Financial Crime World

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Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) Measures in Korea

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The Financial Action Task Force (FATF) has prepared a report highlighting the strengths and weaknesses of Korea’s AML/CTF framework. This executive summary provides an overview of the key points summarized from the report.

Strengths

Korea’s AML/CTF framework demonstrates several strengths:

  • Robustness of FIs and Casinos: Financial institutions (FIs) and casinos in Korea are largely robust, with a good understanding of money laundering (ML)/terrorist financing (TF) risks.
  • Effective Co-operation among Authorities: Entrusted agencies have excellent cooperation and coordination, except for casinos.
  • Good Risk-Based Supervision System: Most supervisors have a strong risk-based system for supervision.

Weaknesses

However, there are several weaknesses in Korea’s AML/CTF framework:

  • Insufficient Coverage of DNFBPs: Only FIs and casinos are subject to the AML/CTF framework or supervised; other designated non-financial businesses and professions (DNFBPs) are not.
  • Limited Understanding of ML/TF Risks Associated with Legal Persons: Authorities do not have a clear understanding of why certain types of legal persons are vulnerable to ML/TF.
  • Inadequate Sanctions for Non-Compliance: Sanctions for non-compliant legal persons are limited.
  • Insufficient Resources for Supervision: Supervision by the Korea Financial Intelligence Unit (KoFIU) and the Financial Supervisory Service (FSS) would benefit from increased resources.

Recommendations

To address these weaknesses, the FATF recommends:

  • Extend the AML/CTF Framework to Apply to All DNFBPs and Designate a Supervisor: This will ensure that all sectors are covered by the framework.
  • Expand the Scope of AML/CFT Obligations to Include Domestic Politically Exposed Persons (PEPs) and PEPs of International Organizations: This will help prevent ML/TF risks associated with high-risk individuals.
  • Amend the Law to Expand the Range of Tax Crimes that are ML Predicate Offenses: This will increase the effectiveness of AML/CFT measures.
  • Continue Exploring Measures to Promote the Actual Recovery of Assets Ordered for Confiscation: This will ensure that assets seized as a result of AML/CFT efforts are actually recovered and used to prevent further ML/TF.

Conclusion

Overall, the report highlights areas where Korea needs to improve its AML/CTF framework to address ML/TF risks effectively. By implementing these recommendations, Korea can strengthen its AML/CTF measures and reduce the risk of money laundering and terrorist financing in the country.