Financial Crime World

Korea’s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Framework: A Look Back at Its History and Structure

History of Korea’s AML/CFT Framework

In 2001, Korea took a significant step towards combating money laundering and terrorist financing by establishing the Korea Financial Intelligence Unit (KoFIU) and enacting the Financial Transaction Reports Act and the Proceeds of Crime Act. Since then, the country has made significant strides in developing its AML/CFT framework.

Structure of Korea’s AML/CFT Framework

The Korea Financial Intelligence Unit (KoFIU)

The KoFIU was created to effectively implement an AML/CFT system, with a mandate to receive suspicious transaction reports from financial institutions and analyze them to identify potential money laundering or terrorist financing activities. The unit is staffed by experts from various government agencies, including:

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

Key Roles in Korea’s AML/CFT Framework

KoFIU’s Role

The KoFIU plays a crucial role in Korea’s AML/CFT framework, serving as an institutional link between financial institutions and law enforcement agencies. The unit receives suspicious transaction reports from reporting entities, analyzes them, and disseminates the information to law enforcement agencies for further action.

Financial Transaction Reports Act

The Financial Transaction Reports Act, enacted in 2001, provides a legal framework for Korea’s AML/CFT system. The act requires financial institutions and casinos to implement certain measures, including:

  • Customer due diligence
  • Suspicious transaction reporting
  • Currency transaction reporting

It also establishes the KoFIU’s authority to collect, analyze, and disseminate financial transaction information.

Proceeds of Crime Act

The Proceeds of Crime Act, also enacted in 2001, criminalizes money laundering and provides for the confiscation of criminal proceeds. The act makes it a crime to disguise or conceal the acquisition or disposition of criminal proceeds, and allows for the confiscation of property equivalent in value to those proceeds.

Evolution of Korea’s AML/CFT Framework

Since its establishment, Korea’s AML/CFT framework has undergone significant changes and improvements. In 2008, the KoFIU was transferred from the Ministry of Finance and Economy to the Financial Services Commission, enhancing its autonomy and independence. The unit has also expanded its scope to include monitoring of virtual currencies and other new payment systems.

Conclusion

Korea’s AML/CFT framework is a comprehensive system that aims to prevent money laundering and terrorist financing while promoting financial stability and integrity. The KoFIU plays a vital role in this framework, working closely with reporting entities and law enforcement agencies to identify and disrupt illicit activities. As the global landscape of financial crimes continues to evolve, Korea’s AML/CFT framework will remain an important tool in the fight against money laundering and terrorist financing.