Financial Crime World

Korea Fails to Tackle Corruption-Linked Money Laundering: Report

A comprehensive review by the Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering (APG) has revealed that South Korea’s efforts to combat money laundering and terrorist financing are incomplete, with significant gaps in addressing corruption-linked crimes.

Insufficient Measures Against Corruption-Linked Crimes

While Korea has a sound legal framework in place to tackle money laundering and terrorist financing, it is failing to effectively stop government and public officials from laundering corruption proceeds. The report notes that tax crimes, illegal gambling, fraud, and corruption are the most significant sources of funds for money laundering, with corruption cases highlighting the risk of fraud and money laundering.

Gaps in Korea’s AML/CFT Framework

The FATF assessment also points out gaps in Korea’s ability to:

  • Freeze assets under United Nations sanctions
  • Prosecute the laundering of proceeds from all tax crimes
  • Expand its AML/CFT measures to prevent politically exposed persons, both domestic and international, from laundering corruption proceeds

Areas for Improvement

The report highlights the need for Korea to improve in the following areas:

  • Utilize international cooperation tools to combat asset flight and offshore tax crime cases
  • Seek and provide beneficial ownership information
  • Prevent accountants, lawyers, real estate agents, and dealers in precious metals and stones from being misused for money laundering and terrorist financing purposes

Strengths of Korean AML/CFT Framework

Korean authorities have been praised for their effective cooperation and collaboration through policy and operational structures that bring together government agencies and the private sector. Additionally:

  • Financial institutions and casinos generally have a good understanding of money laundering and terrorist financing risks
  • Law enforcement agencies make good use of financial intelligence to investigate criminals and terrorists

Priorities for Improvement

To address the identified gaps, Korean authorities should prioritize:

  • Improving asset recovery efforts
  • Depriving criminals of their proceeds
  • Strengthening measures against tax crimes, non-financial businesses and professions, and politically exposed persons

Conclusion

Since its last assessment in 2008, Korea has made significant progress in strengthening its AML/CFT framework, which is now delivering good results. However, the country still faces challenges in addressing corruption-linked crimes. The FATF report highlights the need for continued efforts to strengthen Korea’s AML/CFT framework to effectively combat money laundering and terrorist financing.