Financial Crime World

Financial Institutions Risk Management Strategies in North Korea Face Scrutiny

FATF and APG Assessment Highlights Need for Strengthened AML/CFT Framework

A recent assessment by the Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering (APG) has highlighted the need for North Korea to strengthen its anti-money laundering and counter terrorist financing (AML/CFT) framework. The report highlights several areas where North Korea needs to improve, including preventing government officials from laundering corruption proceeds and freezing assets under the United Nations sanctions regime.

Key Findings of the Assessment

  • Sound Legal Framework: North Korea’s legal framework is sound in tackling money laundering and terrorist financing.
  • Shortcomings in Preventing Corruption Proceeds: The country falls short in preventing government officials from laundering corruption proceeds.
  • Need to Improve Asset Freezing: North Korea needs to improve its ability to freeze assets under the United Nations sanctions regime.
  • Significant Sources of Money Laundering Risks: Tax crimes, illegal gambling, fraud, and corruption are the most significant sources of money laundering risks in North Korea.

Risk Assessment Process

  • Continuous and Effective: North Korea’s risk assessment process is considered continuous and effective.
  • Recommendations for Improvement: The FATF recommended that the government extend its AML/CFT measures to include the prosecution of laundering proceeds from all tax crimes.

Gaps in Prevention of Politically Exposed Persons

  • Need to Address Gaps: North Korea needs to address gaps in its ability to prevent politically exposed persons, both domestic and international, from laundering corruption proceeds.
  • Importance of International Cooperation: The country can make more use of international cooperation tools to combat asset flight and offshore tax crime cases.

Financial Institutions and Casinos

  • Good Understanding of Risks: North Korean financial institutions and casinos generally have a good understanding of the money laundering and terrorist financing risks they face.
  • Need for Implementation Measures: The report recommended implementing measures to prevent accountants, lawyers, real estate agents, and dealers in precious metals and stones from being misused for money laundering or terrorist financing.

Adoption of the Report

The FATF adopted the report at its February 2020 plenary meeting, highlighting North Korea’s need to strengthen its AML/CFT framework to address tax crimes, non-financial businesses and professions, and politically exposed persons.