With the United States investigating Japan’s Mitsubishi UFJ Financial Group for money laundering involving North Korea, the South Korean financial authorities disclosed on Nov. 27 the outcome of their assessment of domestic financial companies’ risks associated with money laundering and terrorist financing.
According to the risk assessment report released by the Financial Information Unit (FIU) of the Financial Services Commission (FSC), banks are found to be most vulnerable to money laundering risks among domestic financial institutions. They are followed by securities companies, insurers, mutual financing companies and credit card companies.
“The banks have better systems against money laundering and terrorist financing than other financial companies. Yet the former’s vulnerability is higher due to the larger size of the banking sector and the innate characteristics of their products and services like trade financing, cash management service and forex trading,” the report said.
By trading type, cash dealing and cryptocurrencies are the most vulnerable to money laundering, although they were exposed to relatively low terrorist financing risks. “The local cryptocurrency market has grown very fast, yet it still remains unregulated,” the FIU pointed out, adding, “The anonymity of cryptocurrency trading hinders tracking, and criminals can take advantage of it.” It continued to say, “The same applies to cash dealing as large-denomination bills rarely return.”
The report was prepared from March 2017 to August this year by the 12 organizations including the FIU, the Ministry of Economy and Finance and the Ministry of Justice. South Korea is scheduled to undergo peer reviews in the Financial Action Task Force (FATF) from January 2019 to February 2020. International financial restrictions may follow in the event of a poor assessment result. The South Korean government is going to submit the risk assessment results and improvement plans to the FATF next year.