Financial Crime World

Korea’s Crusade against Financial Crimes: A look into the AML/CFT Framework

In the 21st century, the Republic of Korea (RoK) intensified its efforts to combat financial crimes by establishing a robust Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) framework. This journey began in 2001 with critical milestones – the founding of the Korea Financial Intelligence Unit (KoFIU) and the enactment of the Financial Transaction Reports Act and the Proceeds of Crime Act.

Establishment of KoFIU

  • KoFIU’s inception: Articles 3 Paragraph 1 of the Financial Transaction Reports Act and 5 of the Enforcement Decree
  • Initial location: Ministry of Finance and Economy (MOFE)
  • Current location: Financial Services Commission (FSC) following a government reorganization in 2008
  • Composition: AML/CFT experts from various agencies, including MOJ, NPA, and NTS
  • Role: A bridge between financial institutions and law enforcement agencies

Independence and Autonomy

  • Receives and analyzes Suspicious Transaction Reports (STRs)
  • Distributes analyzed STRs to appropriate agencies
  • Policy formation and implementation
  • Supervision and education of reporting entities

Legislative Foundations

Financial Transaction Reports Act (2001)

  • Creation and operation of KoFIU
  • Its powers and responsibilities
  • Preventive measures: Customer Due Diligence (CDD), STRs, Currency Transaction Reports (CTRs), and internal control systems

Proceeds of Crime Act (2001)

  • Criminalizes money laundering activities
  • Allows confiscation of tainted funds and property of equivalent value

Penalties

  • Offenders face imprisonment of up to five years or fines of up to KRW 30 million for violating Articles 3, 4, or 5 of the POCA
  • Articles 8 and 10 enable confiscation of criminal proceeds and property

Conclusion

The KoFIU and the Financial Transaction Reports Act and Proceeds of Crime Act have established a formidable AML/CFT framework in the RoK. These foundations, powered by KoFIU’s persistent efforts, underscore the nation’s dedication to combatting financial crimes and shielding its economy.