Financial Crime World

Financial Institutions in Korea (Democratic People’s Republic) Face Increased Scrutiny

Warning Issued by the US Government Agency

Seoul, DPRK - The Financial Crimes Enforcement Network (FinCEN), a US government agency responsible for combating financial crimes, has issued a warning to international financial institutions regarding the Democratic People’s Republic of Korea (DPRK). FinCEN is reminding institutions that the Financial Action Task Force (FATF) has identified the DPRK as one of its “High-Risk Jurisdictions Subject to a Call for Action”.

Enhanced Due Diligence Measures Required

The FATF’s listing means that financial institutions must apply enhanced due diligence measures when dealing with customers or counterparties from the DPRK. This includes:

  • Conducting thorough risk assessments
  • Verifying customer identities
  • Monitoring transactions for suspicious activity

Increased Scrutiny on Correspondent Accounts

FinCEN is also emphasizing the importance of correspondent account monitoring for financial institutions in Korea. Institutions must ensure their due diligence programs are “appropriate, specific, risk-based, and reasonably designed to detect and report known or suspected money laundering activity”. This includes:

  • Verifying the identity of foreign financial institution (FFI) customers
  • Monitoring transactions for suspicious activity

Economic Sanctions Remain in Place

The United Nations has imposed economic sanctions on the DPRK, which include restrictions on financial transactions and trade. The US government also maintains a robust sanctions program targeting North Korean entities and individuals.

Financial institutions must be aware of these sanctions and comply with all applicable regulations. This includes:

  • Avoiding any dealings with sanctioned entities or individuals
  • Reporting suspicious activity to FinCEN

Conclusion

The FATF’s listing of the DPRK as a “High-Risk Jurisdiction Subject to a Call for Action” underscores the importance of due diligence in financial transactions involving North Korean customers or counterparties. Financial institutions must take steps to ensure they are complying with all applicable regulations and reporting suspicious activity to FinCEN.

Institutions that fail to comply with these regulations may face serious consequences, including fines and reputational damage.