Financial Crime World

Korea’s Anti-Money Laundering and Combating the Financing of Terrorism Efforts Under Scrutiny

Strengths and Weaknesses

A recent report has highlighted several areas where Korea’s anti-money laundering (AML) and combating the financing of terrorism (CFT) efforts could be improved. While Korea’s customer identification and verification processes are considered a strength, there are still some weaknesses that need to be addressed.

Customer Due Diligence (CDD)

  • The reliability of Korea’s CDD process could be strengthened by requiring secondary verification of customer information.
  • There is currently no provision in law or regulation requiring CDD for transactions below the designated threshold that appear to be linked.
  • Korea’s legal framework is strong, but there are limitations on the sharing of customer identification information between financial institutions.
  • There is a lack of explicit requirements for record-keeping and transaction reporting.
  • No requirement for financial institutions to pay special attention to complex or unusual transactions, or business relationships with individuals from countries that do not fully implement AML/CFT measures.

Suspicious Transaction Reporting (STR)

  • Korea’s STR system has been praised as well-implemented.
  • However, the low reporting threshold of KRW 20 million (approximately USD 17,000) may undermine its effectiveness.
  • Deficiencies in the list of predicate offenses and TF offenses impact on the scope of the STR requirement.

Conclusion

While Korea has made progress in implementing AML/CFT measures, there are still areas for improvement. These include:

  • The need for more specific requirements for internal controls and employee training.
  • Greater oversight of foreign branches and subsidiaries.

By addressing these weaknesses, Korea can further strengthen its anti-money laundering and combating the financing of terrorism efforts.