Financial Crime World

Titans of Finance: South Korea’s Economy Passes Strict Anti-Money Laundering Test by FATF and APG

Seoul, South Korea

The Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering (APG) have concluded an extensive evaluation of South Korea’s Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) system. Their report, detailing the effectiveness of Korea’s measures and adherence to the FATF Recommendations, was presented on April 16, 2020, in Paris.

Effectiveness of Korea’s AML/CFT Framework

The findings reveal the following on South Korea’s legal framework:

  1. Robust and Effective: Korea’s framework against money laundering and terrorist financing is recognized as robust and effective according to the FATF report.
  2. Improvement Needed: However, there are gaps in addressing corrupt activities perpetrated by government and public officials.

Risk Assessment and Identified Sources of Proceeds

A comprehensive risk assessment process allows Korean authorities to identify the following primary sources of proceeds susceptible to money laundering:

  • Tax crimes
  • Illegal gambling
  • Fraud
  • Corruption

In addition, Korea takes proactive steps in addressing the risks related to the proliferation of weapons of mass destruction.

Low Risk of Terrorist Financing

The country’s risk of terrorist financing remains relatively low. However, there is a need to expand the legal framework to cover the laundering of proceeds from all tax crimes.

Addressing Corruption and Money Laundering

High-profile corruption cases in Korea have underscored the potential for money laundering through fraud and bribery:

  • The FATF recommends strengthening AML/CFT measures to prevent politically exposed persons (PEPs), both domestic and international, from laundering the proceeds of corruption.

Collaboration and Cooperation

South Korean authorities demonstrate strong collaboration and cooperation between government agencies and the private sector. They also show effective international co-operation through various mechanisms that facilitate mutual legal assistance. South Korea could benefit from leveraging international cooperation tools for asset flight and tax crime cases and by exchanging beneficial ownership information.

Compliance by Financial Institutions and Casinos

Financial institutions and casinos in South Korea demonstrate an excellent understanding of the money laundering and terrorist financing risks they face and the measures required to mitigate them.

Law Enforcement and Asset Recovery

South Korean law enforcement agencies make effective use of financial intelligence to aid investigations. Asset recovery is a top priority for the Korean government. Authorities are able to deprive criminals of a considerable portion of their ill-gotten gains but could maximize the use of available tools for seizure and forfeiture.

Significant Progress in South Korea’s AML/CFT Framework

Since the last assessment in 2008, South Korea has made significant strides in strengthening its AML/CFT framework, as per the FATF report. Despite improvements, there are areas requiring further attention, such as:

  • Addressing tax crimes
  • Regulating non-financial businesses and professions
  • Expanding measures to cover politically exposed persons.

Adoption of the Report

The FATF adopted this report at its February 2020 Plenary meeting.