Banks under Scrutiny
Although the mutual evaluation unit of the Financial Action Task Force (FATF) has finished a due diligence on South Korean financial companies, domestic banks cannot relax until the final results come out in April next year. The on-the-spot inspection has been completed, but they now face a stricter process of written evaluations.
Having completed a due diligence on domestic financial firms, the FATF is planning to proceed with a series of written evaluation on financial authorities and financial companies by the end of this year, according to financial industry sources on July 30. An official from a commercial bank said, “South Korean banks cannot relax yet, considering the fact that even Singapore, which has an advanced financial system, turned out to have weak points.”
FATF reportedly conducted a due diligence on KB Kookmin Bank, KEB Hana Bank, BNK Busan Bank and Kakao Bank and foreign banks such as Citibank Korea, SC Cheil Bank and Societe Generale (SG) Bank. These banks have been put under scrutiny for the first time after they joined the FATF in 2009.
The FATF inspected mainly systems related to money laundering and tax evasion. This is because tracing the flow of money which is used for crimes has become the main job of the FATF as drug rings and terrorist groups are getting more intelligent, sophisticated and organized. Some banks also had systems related to voice phishing and cryptocurrency checked.
A bank official said, “The FATF persistently asked us how we prevent money laundering out of concerns that cryptocurrency can be used in money laundering.” SC Cheil Bank’s parent company in the United Kingdom reportedly runs a money-laundering prevention unit consisting of 120 employees and spends tens of billions of won on money-laundering prevention activities every year. The bank has invested trillions of won in anti-money laundering programs until now.
However, domestic banks’ investment in money laundering systems and workforce is still in an early stage. A senior official from a commercial bank said, “If a bank receives a low evaluation score from the FATF, it has to undergo follow-up inspection by the working group every four months and face greater restrictions on management.” Financial companies are already under pressure due to the restrictions on the total amount of household loans and a low interest rate trend. The FATF evaluation poses a new challenge to them.