Today, ARGOS visited the “2019 Blockchain Seminar: Korea’s Legislation of Virtual Asset Transaction” at the National Assembly of Korea. In the sense that it helps virtual asset service providers (VASPs) successfully integrate into the current legal system, FATF’s imposition of anti-money laundering obligations on virtual assets is positive news. Representatives from the Financial Supervisory Service, the Financial Intelligence Unit, the Compliance Association, and cryptocurrency exchanges participated in the debate. Let’s take a look at the major issues discussed.
Implementation of FATF Recommendations
Kim Soo-ho, manager of the Financial Intelligence Unit, stressed the need for an early implementation of the FATF recommendations. Due to the anonymity of virtual assets and the nature of non-face-to-face transactions, high risks of money laundering exist, and concerns remain about high-risk transactions, such as currency exchange through virtual assets and investments in virtual asset miners. The FATF has called for rapid implementation by all member states since its announcement of recommendations regarding virtual assets in June.
The Korean law needs to be revised promptly, as the FATF plans to review the implementation status of each member state at the general assembly in June 2020 with a grace period of one year. Based on Rep. Kim Byung-wook’s bill, pending in the National Assembly, a revision to the ‘Act on Report on, and the Use of Specific Financial Transaction Information (Special Act hereafter)’ was proposed. There was a series of requirements, including clarifying the scope of ‘VASPs,’ and establishing a mandatory transaction rejection procedure, regarding transactions with a high risk of money laundering between financial companies and VASPs.
Issuing real-name accounts for cryptocurrency exchanges
Kim Mi-young, head of the Financial Supervisory Service’s anti-money laundering office, pointed out that commercial banks are passive towards issuing real-name accounts for cryptocurrency exchanges because the exchanges do not have an obligation to prevent money laundering.
Regarding the criteria for the cryptocurrency exchange licensing system in accordance with the FATF recommendations, opinions from the industry will be taken into account before confirming details and the mandatory reporting range. About the industry’s concerns about the possibility of the cryptocurrency exchange licensing system coming into effect in accordance with real-name account issuance, it was mentioned that if the ‘Special Act’ is enforced successfully and exchanges are obliged to prevent money laundering, banks will be less reluctant to issue real-name accounts to exchanges.
It was valuable to hear the voices of regulators and the industry about the risk of money laundering and the need for regulation of virtual assets. After the revision of the Special Act is passed, it is expected that specific regulatory measures will come into sight concerning the scope and level of regulations for VASPs.