Korea Fails to Address Money Laundering Concerns: Report
A recent review of South Korea’s anti-money laundering and counter terrorist financing (AML/CFT) system has found that while the country has a sound legal framework, it needs to do more to stop government and public officials from laundering the proceeds of corruption.
Effective in Addressing Terrorist Financing Risks
According to a report by the Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering (APG), Korea’s AML/CFT system is effective in addressing the risks emanating from UN and domestically designated terrorists and terrorist organizations. However, the country faces low terrorist financing risks.
Key Proceeds-Generating Crimes
The report highlights that tax crimes, illegal gambling, fraud, and corruption are the most important proceeds-generating crimes that present the highest money laundering risks in Korea. These crimes are:
- Tax crimes
- Illegal gambling
- Fraud
- Corruption
Gaps in Asset Freeze Regime
Korea has a high level of awareness of the proliferation financing risks it faces, but needs to address gaps in its ability to freeze assets under the United Nations sanctions regime.
Inadequate AML/CFT Measures for Tax Crimes
Korea’s AML/CFT measures are also inadequate when it comes to preventing the laundering of proceeds of all tax crimes. The country should extend its prosecution of such crimes and expand its AML/CFT measures to prevent politically exposed persons, both domestic and international, from laundering corruption proceeds.
Cooperation with Foreign Counterparts
The report notes that Korean authorities co-operate effectively with foreign counterparts through a range of mechanisms to streamline mutual legal assistance. However, the country could make more use of international cooperation tools to go after asset flight and offshore tax crime cases and seek and provide beneficial ownership information.
Financial Institutions and Casinos
Korean financial institutions and casinos generally have a good understanding of the money laundering and terrorist financing risks they face, but the country should implement measures to prevent accountants, lawyers, real estate agents, and dealers in precious metals and stones from being misused for money laundering or terrorist financing.
Asset Recovery
Asset recovery is a government priority in Korea, with authorities able to deprive criminals of a reasonable amount of their proceeds. However, the country can make further use of available mechanisms.
The FATF adopted this report at its February 2020 Plenary meeting, highlighting Korea’s need to strengthen its AML/CFT framework to address tax crimes, non-financial businesses and professions, and politically exposed persons.