South Korean State Council approved AML law on virtual assets and virtual asset service providers(VASPs).
Yesterday the South Korean State Council approved the amendments to the Act on Reporting and Use of Specific Financial Transaction Information (Specific Financial Transaction Information Act hereafter) passed by the South Korean National Assembly earlier this month. Based on the FATF’s regulatory guidelines released in June 2019, the Specific Financial Transaction Information Act was proposed to meet international AML standards for virtual assets and to prevent money laundering and other financial crimes such as financing terrorists.
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.
- Issuing real-name verified bank accounts: So far in the country, only four VASPs in the country have been providing real-name verified bank accounts. Other exchanges and VASPs are now obliged to acquire real-name verification accounts in order to register their business.
Lee Won-kyu, CEO of Argos, in a recent interview with Paxnet News regarding the revision of Specific Financial Transaction Information Act said, “legalizing virtual assets is a definite welcome news. But this is also a very crucial moment for virtual asset service providers in the country. Their bread and butter will depend on what the enforcement decree entails.
In the wake of the new AML law, the industry is under heavy pressure to prepare for reporting requirements for VASPs. Lee pointed out that most of the overseas KYC AML companies have large enterprises as their customers, “it is very costly for small businesses to use.” He introduced Argos Know Your Customer and Money Laundering Risk Analysis service, which helps small virtual asset service providers address regulatory compliance.
the amendments to the Specific Financial Transaction Information Act will take effect one year after the promulgation, giving VASPs time to prepare for the new regulatory requirements. If the Specific Financial Transaction Information Act is promulgated within this month, as announced by the Financial Services Commission, it will officially take effect in March 2021. All VASPs operating within the nation will now be in pressing need to, not only report to KoFIU, but implement KYC and anti-money laundering system and acquire ISMS certification.
Know Your Customer and Money Laundering Risk Analysis service
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