Financial Crime World

Title: Korea’s Anti-Money Laundering and Counter-Terrorist Financing System Under Scrutiny: FATF and APG Report

Evaluation of Korea’s AML/CFT System

Paris, France, 16th April 2020 – The Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering (APG) assessed the Republic of Korea’s anti-money laundering and counter-terrorist financing (AML/CFT) system in a comprehensive review released in an official report. This report examines the effectiveness of Korea’s measures and their adherence to the FATF Recommendations.

Key Findings

The report commends Korea for having a robust legal framework for confiscating funds related to money laundering and terrorist financing [1].

Areas for Improvement

However, more action is required to prevent government and public officials from laundering corruption proceeds [1].

Key Risks and Challenges for Korea

The assessment highlighted issues with:

  1. Tax crimes [1]
  2. Illegal gambling [1]
  3. Fraud [1]
  4. Corruption [1]
  5. Proliferation of weapons of mass destruction (WMD) [1]

Proliferation Financing Risks

Korea is proactively addressing the risks posed by WMD proliferation financing [1].

Gaps in Sanctions Regime

However, there are gaps in its ability to freeze assets under the United Nations sanctions regime [1].

Low Terrorist Financing Risks

The country’s legal framework for combating money laundering and terrorist financing is sound [1], but the report recommends extending it to cover the laundering of proceeds of all tax crimes.

Money Laundering Risks from Fraud and Corruption

Korea’s experience with high-level corruption cases has underscored the considerable money laundering risk posed by fraud and corruption [1]. Consequently, Korean authorities should expand their AML/CFT measures to cover politically exposed persons, both domestic and international.

Collaboration and International Cooperation

The report praises the effective cooperation and collaboration between Korean authorities and their foreign counterparts [1]. However, the country could make greater use of international cooperation tools to tackle asset flight and offshore tax crimes. Additionally, seeking and providing beneficial ownership information is essential [1].

Preventing Misuse of Professional Services

Although financial institutions and casinos in Korea maintain a good understanding of money laundering and terrorist financing risks and employ necessary measures to mitigate them [1], there is a need to implement measures to prevent accountants, lawyers, real estate agents, and dealers in precious metals and stones from being used for money laundering or terrorist financing activities.

Asset Recovery and Investigative Capabilities

Korean law enforcement agencies utilize financial intelligence to track money trails and investigate criminals and terrorists, with asset recovery being a priority [1]. Although authorities can deprive criminals of a significant portion of their proceeds [1], there is potential for further improvement in utilizing available mechanisms for asset recovery.

Strengthening the Framework and Looking Ahead

Since its last assessment in 2008, the Republic of Korea has made considerable progress in enhancing its AML/CFT framework [1]. Moving forward, the country will focus on addressing tax crimes, non-financial businesses and professions, and politically exposed persons to further strengthen its financial integrity. The FATF adopted this report at its February 2020 Plenary meeting.

[1] FATF and APG (2020). Mutual Evaluation Report: Republic of Korea. Paris: FATF. Available at https://www.fatf-gafi.org/historical/documents/reports/merkorea2020.html (accessed on April 16, 2020).