FSC Weekly e-Briefing (2010.2.24)

Korea’s AML/CFT Policy Direction

Ernst, J. Lee:

Hello. Welcome back to Financial Services Commission’s Weekly e-Briefing. My name is Ernst Lee. The lunar calendar New Year has just passed. So let me share my greetings to you and your family and I wish the joy and happiness will stay with you and your family throughout the year.

Today let me start with a very casual movie story, I remember it was 1999. There was a movie called ‘Entrapment’ by the favorite movie star, Sean Connery and Catherine Zeta Jones. In the movie, Sean Connery was just a thief. He used the millennium bug to stop a central bank’s server in Asia for a few seconds. And he transferred money just before the millennium starts. So he was quite successful. What a movie!

And the other case I’d like to talk about is it’s not a movie but it was almost like a movie. Osama Bin Laden, the accused one for 9.11. He has not been arrested yet and people suspect that he’s been supported financially by terrorists. This is happening in all over the world even nowadays. So this is why we have to think about anti-money laundering and counter-financing of terrorism.

Today no country is free from the threats of money laundering and terrorist financing. Countries with weak or inefficient countermeasures attract illicit funds into their financial systems and provide platform for such criminals and terrorists.

In order to protect integrity of the Korean financial system, after liberalization of foreign exchange transactions, Korean government has established the Korea Financial Intelligence Unit (KoFIU) in 2001 within the Financial Services Commission to stand against terrorism and to take effective measures against all of money laundering. Recently KoFIU has been admitted to the Financial Action Task Force, the leading international organization for anti-money-laundering and counter-financing of terrorism.

And I have a very special guest today, the chief of FIU, Financial Intelligence Unit, of Korea, Mr. Soo-Hyun, Choi, who’s been to Abu Dhabi for the Plenary Meeting of FATF.

He will share with us what does the FATF do and Korea’s role in it.

So please welcome Mr. Soo-Hyun, Choi

Thank you

Soo-Hyun, Choi:

Good afternoon, everyone. My name is Soo-Hyun, Choi, and I am the Commissioner of the Korea Financial Intelligence Unit (KoFIU). It is my great pleasure to have this chance to brief you on the Korean government’s policy for anti-money laundering and counter-terrorist financing as known as AML and CFT, respectively.

Spring is definitely just around the corner, and I am looking forward to a new season where I hope to see fresh energy and growth in our economy and financial market.

Last week, as head of the Korean delegation, I attended the FATF Plenary held in Abu Dhabi, and I would like to take this opportunity to elaborate on the issues and trends in the market that were mainly addressed during this Plenary.

First of all, there was reporting on how Korea has been implementing its Action Plan since it became a member of the FATF in October last year.

To give you more detail, the report on our progress in taking follow-up actions was received without any objection by both the Plenary and the working group. This implies that the action plan is making solid progress.

One point I would like to address here is that the expansion of roles that FATF is responsible for, has resulted in the scope of its work being extended in various areas such as weapons of mass destruction (WMD), finance, taxation, and anti-corruption measures. In detail, we discussed the issue of making the UN Convention Against Corruption an FATF standard. Another issue addressed was adding tax crimes to the list of predicate offenses in money laundering.

And, for low-risk financial transactions, we expect to see deregulation in anti-money laundering rules as to allow more accessibility to financial services for those at the poverty level.

Also, the FSAP, which stands for the Financial Sector Assessment Program run by IMF and IBRD, is planning to include the FATF anti-money laundering standards as part of its essential components.

And, we are working to amend the Enforcement Decree of the Financial Transaction Reports Act to lower the reporting threshold for suspicious transactions from the current level of 20 million won or 10,000 US dollars to 10 million won or 5,000 US dollars. These amendments are due to take effect in June this year.

Another example that should be illustrated is the on-going process of amending a rule known as the Prohibition of Financing for Offenses of Public Intimidation. This aims to establish a stronger mechanism for freezing terrorist funds or assets. I believe that this measure will bring Korea’s AML/CFT system one step closer to the full implementation of the FATF Recommendations.

In our initiative to strengthen our IT system, KoFIU has been making best efforts in enhancing all data and information security systems. As part of this initiative, for instance, a guideline was provided that prohibits any use of USB flash drives within the KoFIU office. In addition, we are now working on a mid-and-long term development plan, which will be unveiled next year when KoFIU celebrates its 10th anniversary. This plan will show a new vision of KoFUI in the coming years.

Internationally, Korea is playing an increasing role in global efforts to prevent money laundering and terrorist financing, and ultimately, to promote the concept of integrity within the financial market. It should be noted that Korea has been invited to join the technical assistance work in Mongolia this coming March as part of collaboration with APG, also known as Asia/Pacific Group on Money Laundering.

As you may be aware of, the G20 Summit called for an action to enhance the financial market’s integrity as part of measures to prevent and avoid severe financial crises in the future. In light of this, as the chair of the G-20 Summit this Fall in Seoul, Korea is committed to playing a constructive role in ensuring a high-level of compliance among all nations with the global requirement for elevated financial transparency.

On my part as the KoFIU Commissioner, I am also determined to make a solid contribution to this goal and help coordinate the process in all means possible. Thank you.