South Korea’s government is aiming to bring all cryptocurrency exchanges operating in the country under the direct supervision of the nation’s Financial Intelligence Unit (FIU). This will make it obligatory for all South-Korea based exchanges to follow anti-money laundering directives like banks do. This is the first time that a government agency has said that it will oversee crypto exchanges.
The FIU, which is under the direct supervision of the Financial Services Commission (FSC), recently held a meeting of the Anti-Money Laundering Policy Advisory Committee. Discussed during the meeting were measures against money laundering and against terrorism financing activities.
Local media outlet Maeil Business said that the committee planned to include “virtual currency exchanges under a direct supervision of the AML / CFT (Anti-Money Laundering/ Countering Terrorism Financing) system,” and said that legislation to this effect had already been introduced to the National Assembly. The news outlet further elaborated, saying that:
“This is the first time government agencies have said they will oversee virtual currency exchanges…When the bill is passed, virtual currency exchanges will be obliged to monitor the suspicious money-laundering transactions and report them to the FIU.”
As of now, both the FSC and FIU have no jurisdictional authority over exchanges as cryptocurrencies are not considered financial assets. The regulatory commissions have to monitor suspected money-laundering activities of crypto exchanges through banks.
If the proposed changes are approved, however, the publication says that “If a virtual currency exchange does not comply with these obligations, the FIU or the entrusted FSS [Financial Supervisory Service] will be able to inspect the monitoring system of the virtual currency exchange.”
The Hankyoreh, another local media outfit, also said that the FSS plans to tighten bank oversight, specifically of banks that provide accounts to crypto exchanges. For one, banks must report deposits that total more than 10 million won per day or more than 20 million won over the period of 7 days for crypto transactions to the FIU as suspicious transactions that could possibly be a case of money laundering.
Recently, the top crypto exchanges in South Korea have begun ramping up their AML efforts.
Bithumb, one of the country’s biggest crypto exchanges, recently implemented very strong ANL measures. Just last month, the exchange blocked trading of 11 countries as well as made its verification process tougher for foreign users. Bithumb also lowered the withdrawal limits for traders who do not fully verify their identities. Meanwhile, Coinone, the largest crypto exchange in South Korea, also reported that they will implement similar withdrawal limits for user accounts that do not use their real names.
Another major crypto exchange, Upbit, uses an AML system developed by Thomson Reuters called World-Check. Upbit also recently rewarded users for reporting several fraudulent cryptocurrency investment schemes