Korea HeraldKorea risks tag of global money laundering refuge
Officials conceded yesterday that legislative controls set so far to curb illicit flows of funds may not have been enough, as a global supervisory body may soon brand Korea as a money laundering haven.
According to an official from the Ministry of Finance and Economy, the government needs to expedite its efforts to push anti-money laundering legislation, or face the likelihood of being named as a "non-cooperative country or territory (NCCT)" by the Financial Action Task Force on Money Laundering (FATF), considered by many to be the world's global authoritative body on money laundering.
The NCCT-tag, which means that the country's financial regulations are deemed inadequate to cope with money laundering problems, would be a big blow to the nation's reputation and could make investors think twice before making any financial commitments in Korea, the official added.
"If the government does not hurry setting proper legislation, there is high probability that Korea may be designated as an NCCT, when the FAFT convenes in June," the official said, blaming parliament for being too slow in passing legislation.
Bills submitted last month, such as one to establish a formal body - called the financial intelligence unit, or FIU - to monitor suspicious foreign exchange transactions, as well as another proposal detailing what penalties to impose on violators, have yet to be reviewed by the National Assembly. Diverting too much attention on politically-motivated issues, such as investigations on campaign slush funds, have impeded needed progress in setting regulation, the official argued.
Legislative bottlenecks have also hindered the government to apply for FATF membership. Korea is one of only four countries - the others being Poland, the Czech Republic and Hungary - part of the Organization for Economic Cooperation and Development (OECD) that have not yet been inducted into the FATF, which currently has 31 members and is affiliated with numerous international organizations.
Aside from publishing regular progress reports on global money laundering trends, the FATF unveiled a list of fifteen NCCTs last June Bahamas, Cayman Islands, Cook Islands, the Dominican Republic, Israel, Lebanon, Liechtenstein, Marshall Islands, Nauru, Niue, Panama, Philippines, Russia, St. Kitts/Nevis and St. Vincent/Grenadines. Korea barely averted being included in the NCCT-list last year because the government was able to convince the FATF in May - one month before the list was released - that it had been cracking down on the issue through numerous state-led initiatives, such as setting up an FIU, the official noted.
If is added unto the list this year, Korea would be the only OECD country to be designated so.
Nonetheless, the FATF's plenary body will convene in Paris June 20 and is expected to announce a revised NCCT-list.
Meanwhile, the Asia/Pacific Group on Money Laundering, an FATF-style regional body comprised of 20 members including Korea, said it would send a team of inspectors to Seoul in September to get a first-hand review of the county's anti-money laundering policies.
Although it is difficult to track, the government estimates Korea's annual money laundering levels to be somewhere between 48-147 trillion won, or 11-33 percent of the gross domestic product.
And as foreign exchange transactions have been fully liberalized this year, regulators have tried to accelerate their efforts to establish adequate monitoring mechanisms.