South Korea’s financial regulator will require financial institutions to report all cash transactions over 10 million won ($8,884) from the second half of next year, toughening its measures to prevent money laundering and terrorist financing to the international standard.

The Financial Services Commission’s financial intelligence unit (KoFIU) in a pre-announcement of the revised financial transaction law on Monday said it will become mandatory for all financial companies to report on cash transactions, which is either withdrawal or deposit, of 10 million won or more. The revised law will take force from the second half of next year.

Currently, it is compulsory for banks, financial investors and insurance firms to report any cash transactions over 20 million won to KoFIU. The financial regulator will lower the reporting threshold to 10 million won and also require online financial services providers and moneylenders with 50 billion won or more assets to make a report on large cash transactions as well as suspicious accounts.

Account holders who withdraw or deposit 10 million won or more in cash from financial institutions are subject to reporting their cash transactions. Any activities that are traceable such as account transfer, foreign currency remittance, and check withdrawal are excluded from the reporting requirement.

The revision in the cash transaction reporting rule comes as the financial regulator is preparing for the Financial Action Task Force (FATF)’s peer review coming up next year. The FATF is an intergovernmental organization set up to combat money laundering and terrorism financing. It has mutual evaluations of its member countries on a regular basis to monitor progress in implementing FATF’s recommendations. A member found insufficient in following its recommendations during a peer review may face disadvantages such as financial sanctions.

“Other FATF member countries including the United States and Australia have set their cash transaction reporting threshold at $10,000 and all travelers entering Korea also must make customs declaration for cash of $10,000 and above,” said the Financial Services Commission. “The revision comes in line with those rules already in place.”

Profits made from criminal activities often take the form of cash, which then flows into mainstream financial systems as legitimate transactions. The financial intelligence unit reviews cash transaction reports and shares any cases found suspicious of money laundering or other illegal activities with other relevant authorities such as police and tax bureau.

By Kim Dong-eun and Cho Jeehyun

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