Financial Crime World

South Korea Strengthens Anti-Money Laundering Regulations for Virtual Asset Service Providers

Overview of Regulatory Changes

In an effort to combat money laundering and strengthen anti-money laundering (AML) regulations, South Korea’s regulatory agency KoFIU has implemented enhanced know your customer (KYC) procedures for virtual asset service providers (VASPs). This move aims to improve the transparency and accountability of VASPs operating in the country.

Key Requirements for Virtual Asset Service Providers

  • Since September 2021, VASPs in South Korea have been required to:
    • Submit suspicious transaction reports (STRs) and currency transaction reports (CTRs)
    • Establish KYC procedures similar to those of financial institutions
    • Secure national bank accounts to verify customers’ real names
    • Implement data protection management systems
    • Maintain separate records of each customer’s transactions

Consequences of Non-Compliance

KoFIU has sanctioned South Korea’s top five VASPs for violating AML regulations, including:

  • Institutional warnings
  • Reprimands for executives and employees
  • Civil fines

The regulatory agency aims to enhance accountability and transparency in the virtual asset market by strengthening and clarifying the AML-related responsibilities of individuals within financial companies.

New Legislation and Regulatory Framework

The Korean National Assembly passed the Act on the Protection of Virtual Asset Users in July 2023, which will come into effect on July 19, 2024. The law mandates:

  • The separation of customers’ assets from VASPs’ assets
  • The prohibition of unfair trade practices related to virtual assets
  • The authority of the Financial Services Commission (FSC) to supervise virtual asset businesses

Impact on the Virtual Asset Market

As the regulatory landscape continues to evolve in South Korea’s virtual asset market, it remains to be seen how these new measures will impact the industry. However, one thing is clear: VASPs must prioritize robust KYC procedures and AML compliance to operate successfully in the country.

By staying up-to-date with the latest developments and regulations, VASPs can ensure they remain compliant and continue to provide secure and transparent services to their customers.