Korea Is No Longer a Safe Haven for Money Laundering

FIU Reports 884,000 Suspicious Transactions by Financial Firms
152,000 Cases (20.7%) Increase in One Year
70,000 Cases Referred to Prosecutors and Police for Money Laundering Suspicion
12 Cases Transferred to National Intelligence Service Last Year Alone

[Asia Economy Reporter Song Seung-seop] Suspicious transactions in the domestic financial sector significantly increased last year. Not only banks but also the secondary financial sector saw a surge in suspicious cases such as money laundering and financing of public threats. Amid forecasts that the scale of suspicious foreign exchange remittance controversies emerging in the banking sector could be larger than expected, concerns are being raised that South Korea is no longer a safe haven for money laundering. [Related article: Bitcoin crash leads to rise in suspicious money laundering transactions... “Need to increase dedicated monitoring personnel”]

According to the Financial Intelligence Unit (FIU) on the 20th, the total number of Suspicious Transaction Reports (STRs) reported by domestic financial institutions in 2021 was 884,655. An STR is a system where financial institutions report to the FIU director if the money exchanged in financial transactions (including casino chip exchanges) is suspected to be illegal property or if the counterparty is believed to be attempting money laundering. Initially, branch employees decide based on their business knowledge, expertise, and experience.

The number of suspicious transactions reported by financial institutions increased by 152,119 (20.7%) from 732,536 in 2020. Compared to ten years ago (329,463 cases), it has increased 2.7 times. Since 2005, when the number of STRs first exceeded 10,000, the average annual growth rate has been about 30%. The FIU explained, "The advancement of financial institutions' IT systems has enabled precise tracking of suspicious transactions. Although the total number of suspicious transaction reports decreased in 2020 compared to 2018-2019, it appears to have risen again last year."

By institution, banks accounted for the largest share with 589,355 cases, an increase of 64,346 (12.2%) from the previous year. Notably, the secondary financial sector showed a remarkable increase. In the securities sector, although the number of reports was small at 27,650, it increased by about 77% compared to the previous year. Other sectors (mutual finance, savings banks, casinos, virtual asset service providers) received 257,991 reports, an increase of 74,817 cases, with 174,142 reports coming from cooperative associations.

Suspicious transactions handed over to prosecution and police also increased... 70,000 cases detected with money laundering and other charges

The number of suspicious transaction reports provided by the FIU to law enforcement agencies is also increasing. When the FIU receives suspicious transaction information from financial companies, its internal preliminary analysis team examines whether it is related to a crime. If it is recognized as related to money laundering activities, the FIU passes the analysis data to the relevant agency. This means that it is not that financial institutions or bank employees are reporting excessively, but that there are actually many suspicious money laundering cases requiring investigation.

Last year, the FIU handed over 42,595 cases of 'Specified Financial Transaction Information' to 10 law enforcement agencies. This accounts for 12% of all information handed over since the FIU was established in 2001. It increased by 4,827 cases (12.7%) compared to the previous year and is higher than the 12,892 cases (43.4%) in 2013. Information transfers to the National Intelligence Service, which had not occurred even once since 2017 (4 cases), happened 12 times last year alone.

Up to 2021, the FIU had transferred 354,099 cases to law enforcement agencies, of which 269,757 cases led to investigations. Among these, 69,759 cases detected illegal charges such as money laundering, resulting in prosecution, accusation, and confiscation measures.

Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, “South Korea has never been a safe haven for money laundering. It should be seen as having been used as a significant channel, and financial institutions should enforce stricter controls regarding money laundering.”

This content was produced with the assistance of AI translation services.