AML in South Korea

South Korea, also known as the Republic of Korea, boasts a thriving economy driven by prominent corporations. It has taken numerous measures to establish itself as a high-tech industrialized nation. However, with economic progress and the rise in corporate earnings, there has been an unfortunate surge in criminal activities. Notably, there has been an increase in drug trafficking within South Korea. Money laundering operations are also conducted, often involving international connections.

In South Korea, various institutions including casinos, insurance companies, mutual savings banks, financial companies, credit cooperatives, credit unions, trust companies, commercial banks, and securities companies are exposed to the risk of money laundering. These institutions must take precautionary measures and adhere to AML/CTF regulations. Additionally, all financial institutions in Korea are required to comply with Customer Due Diligence (CDD) procedures. Failure to comply with CDD regulations can result in substantial fines.

South Korea has implemented several local AML regulations, including the Act on Reporting and Using Specified Financial Transaction Information, the Prohibition Against the Financing of Terrorism Act, the Regulation and Punishment of Criminal Proceeds Concealment Act, the Act on Special Cases Concerning the Prevention of Illegal Trafficking in Narcotics, the Real Name Financial Transactions and Privacy Law, the Foreign Currency Transactions Act, the Criminal Law, the Criminal Procedure Law, and the Anti-Money Laundering (AML) Regulation/Combating the Financing of Terrorism (CFT) Regulation.

Bribery, both domestically and internationally, is prohibited in South Korea under the Corporate Tax Law and the Personal Income Tax Law. Companies involved in tax evasion are subject to penalties under the Tax Evaders Penalty Act (PTEA). Money laundering activities are regulated by the Anti-Money Laundering (AML) Regulation/Anti-Terrorism Financing (CFT) Regulation, Real Name Financial Transactions and Privacy Law, and the Criminal Court Law, which impose legal consequences on individuals engaged in such activities.

South Korea became a member of the FATF in 2009 and is not currently listed as having AML deficiencies. In the most recent Mutual Assessment Report (2020), South Korea was found to be compliant with 12 of the FATF 40 recommendations and largely compliant with 20 of them. South Korea is also not included on the AML Deficient List.

For fintech companies operating in South Korea, it is essential to effectively manage Customer Due Diligence (CDD) processes to mitigate potential risks.