Financial Crime World

Anti-Money Laundering Regulations in Korea, Democratic People’s Republic of

Introduction

In an effort to combat money laundering, the government of Korea, Democratic People’s Republic of has established a robust anti-money laundering (AML) framework. The AML framework is designed to detect and prevent both domestic and international illegal money laundering activities.

Implementation of the AML Framework

The Korean Financial Intelligence Unit (KoFIU), established in 2001, plays a crucial role in implementing the country’s AML/CFT regime. The unit collects and analyzes suspicious transaction reports (STRs) from financial institutions, which are then disseminated to law enforcement agencies for further action.

KoFIU Structure and Function

The KoFIU is staffed by experts from various government agencies, including:

  • Financial Services Commission
  • Ministry of Justice
  • National Police Agency
  • National Tax Service
  • Korea Customs Service
  • Others

The unit’s primary function is to serve as a link between financial institutions and law enforcement agencies, enabling them to share information and coordinate efforts to combat money laundering.

The AML/CFT regime in Korea is backed by four major pieces of legislation:

  • Financial Transaction Reports Act (FTRA)
  • Act on Special Cases Concerning the Prevention of Illegal Trafficking in Narcotics
  • Act on Regulation and Punishment of Criminal Proceeds Concealment
  • Act on Prohibition against the Financing of Terrorism and Proliferation of Weapons of Mass Destruction

FTRA: Reporting Suspicious Transactions

The FTRA serves as the legal basis for reporting suspicious transactions to the KoFIU. Financial institutions are required to report any transactions suspected to be involved in money laundering or tax evasion to the head of FIU by a specific deadline.

  • The act also allows for foreign exchange of information based on the principle of reciprocity.
  • Under Article 3 of POCA, anyone who disguises the acquisition or disposition of criminal proceeds, conceals the origin of criminal proceeds, or hides criminal proceeds is subject to imprisonment not exceeding five years or a fine not exceeding KRW 30 million.

FIU Information System

The KoFIU has established a sound financial practice and protected the nation from the proliferation of anti-social serious crimes by preventing money laundering activities through financial institutions. To effectively handle cross-border movements of illegal proceeds, the unit built an FIU Information System in November 2002. The system enables the KoFIU to:

  • Identify and analyze individuals involved in money laundering activities through foreign transactions and financial information
  • Analyze data without receiving STRs from financial institutions

International Cooperation

The KoFIU also provides consistent training to financial institutions and actively participates in global network projects, demonstrating its commitment to international cooperation in combating money laundering.

Conclusion

Korea’s AML/CFT regime is a comprehensive system that incorporates legal and institutional tools to detect and prevent domestic and international illegal money laundering activities. The KoFIU plays a vital role in implementing this regime, ensuring that financial institutions report suspicious transactions and law enforcement agencies take appropriate action to combat money laundering.