Korea’s Regulatory Bodies for Anti-Money Laundering Compliance: A Framework of Detection and Prevention
Overview of Korea’s AML Framework
Korea has a comprehensive anti-money laundering (AML) framework that encompasses both legal and financial institutions, as well as international cooperation. This framework serves as a tool to detect and prevent domestic and international money laundering activities.
Definition of Money Laundering in Korea
Money laundering refers to the process of disguising illicit funds as legitimate, with detailed definitions varying by country and law. In Korea, it is defined as “criminal acts of disguising the fact of acquisition and disposal of assets or concealing such assets, or disguising and concealing for the purpose of evading taxes.”
The Role of the Financial Intelligence Unit (KoFIU)
The Financial Intelligence Unit (KoFIU), established under the Financial Transaction Reports Act (FTRA), serves as a central body that collects and analyzes Suspicious Transaction Reports (STRs) from financial institutions, disseminating information to law enforcement agencies.
Key Components of Korea’s AML/CFT Regime
- The Financial Transaction Reports Act: This act serves as the legal ground for adopting STRs, where transactions suspected to be involved in money laundering and tax evasion must be reported to the head of FIU by financial institutions.
- Foreign Exchange Information Sharing: Foreign exchange information can be shared based on the principle of reciprocity.
- Suspicious Transaction Reporting: Financial institutions are required to report suspicious transactions to the FIU.
- Secrecy of Financial Transactions: Secrecy of financial transactions is covered by the Act.
KoFIU’s AML/CFT Regime
The KoFIU collects and analyzes specific financial transaction data, operates international cooperation such as information exchange with foreign FIUs, and coordinates with domestic agencies. Reporting entities file STRs and CTRs to the KoFIU, which subsequently disseminates the information to law enforcement agencies for further action.
Law Enforcement Agencies’ Use of Financial Transaction Data
Law enforcement agencies use financial transaction data received from the KoFIU to apply sanctions to severe criminals and money laundering offenders under the AML/CFT regime.
KoFIU’s International Cooperation and Training
KoFIU actively participates in global network projects and provides consistent training to financial institutions. Its sound financial practice protects the nation from anti-social serious crimes by preventing money laundering activities through financial institutions.
The FIU Information System
To effectively handle cross-border movement of illegal proceeds, KoFIU built an FIU Information System, which allows identification and analysis of individuals involved in money laundering activity through foreign transactions, even without STRs from financial institutions.