Korea’s Battle Against Money Laundering and Terrorist Financing: A Look at AML/CFT Legislation

In its unwavering commitment to combating money laundering and terrorist financing, the Republic of Korea has enacted a robust legal framework. The following three key pieces of legislation form the backbone of this regime:

The Financial Transaction Reports Act (FTRA)

Designed to safeguard the financial system from illicit activities, the FTRA mandates preventive measures:

• Established the Korean Financial Intelligence Unit (KoFIU): This unit is responsible for collecting, analyzing, and disseminating suspicious transaction reports.
• Customer Due Diligence (CDD): Financial institutions must conduct CDD on their clients to ensure their identities are verified and their funds have a legitimate source.
• Suspicious Transaction Reports (STRs): Financial institutions are required to submit STRs to KoFIU when they detect potential money laundering or terrorist financing activities.
• Cash Transactions Reports (CTRs): Financial institutions must monitor and report CTRs exceeding specific thresholds to the KoFIU.

The Proceeds of Crime Act (POCA)

An essential element in penalizing money laundering, the POCA criminalizes the process of converting, transferring, or disguising proceeds of criminal activities. Additionally, it grants governmental authority to preserve and confiscate tainted assets.

The Act on Prohibition Against the Financing of Terrorism and Proliferation of Weapons of Mass Destruction (PFOPIA)

This legislation serves a pivotal role in combating terrorist financing:

• Criminalizes Financing of Terrorism: The PFOPIA outlaws providing funds, directly or indirectly, to any individual or entity involved in terrorist activities.
• Designation Authority: Authorities can designate individuals and entities, whose dealings financial institutions must halt without Financial Services Commission approval.