Korea’s Financial Institution Customer Due Diligence Procedures: A Key Measure Against Illicit Transactions

Introduction

In an effort to prevent illicit financial transactions and money laundering, the Democratic People’s Republic of Korea has implemented strict customer due diligence (CDD) procedures for financial institutions. These regulations are outlined in the Act on Real Name Financial Transactions and Guarantee of Secrecy and the Financial Transaction Reports Act.

Evolution of CDD Procedures

The CDD regime has undergone significant changes since its inception in 1993, with a major overhaul in 2005 that expanded the scope of CDD measures. Today, financial institutions are required to verify the identity of their customers whenever they open new accounts or conduct occasional transactions exceeding a designated threshold.

Requirements for Customer Identification

According to Article 5-2(1)(1) of the Financial Transaction Reports Act, financial institutions must identify and verify the identity of their customers when opening new accounts. This includes checking and verifying identification information such as:

• Name
• Date of birth
• Address
• Other relevant details

Occasional Transactions Above Threshold

The CDD measures also extend to occasional transactions above a designated threshold, including: * Receiving and paying cash without using an account * Obtaining or cashing a cashier’s check * Purchasing or selling traveller’s checks * Safeguard deposit * Buying and selling prepaid cards * Wire transfers

Customer Identification Information

Financial institutions are required to identify and verify the identification of customers under Article 5-2(1)(1) of the Financial Transaction Reports Act and Article 10-4 of its Enforcement Decree. The customer identification information that financial institutions must check and verify for each category of customers is set out in the following table:

Conclusion

Financial institution customer due diligence procedures play a crucial role in preventing illicit financial transactions and money laundering in Korea. As the regulations continue to evolve, financial institutions must ensure that they comply with the requirements to maintain the integrity of the financial system.