Financial Crime World

South Korea Cracks Down on Money Laundering with Comprehensive Framework

Seoul, South Korea - A New Era in Anti-Money Laundering

In a bid to combat money laundering and related crimes, the government of South Korea has established a robust anti-money laundering (AML) framework that involves multiple agencies and financial institutions.

A Central Hub for Anti-Money Laundering Efforts

At the heart of this framework is the Korea Financial Intelligence Unit (KoFIU), which was set up in 2001 under the Financial Transaction Reports Act. The KoFIU serves as a central hub for collecting, analyzing, and disseminating suspicious transaction reports (STRs) from financial institutions to law enforcement agencies.

A Comprehensive Approach

The AML framework in South Korea is comprehensive, involving not only financial institutions but also multiple government agencies, including:

  • Financial Services Commission: Regulates and supervises financial institutions.
  • Ministry of Justice: Responsible for enforcing laws related to money laundering.
  • National Police Agency: Investigates and prosecutes money laundering offenses.
  • National Tax Service: Tracks and monitors suspicious transactions.

This integrated approach enables a more effective exchange of information and coordination among agencies to tackle money laundering and related crimes.

Key Legislation

Four major AML/CFT legislation in South Korea include:

  1. The Financial Transaction Reports Act (FTRA): Requires financial institutions to report suspicious transactions to the KoFIU.
  2. The Act on Regulation and Punishment, etc. of Criminal Proceeds Concealment: Criminalizes money laundering and provides for confiscation of proceeds.
  3. The Act on Special Cases Concerning the Prevention of Illegal Trafficking in Narcotics: Regulates the financing of narcotics trafficking.
  4. The Act on Prohibition against the Financing of Terrorism and Proliferation of Weapons of Mass Destruction

KoFIU’s Role

The KoFIU plays a critical role in this AML framework by:

  • Collecting and analyzing STRs from financial institutions.
  • Operating international cooperation with foreign Financial Intelligence Units (FIUs).
  • Coordinating with domestic agencies.
  • Providing training to financial institutions on anti-money laundering practices.

International Cooperation

South Korea’s AML framework is designed to prevent the cross-border movement of illicit funds. To achieve this, the KoFIU has built an FIU Information System in 2002 to identify and analyze individuals involved in money laundering activities through foreign transactions.

The government has also committed to international cooperation by actively participating in global network projects to combat money laundering and related crimes.

Efforts to Combat Money Laundering

The AML/CFT regime in South Korea includes various measures to prevent, detect, and prosecute money laundering offenses. Reporting entities, such as financial institutions, are required to file STRs and CTRs (Currency Transaction Reports) with the KoFIU, while law enforcement agencies use financial transaction data received from the KoFIU to investigate and sanction severe criminals and money laundering offenders.

The government’s efforts to combat money laundering have been recognized internationally, with South Korea participating in global network projects and cooperating with foreign FIUs to prevent the cross-border movement of illicit funds.