The Financial Supervisory Service (FSS) will inspect anti-money laundering systems at overseas branches of the four major banks (KB Kookmin, Shinhan, Hana, Woori) in the second half of this year. The FSS is launching the inspections after deficiencies were found in the anti-money laundering systems at some banks' overseas branches. The financial authorities have been tightening money-laundering inspections following large-scale crimes by an organization based in Cambodia last year.
According to the financial authorities on the 18th, the Financial Supervisory Service (FSS) plans to soon finalize the detailed schedule and targets for inspecting the anti-money laundering systems at the overseas branches of the four major banks. Money laundering refers to making illegal revenue from crimes such as drugs, fraud, embezzlement, and voice phishing appear legitimate by hiding the source through multiple financial transactions. Among overseas branches, those in Southeast Asia are the main targets.
The Financial Supervisory Service (FSS) plans to examine whether banks properly classified suspicious customers based on an understanding of overseas branch customers' transaction patterns and business sectors. It will also check whether they refrained from transacting with individuals designated by the U.S. Office of Foreign Assets Control (OFAC) as subject to transaction restrictions.
Financial companies must report transaction records to the Financial Services Commission's Financial Intelligence Unit (FIU) if there are reasonable grounds to suspect that specific financial transactions involve money laundering or terrorist financing, and the Financial Supervisory Service (FSS) will check whether they filed those reports properly.
The FIU said in November last year it would establish a response system to prevent money laundering related to cross-border crimes. At the time, the FIU noted that some internal control deficiencies were found, such as some banks relying only on written inspections for their Southeast Asia overseas branches and subsidiaries.
According to materials submitted by the Financial Supervisory Service (FSS) to the office of Kang Min-guk of the People Power Party last year, five local Cambodian subsidiaries of domestic financial companies, including KB Kookmin Bank, Jeonbuk Bank, and Woori Bank, conducted a total of 52 transactions with the Prince Group.
The Prince Group is a large corporate conglomerate that has engaged in various businesses, including real estate and finance, and has wielded significant influence over Cambodia's economy. It has been designated for sanctions by the United States and the United Kingdom after becoming known as the organization behind a range of serious crimes, including voice phishing, human trafficking, online fraud, and illegal confinement. It is also reportedly linked to incidents involving assault, confinement, and death targeting Koreans.
An official at the Financial Supervisory Service (FSS) said, "We will examine whether banks' overseas branches have properly established systems to prevent suspicious transactions."