Financial Crime World

Korea’s Definition of Money Laundering: A Legal Framework to Combat Criminal Activity

The Korea Financial Intelligence Unit (KoFIU) was established to detect and prevent money laundering in the country. According to Article 2(5) of the Financial Transaction Reports Act (FTRA), money laundering is defined as:

  • “Criminal acts of disguising the fact of acquisition and disposal of assets or concealing such assets, or disguising and concealing for the purpose of evading taxes.”

The KoFIU’s Mission

To combat money laundering, the KoFIU has implemented a comprehensive system that includes:

  • Legal and financial regulations: Laws and regulations that govern financial transactions and prevent illegal activities.
  • International cooperation: Collaboration with foreign Financial Intelligence Units (FIUs) to share information and best practices.
  • Data analysis: The collection and analysis of suspicious transaction reports (STRs) from financial institutions.

Korea’s Financial Intelligence Unit

The KoFIU was established in November 2001 as a central, unified government body responsible for:

  • Collecting and analyzing ML-related STRs from financial institutions
  • Disseminating information to law enforcement agencies (LEAs) for further action

The KoFIU’s AML/CFT Regime

The KoFIU’s AML/CFT regime is based on four major laws:

  • Financial Transaction Reports Act: Requires financial institutions to report suspicious transactions.
  • Act on Special Cases Concerning the Prevention of Illegal Trafficking in Narcotics: Regulates the prevention of illegal drug trafficking.
  • Act on Regulation and Punishment of Criminal Proceeds Concealment: Regulates the concealment of criminal proceeds.
  • Act on Prohibition against the Financing of Terrorism and Proliferation of Weapons of Mass Destruction: Regulates the financing of terrorism and proliferation of weapons of mass destruction.

Reporting Entities

Reporting entities, such as financial institutions, file:

  • Suspicious Transaction Reports (STRs): Reports of suspicious transactions to the KoFIU.
  • Cash Transaction Reports (CTRs): Reports of cash transactions over a certain amount to the KoFIU.

The KoFIU analyzes these reports and disseminates information to LEAs for further action.

Law Enforcement Agencies

Law enforcement agencies use financial transaction data received from the KoFIU to:

  • Respond with feedback on what was received
  • Apply sanctions to severe criminals and money laundering offenders under the AML/CFT regime

Data Sources

The KoFIU uses data from:

  • Relevant administrative agencies: Administrative agencies that provide information relevant to money laundering.
  • Centralized credit registry: A database of financial information.
  • Centralized foreign exchange registry: A database of foreign exchange transactions.

The relevant law is the Financial Transaction Reports Act.