This document is a mutual evaluation report from March 2020 that assesses Korea's anti-money laundering and counter-terrorist financing system. It finds that Korea has a good understanding of its money laundering and terrorist financing risks. However, it identifies several priority areas for Korea to strengthen its framework, including extending anti-money laundering obligations to all designated non-financial businesses and professions, expanding the scope of tax crimes that are money laundering predicates, and addressing technical deficiencies in its implementation of targeted financial sanctions.

1. Anti-money laundering and counter-terrorist financing measures in Korea - Mutual Evaluation Report – March 2020 1
Anti-money laundering and counter-
terrorist financing (AML/CFT)
measures in Korea
Fourth Round Mutual Evaluation
Key findings, ratings and priority actions
March 2020
http://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-korea-2020.html

2. Anti-money laundering and counter-terrorist financing measures in Korea - Mutual Evaluation Report – March 2020
Ratings – Effectiveness (1/3)
2
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Korea has
achieved this
objective
1. ML and TF risks are understood and, where appropriate,
actions co-ordinated domestically to combat ML and TF
Substantial
2. International co-operation delivers appropriate information,
financial intelligence, and evidence, and facilitates action
against criminals and their assets
Substantial
3. Supervisors appropriately supervise, monitor and regulate
financial institutions and designated non-financial
businesses and professions (DNFBPs) for compliance with
AML/CFT requirements commensurate with their risks.
Moderate
4. Financial institutions and DNFBPs adequately apply AML/CFT
preventive measures commensurate with their risks, and
report suspicious transactions.
Moderate

3. Anti-money laundering and counter-terrorist financing measures in Korea - Mutual Evaluation Report – March 2020 3
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Korea has
achieved this
objective
5. Legal persons and arrangements are prevented from misuse
for money laundering or terrorist financing, and information
on their beneficial ownership is available to competent
authorities without impediments
Moderate
6. Financial intelligence and all other relevant information are
appropriately used by competent authorities for money
laundering and terrorist financing investigations.
Substantial
7. Money laundering offences and activities are investigated
and offenders are prosecuted and subject to effective,
proportionate and dissuasive sanctions
Moderate
8. Proceeds and instrumentalities of crime are confiscated. Substantial
Ratings – Effectiveness (2/3)

4. Anti-money laundering and counter-terrorist financing measures in Korea - Mutual Evaluation Report – March 2020 4
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Korea has
achieved this
objective
9. Terrorist financing offences and activities are investigated
and persons who finance terrorism are prosecuted and
subject to effective, proportionate and dissuasive sanctions.
Substantial
10. Terrorists, terrorist organisations and terrorist financiers are
prevented from raising, moving and using funds, and from
abusing the non-profit sector.
Moderate
11. Persons and entities involved in the proliferation of weapons
of mass destruction are prevented from raising, moving and
using funds, consistent with the relevant United Nations
Security Council Resolutions.
Moderate
Ratings – Effectiveness (3/3)

5. Anti-money laundering and counter-terrorist financing measures in Korea - Mutual Evaluation Report – March 2020 5
Ratings – Effectiveness
March 2020

6. 27-Apr-20
6
Ratings – technical compliance
(1/5)
AML/CFT POLICIES AND COORDINATION
1. Assessing risks & applying a risk-based approach LargLarLarLar Largely compliant
2. National cooperation and coordination ComComComCom Compliant
MONEY LAUNDERING AND CONFISCATION
3. Money laundering offence LargLarLarLar Largely compliant
4. Confiscation and provisional measures LargLarLarLar Largely compliant
TERRORIST FINANCING AND FINANCING OF PROLIFERATION
5. Terrorist financing offence LargLarLarLar Largely Compliant
6. Targeted financial sanctions related to terrorism & terrorist
financing Part ParParPar Partially compliant
7. Targeted financial sanctions related to proliferation Part ParParPar Partially compliant
8. Non-profit organisations LargLarLarLar Largely compliant

