South Korea Earns Top FATF Anti-Money Laundering Compliance Rating

On October 27, 2024, the Korea Financial Intelligence Unit (FIU) of the Financial Services Commission revealed good news for South Korea in combating financial crimes.

In the FATF plenary meeting that took place at the OECD headquarters in Paris from October 21 through October 25, FATF upgraded South Korea’s AML compliance from the intermediate level to the highest one, stated FIU.

This upgrade is a turning point in the country’s compliance with international standards in AML and CFT.

South Korea’s Development And Rating Per FATF

In the FATF plenary meeting, South Korea’s compliance rating was upgraded from an ‘enhanced follow-up’ to a ‘regular follow-up,’ attribution to the numerous reforms observed in the country’s effort to enforce the FATF recommendations.

The FATF is an intergovernmental organization established in 1989, comprising 38 member countries, focused on setting global standards to prevent money laundering and terrorism financing.

According to the Mutual Evaluations 2020 report, South Korea has been classified as a regular follow-up on the stated organization as it has met 32 of the 40 stated standards.

The remaining eight areas contained recommendations by the FATF for its enhancement.

On this basis, South Korea agreed to have the review process. Over the last few years, South Korea has been committed to enhancing its AML/CFT regime through its annual report to the FATF.

South Korea’s Commitment to Global AML Standards

The nation has updated the FATF on its actions since their mutual evaluation, under the FATF Procedures for Mutual Evaluations 2020.

As a result, the FATF has re-rated Korea on one recommendation to account for its progress:

Recommendation 8 has been re-rated from “partially compliant to largely compliant.”

Korea is currently compliant on 13 of the recommendations and largely compliant on 20 of them. Seven recommendations in the nation have a partially compliant rating.

After its fifth round of mutual review, Korea will report back on any remaining shortcomings.

Implications for South Korea’s Financial Institutions

According to the FIU, this upgrade will help to create a favorable image of South Korea around the world and improve the image of the country’s banking system.

The FIU pointed out that the mutual evaluation results are also considered by credit rating agencies and other parties as evidence of the country’s financial and judicial systems’ transparency.

“This will improve the credibility of domestic financial institutions and the overall condition of the economic system in the global market.”

Financial Intelligence Unit (FIU)

The upgrade has a positive footing on South Korea’s financial system because operations can no longer be exploited by international criminal organizations for money laundering.

The FIU believed that as South Korea’s AML/CFT framework produces increasing effectiveness, such attempts will decline.

International Context and Future Considerations

In the same plenary session, the FATF reintroduced Iran and North Korea as ‘high-risk jurisdictions’ and Myanmar as ‘increased monitoring.’

While the FATF recognized some improvement in Myanmar’s compliance, the committee stated that if there were no more improvements to highlight in the next meeting, countermeasures could be implemented.

The FATF added four new countries: Algeria, Angola, Côte d’Ivoire, and Lebanon to the list of countries for an enhanced follow-up, bringing the number to twenty-four.

These countries will experience improved scrutiny from the financial institutions in relation to AML’s new due diligence standards.

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The next FATF plenary meeting is scheduled for February of next year in the OECD in France. The FIU also intends to engage in the process of setting or adjusting the FATF’s trends to fight money laundering and finance terrorism.

Strengthening South Korea’s Financial Integrity

The upgraded rating is a victory for South Korea in supporting its AML/CFT system improvements further and bringing the country into compliance with the standards of the FATF.

This development not only strengthens and improves the financial situation in the country but also contributes to the common fight against financial crimes throughout the world.