FIU Assigns Money Laundering Risk Ratings to Financial Companies

[Asia Economy Reporter Song Hwajeong] Going forward, the exposure level and management level of money laundering risks will be evaluated by financial sector, and each evaluation result will be graded on a 5-level scale.

On the 16th, the Financial Intelligence Unit (FIU) under the Financial Services Commission announced the 2022 Anti-Money Laundering (AML) system implementation evaluation reform plan containing these details.

This reform plan includes ▲ updating by adding evaluation indicators for new sectors ▲ introduction of a grading system for evaluation results ▲ promotion of on-site inspections ▲ implementation of comprehensive evaluations using risk management assessments.

First, AML evaluation indicators were developed tailored to the financial transaction characteristics of each sector for newly obligated entities such as electronic financial service providers, lenders, virtual asset service providers, and online-linked investment finance providers (P2P).

Also, the exposure level to money laundering risks and management level are evaluated by sector, and each evaluation result is graded on a 5-level scale and notified to individual companies. Previously, rankings based on evaluation results were provided. The exposure level measures the inherent money laundering risk of financial businesses by evaluating transaction volume with high-risk countries, and the management level measures the degree of compliance with AML regulations and management of money laundering risks.

To ensure the reliability of evaluation data from financial companies, the FIU plans to request supporting documents for abnormal values such as excessive performance entries among the evaluation data input by each financial company, and to promote on-site inspections for companies with inadequate documentation.

Going forward, a comprehensive evaluation will be conducted using risk management assessments, simplifying the procedure. The system implementation evaluation is divided into risk management assessments reflecting sector-specific business characteristics (quarterly, intra-sector comparison) and comprehensive evaluations reflecting common matters across all sectors (annual evaluation, overall comparison). To reduce the burden on financial companies and improve work efficiency, the comprehensive evaluation indicators will be selected and utilized from the quarterly risk assessment indicators, eliminating the need for separate input or procedures for comprehensive evaluation by financial companies. The FIU expects to enhance comparability between and within sectors through evaluation results.

The FIU will hold briefing sessions for three days from the 17th to the 19th to inform financial companies and others about the AML system implementation evaluation reform plan. Through these sessions, the FIU plans to explain the purpose of the reform and the changed evaluation contents, provide guidance on major inquiries and requests received in advance, and support financial companies and others to perform AML tasks and evaluations without difficulty.

The FIU evaluates the AML risks and management levels of financial companies and others to ensure smooth establishment and implementation of the AML system. The evaluation target companies exceed 5,000, including virtual asset service providers and online-linked investment finance providers added in 2022, and the target continues to expand. As of June this year, there are a total of 9,088 financial companies and others obligated under AML, but excluding currency exchange businesses and individual post offices that conduct self-evaluations under the Customs Service and Korea Post, a total of 5,115 financial companies and others are subject to evaluation. Through evaluations, the FIU identifies vulnerable areas exposed to money laundering risks or with insufficient management, manages risks, identifies high-risk companies, sectors, and vulnerable areas for inspection, supervision, and education, and rewards companies with excellent evaluation results.