South Korea revises anti-money laundering guidelines for cryptocurrencies
South Korea’s main market regulator has revised its cryptocurrency anti-money laundering guidelines to beef up customer due diligence and heighten information sharing with overseas exchanges.
The revisions, made by the Financial Services Commission (FSC) come into effect on 10 July and replace the previous guidelines, published in January, after bank inspections revealed “some insufficiencies related with the implementation of the [original] guidelines”.
Enhanced customer due diligence
The first new guideline, related to the two seperate types of bank accounts usually held by crypto exchanges, requires ‘enhanced customer due diligence (EDD). This obliges financial services firms to gather additional information on the identity of their customers to prevent money laundering and terrorism funding.
Typically exchanges have one bank account for collecting clients’ money for trading, and a second for parking operational expenses, and currently only the former are subject to enhanced due diligence. The new guideline requires EDD on both accounts.
“In order to prevent cryptocurrency exchanges from using their non-trading accounts for collecting money or other illegal activities, the revised guidelines require financial companies to strengthen monitoring on such non-trading accounts and conduct EDD if they find any sign of suspicious transactions,” the revision said.
The second change in the guidelines addresses not only money laundering, but also tax evasion and requires financial companies to share a list of overseas and domestic crypto exchanges that they use.
This helps “monitor money transfer to overseas exchanges in order to prevent tax evasion or money laundering through such transactions between domestic exchanges and overseas exchanges.”
The final guideline revision states that financial companies shall reject or cease transactions with crypto exchanges immediately when they report any suspicious activity.
“The revision allows financial companies to reject or cease transactions when they are not able to conduct on-site inspections,” the revision statement said.