Internal control ‘hole’ as virtual asset business money laundering… Legislative debate ‘regulation loophole’


The virtual asset market is at a critical crossroads. With the Luna-Terra coin crash as an opportunity, interest in protecting investors and strengthening regulations has increased, and exchanges are also being revealed to be outdated in customer information and money laundering control. There is growing interest in whether the government-led institutional incorporation movement will lay the foundation for investor protection and transparency of the money management system.

On the 29th, the Financial Intelligence Unit (FIU) under the Financial Services Commission carried out an inspection to see if business operators reported virtual assets (money exchange) to the Specific Financial Information Act (Special Provisions Act) from February to fulfill their anti-money laundering. It has been confirmed that many exchanges neglect to manage customer information or suspicious money laundering transactions.

According to the FIU, it was found that the virtual asset provider Company A was not properly fulfilling its obligation to verify customer information, such as missing customer contact information and addresses in the customer information management system. In particular, it was found that the column for entering the purpose of the customer’s transaction or source of funds was filled with unknown information such as codes and special names.

There were also cases where the true owners of corporate customers were not properly identified. In the process of confirming the true owner of the corporate customer, Coin Exchange Company B incorrectly identified the representative who is the second largest shareholder (40% share) as the beneficial owner, not the largest shareholder (60% share), and confirmed whether it was the first shareholder involved in money laundering Another company reported a customer suspected of money laundering to the authorities once, and did not monitor additional suspicious transactions.

The FIU warns that improvement efforts are needed, considering that such crimes are due to a lack of understanding of the law by business operators and a lack of an anti-money laundering system. The FIU said, “The customer cannot be considered sufficiently verified just by having a copy of the resident registration card. If this is neglected, sanctions such as fines of hundreds of millions of dollars can be imposed.”

As such, since the operation and internal control of the exchanges are still conducted in a ruthless manner, the resulting risks are inevitably directly related to the damage of investors. In the midst of this, discussions about incorporating virtual assets into the organizational system are at their peak. In fact, the government is implementing the joint public-private digital assets (TF) taskforce by the end of the year and is in the process of enacting the ‘Digital Assets Framework Act’.

Professor Seon-Young Park of Dongguk University, who gave a theme presentation at the ‘International Seminar on Digital Finance Policy Directions’ held by the Korea Finance Institute this morning, said, “Digital asset legislation must be technology neutral and in line with speed international, and its application must be flexible.” “There is currently no regulation. As we have no choice but to rely on industry self-regulation in this state, monitoring the market is the most important thing.”

Some argued that institutional improvements were needed to prevent financial system risks from occurring. Lee Dae-ki, head of the Financial Innovation Research Department at the Financial Research Institute, said, “We must make a common rule about listing and liquidating digital assets and evaluate risks from time to time to take a preemptive response before a coin occurs . ” He mentioned the need for a system for claiming a refund for fixed currency holders and liability for damages caused by providing incorrect information.

Meanwhile, the supervisory authorities mentioned that they would refer to the MiCA Act, the European Union’s (EU) virtual asset regulation scheme. Kim Yong-tae, director of the Financial Supervisory Service, said, “We will also consider imposing additional prudential regulations on the custody (custody) and exchange (exchange) industries, and penalties for insider trading and market manipulation.”

©’Global Economic Daily in 5 Languages’ Aju Economic Daily. Unauthorized reproduction and redistribution prohibited

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.