, and prevention strategies, U.S. financial institutions can effectively mitigate the risk of money laundering and other illicit finance activities linked to North Korea.