Financial Crime World

Korea’s Anti-Money Laundering and Counter-Terrorist Financing Efforts Receive Mixed Review

Seoul, Korea - The Financial Action Task Force (FATF) has released its latest assessment of South Korea’s anti-money laundering (AML) and counter-terrorist financing (CFT) measures, revealing a mixed bag of strengths and weaknesses.

Strengths and Weaknesses

  • While financial institutions and casinos are subject to comprehensive AML/CFT measures, there are significant gaps in the regulatory framework.
    • Domestic politically exposed persons (PEPs) are not covered, despite corruption being identified as a major predicate offence.
  • Larger individual financial institutions and casinos have a good understanding of their ML/TF risks and obligations, thanks to vigorous outreach, training, and other efforts by Korean authorities.
    • However, smaller financial institutions and some casinos need further improvements in this area.

Supervision and Reporting

  • Supervision of financial institutions and casinos is largely robust, with most supervisors having a good understanding of the ML/TF risks in their sectors.
    • Concerns about defensive reporting, particularly in the banking sector.
  • Transparency and beneficial ownership (BO) information are crucial. While Korea has taken steps to prevent misuse of legal persons, including prohibiting bearer shares and nominee directors, there is still much work to be done to ensure that BO information is accurate and up-to-date.

International Cooperation

  • Korea’s framework for seeking and providing mutual legal assistance (MLA) and extradition is effective.
    • The country should explore similar arrangements with other jurisdictions, particularly those featuring often in Korea’s ML and tax crime cases.

Priority Actions

To address the shortcomings identified by the FATF, a set of priority actions has been issued for Korea to implement:

  • Extend the AML/CFT framework to apply to all designated non-financial businesses and professions (DNFBPs).
  • Expand the scope of AML/CFT obligations to include domestic PEPs and PEPs of international organisations.
  • Amend the law to align tax crimes with those that require suspicious transaction report (STR) reporting.

Conclusion

The FATF assessment concludes that while Korea has made progress in implementing its AML/CFT obligations, there is still much work to be done to ensure that the country’s financial system is robust against money laundering and terrorist financing.