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Money Laundering in Korea, Republic of: A Critical Analysis

The Financial Action Task Force (FATF) has evaluated the efforts of the Korea, Republic of to implement anti-money laundering (AML) and combating terrorist financing (CFT) measures. The evaluation reveals a mixed picture, with some areas showing significant progress while others require further improvement.

Assessing Risk and Applying a Risk-Based Approach

The FATF found that Korea has largely complied with the requirement to assess risk and apply a risk-based approach (R.1). However, there are still some gaps in the country’s ability to identify and mitigate high-risk areas.

• Gaps identified: Limited capacity to identify and mitigate high-risk areas.
• Recommendations:

National Cooperation and Coordination

Korea has also demonstrated significant progress in national cooperation and coordination (R.2), with effective communication between different government agencies and financial institutions.

• Progress made: Effective communication between government agencies and financial institutions.
• Next steps:
  1. Enhance information sharing among government agencies.
  2. Strengthen collaboration with international partners.

Money Laundering Offence

The FATF notes that Korea has largely complied with the requirement to establish a money laundering offence (R.3). However, there are still some concerns regarding the application of this law in practice.

• Concerns: Limited awareness and understanding among law enforcement agencies.
• Recommendations:

Confiscation and Provisional Measures

Korea is compliant with the requirement for confiscation and provisional measures (R.4), which includes the freezing and seizure of assets suspected of being involved in money laundering or terrorist financing activities.

• Compliance: Effective implementation of confiscation and provisional measures.
• Next steps:
  1. Enhance training for law enforcement agencies on asset recovery techniques.
  2. Increase cooperation with international partners to facilitate asset recovery.

Terrorist Financing Offence

The FATF found that Korea has largely complied with the requirement to establish a terrorist financing offence (R.5). However, there are still some concerns regarding the country’s ability to prevent and investigate terrorist financing activities.

• Concerns: Limited capacity to detect and disrupt terrorist financing networks.
• Recommendations:

Targeted Financial Sanctions

Korea has partially complied with the requirement for targeted financial sanctions related to terrorism and terrorist financing (R.6) and proliferation (R.7).

• Partial compliance: Limited scope of targeted financial sanctions.
• Next steps:
  1. Expand the scope of targeted financial sanctions to include more individuals and entities.
  2. Enhance monitoring and reporting requirements for designated entities.

Non-Profit Organisations

The FATF notes that Korea is partially compliant with the requirement for non-profit organisations (R.8), which includes ensuring that these entities are subject to adequate supervision and regulation.

• Partial compliance: Limited oversight of non-profit organizations.
• Recommendations:

Regulation and Supervision of Financial Institutions

The FATF found that Korea has largely complied with the requirement for regulation and supervision of financial institutions (R.9). However, there are still some concerns regarding the effectiveness of supervisory bodies.

• Concerns: Limited powers of supervisors to take effective action.
• Recommendations:

International Cooperation

The FATF notes that Korea has partially complied with the requirement for international cooperation (R.10), which includes enhancing information sharing and collaboration with international partners.

• Partial compliance: Limited scope of international cooperation.
• Next steps:
  1. Enhance information sharing with international partners on suspicious transactions.
  2. Increase cooperation with international partners to facilitate asset recovery.

In conclusion, while Korea has made significant progress in implementing anti-money laundering and combating the financing of terrorism regulations, there are still some areas where improvements are needed. The country should continue to work towards strengthening its regulatory framework and ensuring effective implementation and enforcement of these regulations.

Note: This report is based on the assessment of the FATF (Financial Action Task Force) which is an intergovernmental organization that sets international standards for anti-money laundering and combating the financing of terrorism (AML/CFT). The report provides a comprehensive overview of Korea’s AML/CFT regime, highlighting areas of compliance and non-compliance with the FATF Recommendations.