Today the South Korean National Assembly passed the amendments to Act on Reporting and Use of Specific Financial Transaction Information (Specific Financial Transaction Information Act hereafter).
The enactment of the amendment obliges all VASPs (Virtual Asset Service Providers) in the nation to comply with stricter anti-money laundering and terrorist financing prevention rules and reporting duties.
The passed revision to the Specific Financial Transaction Information Act, based on the FATF’s regulatory guidelines released in June 2019, was proposed by Representative Kim Byung-wook. The amendments tighten the South Korean government’s control over cryptocurrency exchanges and other service providers dealing with virtual assets.
Going into effect in March 2021, the enactment will have cryptocurrency exchanges and VASPs subject to the control of the financial authorities. With the enactment, all VASPs (Virtual Asset Service Providers), including the cryptocurrency exchanges, wallet services, ICOs are now within legal boundaries.
Requirements of the Specific Financial Transaction Information Act
- Business reporting system: all VASPs are required to report to the Korean Financial Intelligence Unit(KoFIU) under the Financial Services Commission within six months of the enactment. Unreported businesses will face a maximum five years of imprisonment or a fine of 50 million won.
- KYC(Know Your Customer), AML screening on customers: The measures imposed by the law will ensure more stringent AML and prevention of the financing of terrorism (CFT). Identity verification of customers and anti-money laundering screening (searching for politically exposed persons, global sanction lists and watchlists and official list of terrorists and financial transaction restrictions, etc.) is now required by law.
- ISMS (Information Protection Management System) Certification: Korea Internet & Security Agency certifies businesses established a system in which important information such as personal information and business secrets are managed systematically and safely. Major information and communication service providers or information communication service providers whose annual sales or number of users is higher than a certain number are eligible for ISMS certification.
- Real-name verified bank account: So far banks have been providing real-name verified bank accounts to only four exchanges, Upbit, Bithumb, CoinOne, and Korbit. Other exchanges and VASPs are now obliged to acquire real-name verification accounts in order to register their business.
Passing amendments to the Specific Financial Transaction Information Act signals the incorporation of cryptocurrency industry into the South Korean financial system, classified as a transparent and reliable industry. Although details of how the law will be executed is still in question, specific regulatory measures will come into sight concerning the scope and level of regulations for VASPs after the Enforcement Decree is released.
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