7. 27-Apr-20
7
Ratings – technical compliance
(2/5)
PREVENTIVE MEASURES
9. Financial institution secrecy laws LargLarLarLar Largely Compliant
Customer due diligence and record keeping
10. Customer due diligence LargLarLarLar Largely compliant
11. Record keeping ComCo Co Com Compliant
Additional measures for specific customers and activities
12. Politically exposed persons Part ParParPar Partially compliant
13. Correspondent banking ComCo Co Com Compliant
14. Money or value transfer services ComCo Co Com Compliant
15. New technologies ComCo Co Com Compliant
16. Wire transfers LargLarLarLar Largely compliant

8. 27-Apr-20
8
Ratings – technical compliance
(3/5)
PREVENTIVE MEASURES (continued)
Reliance, Controls and Financial Groups
17. Reliance on third parties ComCo Co Com Compliant
18. Internal controls and foreign branches and subsidiaries LargLarLarLar Largely compliant
19. Higher-risk countries LargLarLarLar Largely compliant
Reporting of suspicious transactions
20. Reporting of suspicious transactions ComCo Co Com Compliant
21. Tipping-off and confidentiality ComCo Co Com Compliant
Designated non-financial Businesses and Professions (DNFBPs)
22. DNFBPs: Customer due diligence Part ParParPar Partially compliant
23. DNFBPs: Other measures Part ParParPar Partially compliant

9. 27-Apr-20
9
Ratings – technical compliance
(4/5)
TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS
AND ARRANGEMENTS
24. Transparency and beneficial ownership of legal persons Part ParParPar Partially compliant
25. Transparency and beneficial ownership of legal arrangements LargLarLarLar Largely compliant
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND
OTHER INSTITUTIONAL MEASURES
Regulation and Supervision
26. Regulation and supervision of financial institutions LargLarLarLar Largely compliant
27. Powers of supervisors ComCo Co Com Compliant
28. Regulation and supervision of DNFBPs Part ParParPar Partially compliant
Operational and Law Enforcement
29. Financial intelligence units ComCo Co Com Compliant
30. Responsibilities of law enforcement and investigative authorities ComCo Co Com Compliant
31. Powers of law enforcement and investigative authorities LargLarLarLar Largely compliant
32. Cash couriers LargLarLarLar Largely compliant

10. 27-Apr-20
10
Ratings – technical compliance
(5/5)
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND
OTHER INSTITUTIONAL MEASURES (continued)
General Requirements
33. Statistics ComCo Co Co Compliant
34. Guidance and feedback LargLarLarLar Largely compliant
Sanctions
35. Sanctions LargLarLarLar Largely compliant
INTERNATIONAL COOPERATION
36. International instruments LargLarLarLar Largely compliant
37. Mutual legal assistance LargLarLarLar Largely compliant
38. Mutual legal assistance: freezing and confiscation ComCo Co Co Compliant
39. Extradition LargLarLarLar Largely compliant
40. Other forms of international cooperation LargLarLarLar Largely compliant

11. Anti-money laundering and counter-terrorist financing measures in Korea - Mutual Evaluation Report – March 2020 11
Ratings – technical compliance
March 2020

12. Anti-money laundering and counter-terrorist financing measures in Korea - Mutual Evaluation Report – March 2020
Key findings
 Korea shows a good understanding of its money laundering
(ML) and terrorist financing (TF) risks informed by an
ongoing risk assessment process. Its identification and
cross-government response to the emerging risks posed by
virtual assets is particularly positive. A deeper
understanding of the risks relating to legal persons and
arrangements would be useful. Strong policy and
operational structures are in place to co-operate and co-
ordinate at the national level on AML/CFT issues with
involvement from a broad range of public and private sector
agencies and institutions. However, co-ordination on
proliferation financing (PF) issues is largely ad hoc and
would benefit from a more formal system.
12
March 2020

