South Korean cryptocurrency regulations: Act on Reporting and Use of Certain Financial Transaction Information

Regulations on cryptocurrency exchanges are taking shape. If you run an exchange, you must know the Act on Reporting and Use of Certain FinancialTransaction Information! Let’s take a look at it together.

The Act on the Reporting and Use of Specific Financial Transactions Information regulates money laundering through financial transactions.

The Act defines the business guidelines and supervisory obligations that financial companies, etc., must comply with to prevent money laundering.

The obligation to prevent money laundering, including KYC, sanctions list screening, suspicious transactions reporting, and high-value cash transaction reporting, is also in accordance with the law.

Recently, a bill to revise Act on Reporting and Use of Certain Financial Transaction Information was proposed to reflect the tougher standards of the Financial Action Task Force. It includes stricter regulations for cryptocurrency exchanges.

1. Cryptocurrency Exchange Operation Report System
Currently, exchanges can be operated by anyone. However, upon the revision of the Act, the names of representatives and  exchanges will be reported, and those who do not report will be sentenced to no more than five years in prison or a 50 million won fine.

2. Imposing obligations to report suspicious transactions and high-value cash transactions
As it has been classified as a financial company, cryptocurrency exchanges will now have a direct obligation to STR•CTR. Violations will result in imprisonment of upto one year or fines of up to 10 million won. The exchange has the same responsibility as traditional commercial banks.

3. Checking cryptocurrency exchanges and financial institutions perform their duties
Financial institutions such as banks should check that the exchange has faithfully fulfilled its reporting obligations when dealing with the exchange. If the cryptocurrency exchange defaults on its obligations, the bank will reject the financial transaction.

4. Transaction detail management per customer
Under the revision, the exchange must manage the transaction details separately for each customer. As the exchange directly bears anti-money laundering obligations, it will become easier to issue virtual accounts. Then, it will no longer be necessary for the exchanges to use collective accounts.

5. Regulations for offshore application
In the case of overseas transactions, if the effect is domestic, it is regulated by the Act. It is designated to protect domestic investors by strengthening anti-money laundering obligations.

Accordance with Act on Reporting and Use of Certain Financial Transaction Information needs to be prepared.
If the revision is passed, existing exchanges must report their business operations within six months of the law’s enforcement.

In need for KYC•AML? ARGOS is with you.

Emma Kang

Author Emma Kang

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