Financial Crime World

Compliance Procedures for Banks Under Scrutiny by Financial Action Task Force and Asia-Pacific Group on Money Laundering: A Report on Korea’s Progress

The Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering (APG) recently assessed Korea’s anti-money laundering (AML) and counter-terrorist financing (CFT) system. The comprehensive review evaluated the effectiveness of Korea’s measures and their compliance with FATF Recommendations.

Strengthening Efforts Against Money Laundering and Terrorist Financing

While Korea has made significant progress in combating money laundering and terrorist financing, there are still areas for improvement. The report noted that:

  • Korea needs to strengthen its efforts to prevent public officials from laundering the proceeds of corruption.
  • A continuous risk assessment process gives Korean authorities a good understanding of the risks they face, with tax crimes, illegal gambling, fraud, and corruption being the most significant concerns.

Assessing Compliance

The report assessed Korea’s legal framework, which is sound and provides a solid foundation for tackling money laundering and terrorist financing. However, it highlighted gaps in the country’s ability to freeze assets under United Nations sanctions.

Regarding terrorist financing risks, the report stated that:

  • Korea currently faces low levels of risk.
  • The country’s legal framework is strong, but should be expanded to include the prosecution of laundering proceeds from all tax crimes.

Significant Money Laundering Risk

The assessment highlighted a significant money laundering risk posed by corruption and fraud cases in Korea. This emphasizes the need for:

  • Expanded AML/CFT measures to prevent politically exposed persons (PEPs) from laundering corrupt proceeds.
  • Better use of international cooperation tools to tackle asset flight and offshore tax crime cases.

Recommendations

The report made several recommendations, including:

  • Implementing measures to prevent accountants, lawyers, real estate agents, and dealers in precious metals and stones from being misused for money laundering or terrorist financing.
  • Enhancing law enforcement agencies’ use of financial intelligence to investigate criminals and terrorists.
  • Utilizing available mechanisms for asset recovery.

Progress Made

The report noted that since its last assessment in 2008, Korea has significantly strengthened its AML/CFT framework, which is now delivering good results. However, the country needs to strengthen its framework to address:

  • Tax crimes
  • Non-financial businesses and professions
  • Politically exposed persons (PEPs)

Roadmap for Compliance

The FATF adopted this report at its February 2020 Plenary meeting, providing a roadmap for Korea’s compliance procedures in combating money laundering and terrorist financing.

By implementing these recommendations, Korea can further strengthen its efforts to combat money laundering and terrorist financing, and continue to improve its AML/CFT framework.