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North Korea: Anti-Money Laundering and Anti-Terrorism Financing Law Adopted

(May 19, 2016) On April 20, 2016, the Presidium of the Supreme People’s Assembly of the Democratic People’s Republic of Korea (DPRK) issued a decree on the adoption of the Law on Anti-Money Laundering and Combating Financing of Terrorism. The Law has 40 articles divided among six chapters.  (Revision: KCNA: North Korea Adopts New Law on “Anti-Money Laundering and Combating Financing of Terrorism,’” KCNA [Korean Central News Agency] (May 17, 2016), Open Source Center online subscription database, ID No. KPR2016051736068549.)  According to the decree, the former Law on Anti-Money Laundering, which was adopted on October 25, 2006, no longer has any binding force.  (Id.)

The subjects covered by the new Law are:

  • the Law’s objectives, the establishment of a national coordinating committee for anti-money laundering and combating financing of terrorism (AML/CFT) actions, and the scope of the Law’s application;
  • the obligations of reporting institutions on verification of customer identification data, the establishment of an internal reporting system for large or suspicious transactions, and the reporting procedures for such types of transactions and confidentiality;
  • the placement in and status of the financial intelligence unit (FIU) in the government structure, the FIU’s obligations and powers, and the operation of its database, among other matters;
  • AML/CFT supervisory and regulatory institutions, obligations and powers of the Financial Supervisory Bureau, the tasks of customs agencies, and the obligations and powers of law enforcement institutions;
  • the principles of international cooperation, the institutions involved in international cooperation, and the types of international cooperation for AML/CFT purposes; and
  • the property subject to sanctions and handling of complaints in connection with AML/CFT activities and the settlement of such complaints. (Id.)

Expert observers are of the view that the adoption of the new Law indicates North Korea’s desire to join the Financial Action Task Force (FATF), the international AML organization.  More specifically, they suggest, it seems that North Korea is seeking to become a full member of the Asia Pacific Group on Money Laundering (APG), a regional body of the FATF that North Korea joined as an observer in July 2014.  However, the FATF has blacklisted North Korea, along with Iran.  (Ha-young Choi, North Korea Adopts Anti-Money Laundering Law, NKNEWS.ORG (May 18, 2016); Who We Are, FATF website (last visited May 18, 2016).) North Korea and Iran are identified by the FATF as being among 13 “high risk and non-cooperative jurisdictions” and the only two for which there is a “call for action.”  (High Risk and Non-Cooperative Jurisdictions, FATF website (last visited May 18, 2016).)

The blacklisting entails enhanced monitoring of and restrictions on financial access of North Korean financial institutions by the international financial system, according to Tristan Webb, former senior DPRK research analyst for the Foreign and Commonwealth Office of the United Kingdom. (Choi, supra.)  In addition, according to article 34 of Resolution 2270 of the United Nations Security Council, adopted in March in response to North Korea’s nuclear test of January 6, 2016, “States shall prohibit financial institutions within their territories or subject to their jurisdiction from opening new representative offices or subsidiaries, branches or banking accounts in the DPRK.”  (United Nations Security Council, Resolution 2270 (2016), S/RES/2270 (2016) (Mar. 2, 2016), SECURITY COUNCIL REPORT.)  Webb noted that even if the DPRK meets the FATF standards, the financial sanctions will not necessarily be lifted.  (Choi, supra.)

Adoption of the new Law alone will not lead to full APG membership; North Korea will also have to “reveal annual reports for three years for the purpose of monitoring to judge its sincerity,” according to Rhee Yoojin, a research fellow with the Korea Development Bank based in Seoul.  (Id.)  On the other hand, although the Law’s adoption does not necessarily mean that North Korea will institute an open door policy or aggressive economic reforms, “it does signify its desire to overcome international sanctions” that have prevented foreign financial organizations from seeking to enter the country, Rhee stated.  (Id.)