13. Anti-money laundering and counter-terrorist financing measures in Korea - Mutual Evaluation Report – March 2020
Key findings
 Financial institutions (FIs) and casinos are subject to a
comprehensive AML/CFT framework which is generally well
implemented. However, there are technical gaps and
shortcomings in implementation relating to TF and PF-related
targeted financial sanctions (TFS), and requirements for
domestic politically exposed persons (PEPs) and PEPs of
international organisations. FIs and casinos and their
supervisors generally have a sound understanding of
AML/CFT risks. Supervisors largely take a risk-based approach
to supervision with the exception of the casino supervisor in
Korea’s self-governing province, Jeju. These strengths are
somewhat undermined by designated non-financial
businesses and professions (DNFBPs) other than casinos not
being subject to Korea’s AML/CFT framework nor monitoring.
March 2020
13

14. Anti-money laundering and counter-terrorist financing measures in Korea - Mutual Evaluation Report – March 2020
Key findings
 Law enforcement agencies (LEAs) make good use of financial
intelligence. This could be strengthened by increasing the
resources of the Korean financial intelligence unit (KoFIU) and
enhancing the strategic and operational analysis, in particular
related to high-risk areas such as tax crime. LEAs take a “follow
the money” approach which has been further strengthened
by operational and structural changes since 2017. Korea
makes efforts to pursue ML in line with its risks. However,
while tax crime is identified as Korea’s largest proceeds-
generating offence, Korea’s predicate offence framework only
covers a tiny portion of tax offences preventing the pursuit of
ML related to tax crime. Despite steps to prevent and detect
the use of borrowed name accounts, (see para.39), this
remains a common typology and is inherently difficult to
investigate.
14
March 2020

15. Anti-money laundering and counter-terrorist financing measures in Korea - Mutual Evaluation Report – March 2020
Key findings
15
March 2020
 Asset recovery is actively pursued and has been a formal
government priority since 2017 which has allowed for increased
resources and specialisation. Between criminal asset recovery,
tax levies, and restitution, Korea is able to deprive criminals of a
reasonable value of proceeds. Further efforts are needed to
increase the recovery of assets subject to confiscation and take
advantage of available mechanisms to facilitate and ensure
recovery. Authorities confiscate and recover both proceeds and
assets of equivalent value in a manner largely in line with
Korea’s risks.
 Korea has not had any TF prosecutions or convictions, which is
consistent with its risk profile. Inquiries into 86 suspicions of TF
show Korea is pursuing TF in line with its risks and
vulnerabilities and demonstrate that authorities are well
equipped to identify and investigate TF should it arise. Inter-
agency co-operation and co-ordination in this area is strong and
agencies actively use alternative measures.

16. Anti-money laundering and counter-terrorist financing measures in Korea - Mutual Evaluation Report – March 2020
Priority Actions for Korea
to strengthen its AML/CFT System
Korea should:
 Extend the AML/CFT framework to apply to all DNFBPs, and
designate a supervisor for these sectors.
 Expand the scope of AML/CFT obligations to include
domestic PEPs and PEPs of international organisations.
 Amend the law to expand the range of tax crimes that are
ML predicate offences (for example, to align this range of
crimes with those that require STR reporting) to ensure
Korea is able to prosecute ML based on tax crime.
 Continue exploring measures to promote the actual
recovery of assets ordered for confiscation and
systematically take advantage of available mechanisms and
measures to facilitate confiscation and recovery.
16
March 2020

17. Anti-money laundering and counter-terrorist financing measures in Korea - Mutual Evaluation Report – March 2020
Priority Actions for Korea
to strengthen its AML/CFT System
 Continue the positive efforts to pursue policy measures
to prevent the use of accounts in borrowed names and
explore tools to facilitate and enhance LEAs’ ability to
investigate and trace the movement of funds using such
accounts.
 Extend the freezing obligation to DNFBPs and all natural
and legal persons, and address the identified technical
deficiencies.
 Issue targeted guidance on implementing TFS, including
the freezing obligation, and ensure there is a forum for
co-ordination on PF.
 Continue to upgrade KoFIU’s IT resources and increase
the number of permanent staff to ensure institutional
knowledge is maintained within KoFIU.
17
March 2020