Financial Crime World

Korean Banks Face Global Scrutiny in Fight Against Financial Crime

Global Efforts to Prevent Financial Crime

A growing number of banks in the Democratic People’s Republic of Korea (DPRK) have been caught up in global efforts to prevent financial crime, according to a report by experts at AML RightSource.

Recent Examples

  • US banks have been exploited by the DPRK as vehicles for money laundering, despite US sanctions against the country.
  • The US Treasury has taken action to crack down on banks suspected of facilitating these transactions.

China’s Bank of Dandong in Crosshairs

In June 2017, the US Treasury issued a notice of proposed rulemaking aimed at prohibiting the opening or maintenance of a correspondent account in the US for, or on behalf of, China’s Bank of Dandong. The bank has been identified as a Financial Institution of Primary Money Laundering Concern.

  • This move follows a string of high-profile cases involving the DPRK’s use of Chinese banks to launder money and evade sanctions.
  • In 2016, four Chinese nationals were criminally charged with conspiring to evade US economic sanctions against the DPRK and violating the Weapons of Mass Destruction Proliferators Sanctions Regulations (WMDPSR).

AML/OFAC Compliance Risk Mitigation

As the global threat environment evolves, Korean banks must continually evaluate and strengthen their AML and OFAC compliance programs to ensure they have safeguards in place to mitigate risks associated with existing global events and threats.

  • Experts recommend that banks revisit their Customer Risk Rating (CRR) Methodology and Country Risk Rating Methodology to gauge if revisions are necessary.
  • They also stress the importance of providing detailed training to AML and OFAC personnel, as wire transfers associated with DPRK-sanctioned front companies are being frequently manipulated to launder millions of dollars.

A Proactive Approach to Financial Crime Prevention

The report emphasizes that Korean banks must adopt a proactive approach to financial crime prevention, rather than simply reacting to global events. This includes:

Key Strategies for Financial Crime Prevention

  • Conducting regular risk assessments and updating policies and procedures accordingly.
  • Providing comprehensive training to AML and OFAC personnel.
  • Integrating KYC programs into AML/OFAC programs.
  • Developing effective transaction monitoring strategies.

By taking a proactive approach, Korean banks can mitigate the risks associated with financial crime and maintain their reputation as trusted and secure institutions.