Bank refusal to open account for resident from 'high-risk country' discriminatory: rights commission

National Human Rights Commission of Korea

A South Korean bank's refusal to open an account for a foreign national resident from a designated "high-risk country" is discriminatory, the country's human rights watchdog agency said Monday.

The National Human Rights Commission of Korea's recommendation was made in response to a complaint lodged by the Korean spouse of a bank customer whose application to open an account was rejected on the grounds of their nationality.

The bank said in August 2022 that because the resident's nationality was from one of the "high-risk countries" identified by the Financial Action Task Force as having significant strategic deficiencies in their efforts to stop money laundering, terrorist financing and proliferation financing, they refused to open the account for the resident.

Under Business Regulations Article 43 announced by the Korea Financial Intelligence Unit, if a customer is a person of interest, for example, a national of a FATF-designated high-risk country, necessary measures must be taken, such as refusing to do business with the customer or receiving approval from a senior manager to do business with the customer.

But rather than terminating the transaction right away, the unit said, banks should investigate the background and purpose of the transaction as much as possible. Banks should establish and run procedures to assess the risks of individual customers from FATF-designated high-risk countries, such as verifying the customer's credit rating.

The Human Rights Commission said that the bank's refusal constitutes an "act of discrimination based on nationality" as the bank flatly refused to conduct the transaction with the customer based solely on their nationality.

"It is unfair to use a cookie-cutter approach and refuse everyone the ability to open a bank account solely based on their nationality. It is an act of discrimination without reasonable cause," the commission said.

"Banks must individually go through strengthened customer verification procedures for customers who wish to make financial transactions and then decide whether or not to make financial transactions," it added.

By Lee Jaeeun(jenn@heraldcorp.com)