In a bid to curtail anti-money laundering (AML) and Know Your Customer (KYC) violations, financial regulators in South Korea are introducing penalties to regulate cryptocurrency exchanges or virtual assets service providers (VASPs), as they’re known in the country.
This announcement was released by South Korea’s Financial Services Commission (FSC) on Wednesday.
Penalties For Crypto Exchanges Or VASPs
According to a revised proposal for the regulation of crypto exchanges, any organization that fails to take proper extensive data collection and identity verification measures would be subject to heavy fines. This news comes a day after Bithumb toughened up its AML rules. The South Korean exchange placed restrictions on a number of traders from countries that are on the FATF’s monitoring list. The exchange has also signed up multiple third parties to help with the implementation and compliance of AML best practices.
The proposal states the new measures and penalty standards for the industry in detail. Failure of exchanges to report and record suspicious transactions would now result in heavy sanctions.
The fines would l depend on the severity of the violated rules. The fine ranges from 30% to 60% of the legally approved maximum amount. For small-scale businesses, penalty relief of up to 50% or more would be available. The FSC also stated that the service providers are now required to have a dedicated reporter for large transactions as well as provide written work guidelines and employee training.
This revised proposal would be put up for public notice from March 11 down till April 20 after which it would take immediate effect.
Regulatory Bill On Crypto Assets
The revised bill on the crypto industry was first introduced in November 2019 by the Korean government amid growing concerns about the use of crypto assets in money laundering and other illegal activities.
The bill was reviewed to reflect changes on crypto assets to be more in line with international standards set forth by the Financial Action Task Force (FATF). After which, the National Assembly then passed it on March 5, 2020. The bill further went into another phase of review as additional rules were added to it by the FSC in February 2021.
Meanwhile, this proposal comes in conjunction with the recent amendment of South Korea’s Act on Reporting and Using Specified Financial Transaction Information. The amendment on this act is said to affect March 25. The Act stipulates that crypto exchanges must impose extensive Know Your Customer and Anti-Money Laundering checks, including reporting their customers’ legal names.
It’s safe to say the Korean government seeks to make virtual assets like cryptocurrency, fall under the traditional regulatory system so as to be managed or controlled by financial authorities.