Financial Crime World

Non-Profit Organizations Face Uncertainty in Strengthening Anti-Money Laundering Efforts

Financial Watchdog Highlights Concerns Over Korea’s Non-Profit Organizations’ Ability to Prevent Money Laundering and Terrorist Financing

Seoul, South Korea - A recent assessment by the global financial watchdog, the Financial Action Task Force (FATF), has highlighted concerns over Korea’s non-profit organizations’ (NPOs) ability to prevent money laundering and terrorist financing. While some NPOs operating abroad are subject to strict reporting and supervision requirements, others face uncertainty in strengthening their anti-money laundering efforts.

FATF Report Highlights Concerns and Areas for Improvement

The FATF report noted that at-risk NPOs would benefit from active engagement with authorities. The assessment team also expressed concerns over the limited scope of Korea’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework, which does not cover all non-profit organizations.

  • Several areas for improvement were highlighted, including:
    • Extending the AML/CFT framework to apply to all designated non-financial businesses and professions (DNFBPs)
    • Expanding the scope of AML/CFT obligations to include domestic political exposed persons (PEPs) and PEPs of international organizations
    • Amending laws to align with international standards

Importance of Cooperation Between Authorities

The assessment team also emphasized the importance of improving cooperation between authorities, including the Korean Financial Intelligence Unit (KoFIU) and financial supervisors. The report noted that Korea has an effective framework for seeking and providing mutual legal assistance, but recommended exploring similar arrangements with other jurisdictions to streamline cooperation.

Korean Government’s Commitment to Implementing Priority Actions

In response to the report’s findings, the Korean government has committed to implementing priority actions aimed at strengthening its anti-money laundering efforts. The government has pledged to:

  • Extend the AML/CFT framework to all DNFBPs
  • Expand the scope of AML/CFT obligations
  • Amend laws to align with international standards

Challenges in Combating Money Laundering and Terrorist Financing

South Korea continues to face challenges in combating money laundering and terrorist financing. In recent years, the country has seen a significant increase in suspicious transactions related to tax crime and other financial offenses.

Adaptation and Compliance for Non-Profit Organizations

As the Korean government works to implement the priority actions outlined in the report, non-profit organizations will need to adapt to the new regulations and ensure they are compliant with anti-money laundering requirements. The assessment team’s findings highlight the importance of continued cooperation between authorities and the private sector to prevent money laundering and terrorist financing.

Priority Actions

  1. Extend the AML/CFT framework to apply to all DNFBPs, and designate a supervisor for these sectors.
  2. Expand the scope of AML/CFT obligations to include domestic PEPs and PEPs of international organizations.
  3. Amend the law to expand the range of tax crimes that are ML predicate offences (for example, to align this range of crimes with those that require STR reporting) to ensure Korea is able to prosecute ML based on tax crime.
  4. Continue exploring measures to promote the actual recovery of assets ordered for confiscation and systematically take effective action against legal persons that fail to comply with their reporting obligations.

Recommendations

  • Strengthen cooperation between authorities, including the KoFIU and financial supervisors.
  • Explore similar arrangements with other jurisdictions to streamline cooperation.
  • Ensure accurate and up-to-date information on registers.
  • Provide targeted guidance on TFS for supervised sectors.