Financial Crimes on the Rise in Korea: Understanding the Types and Consequences

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South Korea has been grappling with a surge in financial crimes, including money laundering, terrorist financing, and other illicit activities. The country’s efforts to combat these crimes have been assessed by the Financial Action Task Force (FATF) in its recent Mutual Evaluation Report 2020.

Compliance with FATF Recommendations

The report assesses Korea’s compliance with the FATF Recommendations, which provide a framework for countries to prevent and detect financial crimes. The report found that Korea is largely compliant with several key requirements, including:

Assessing risk and applying a risk-based approach (R.1)
National cooperation and coordination (R.2)
Existence of money laundering and terrorist financing offenses (R.3 and R.5)
Combating the financing of proliferation (R.7) and terrorist organizations (R.6)

Areas for Improvement

However, the report identified several areas where Korea needs to improve:

Implementing more effective measures to prevent the misuse of shell companies and other legal arrangements (R.25)
Improving transparency in beneficial ownership of legal persons (R.24)
Strengthening supervision and regulation of financial institutions (R.26)

Concerns over North Korea Financing

The report also highlighted concerns over Korea’s lack of progress in addressing the financing of North Korea, which is a major concern for global security.

New Technologies and Correspondent Banking

The report noted that Korea has made significant progress in implementing new technologies to combat financial crimes, including wire transfers and online transactions. To address these weaknesses, Korea has committed to:

Strengthening its regulations on correspondent banking
Money or value transfer services
New technologies (R.13-15)

Conclusion

While Korea has made significant progress in implementing its anti-money laundering and combating the financing of terrorism regime, there is still much work to be done to combat financial crimes. The country must continue to strengthen its regulations and enforcement mechanisms to prevent the misuse of its financial system.

In conclusion, a wake-up call for Korean authorities to take decisive action to combat financial crimes, Korea must work to strengthen its AML/CFT regime and address the identified weaknesses to prevent further illicit activities.