Financial Crime World

Korea’s Anti-Money Laundering (AML) Framework

Overview

Korea’s AML framework is a comprehensive system that encompasses legal and financial institutions, as well as international cooperation, to detect and prevent domestic and international money laundering activities. The framework is based on the Financial Transaction Reports Act (FTRA), which defines money laundering 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.”

Key Components

1. Korea Financial Intelligence Unit (KoFIU)

  • The KoFIU is a central, unified government body that collects and analyzes Suspicious Transaction Reports (STRs) from financial institutions and disseminates them to Law Enforcement Agencies (LEAs).

2. Financial Institutions (FIs)

  • FIs are required to report suspicious transactions to the KoFIU.

3. Law Enforcement Agencies (LEAs)

  • LEAs receive STRs from the KoFIU and investigate money laundering cases.

Legislation

Korea has four major AML/CFT legislation:

1. Financial Transaction Reports Act (FTRA)

  • The FTRA serves as a legal ground for adopting STR, where transactions suspected to be involved in money laundering and tax evasion must be reported to the head of FIU by financial institutions.

2. Act on Special Cases Concerning the Prevention of Illegal Trafficking in Narcotics

  • This act is relevant to law enforcement agencies applying sanctions to severe criminals and money laundering offenders.

3. Act on Regulation and Punishment of Criminal Proceeds Concealment

  • This act also applies sanctions to severe criminals and money laundering offenders under the AML/CFT regime.

4. Act on Prohibition against the Financing of Terrorism and Proliferation of Weapons of Mass Destruction

  • This act is relevant to law enforcement agencies applying sanctions to severe criminals and money laundering offenders.

KoFIU’s Role

The KoFIU establishes sound financial practices and protects the nation from the proliferation of anti-social serious crimes by preventing Money laundering activity through financial institutions. To effectively handle cross-border movement of illegal proceeds, which stems from abusing foreign transaction liberation measures, the KoFIU built an FIU Information System in November 2002.

International Cooperation

The KoFIU operates relevant international cooperation, such as information exchange with foreign FIUs, and has set up a system to coordinate with domestic agencies. The KoFIU also provides consistent training to financial institutions and actively participates in global network projects.

Sanctions for Money Laundering Offenders

Law Enforcement Agencies apply sanctions to severe criminals and money laundering offenders under the AML/CFT regime. Relevant laws include:

  • Act on Regulation and Punishment, etc. of Criminal Proceeds Concealment
  • Act on Special Cases Concerning the Prevention of Illegal Trafficking in Narcotics
  • Act on Prohibitions against the Financing of Terrorism and Proliferation of Weapons of Mass Destruction

Conclusion

Korea’s AML framework is a comprehensive system that encompasses legal and financial institutions, as well as international cooperation, to detect and prevent domestic and international money laundering activities. The KoFIU plays a crucial role in establishing sound financial practices and protecting the nation from the proliferation of anti-social serious crimes.