Financial Crime World

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Strengthening Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) Measures in Korea

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Key Points

Korea’s institutional framework for anti-money laundering (AML) and counter-terrorist financing (CFT) measures has several key points that need attention.

  • Institutional Framework: Korea’s institutional and supervisory framework is complex, but entrusted agencies have excellent cooperation and coordination.
  • DNFBPs not subject to AML/CFT: Except for casinos, designated non-financial businesses and professions (DNFBPs) are not subject to the AML/CFT framework or supervised.
  • Casinos’ rules-based supervision: The supervisor of casinos in Korea’s self-governing province takes a rules-based approach to supervision.
  • Supervision by KoFIU and FSS: Supervision by the Korean Financial Intelligence Unit (KoFIU) and the Financial Supervisory Service (FSS) would benefit from increased resources.
  • Remedial actions: Supervisors take remedial actions through administrative or monetary sanctions, which are effective but not fully proportionate.
  • Guidance and outreach: KoFIU has been active in providing guidance and outreach to supervised sectors, but needs to issue targeted terrorist financing (TF) guidance.
  • Legal persons: Korea has a growing understanding of the ML/TF risks associated with legal persons, but authorities do not yet have a clear understanding of why these entities are particularly vulnerable.
  • Complex corporate structures: LEAs reported seeing an increased use of complex typologies involving corporate structures in both ML and predicate offense cases.
  • Basic and legal ownership information: Basic and legal ownership information on legal persons is publicly available through a comprehensive network of registries, but information may not always be accurate or up-to-date.

Recommendations

To strengthen Korea’s AML/CFT framework, the following recommendations are made:

  1. Extend AML/CFT framework to DNFBPs: Extend the AML/CFT framework to apply to all designated non-financial businesses and professions (DNFBPs) and designate a supervisor for these sectors.
  2. Include domestic PEPs and international organisation PEPs: Expand the scope of AML/CFT obligations to include domestic politically exposed persons (PEPs) and PEPs of international organisations.
  3. Amend tax crimes as ML predicate offenses: Amend the law to expand the range of tax crimes that are money laundering (ML) predicate offenses, aligning this range with those that require suspicious transaction report (STR) reporting.
  4. Promote asset recovery: Continue exploring measures to promote the actual recovery of assets ordered for confiscation and systematically take enforcement actions.

These recommendations aim to strengthen Korea’s AML/CFT framework, improve supervision, and enhance international cooperation to combat money laundering and terrorist financing.