The Financial Services Commission has instructed banks in South Korea to treat exchanges as high-risk clients to diminish illegitimate trading.
Clients of cryptocurrency exchanges will also be subject to toughened transaction monitoring according to The South Korea Times. The news was published on Sunday by the local media and stated that banks are required to refuse service to customers that don’t fulfill certain procedures.
South Korean digital currency exchanges must comply with the ID verification procedures and communicate questionable transactions to an anti-money laundering unit called Korea Financial Intelligence Unit (KoFIU). The regulatory action will affect nearly 60 platforms operating in the country.
Several crypto exchanges work without the permission of the Financial Services Commission that is focused on protecting clients against scams and fraud. FSC also aims to get them their money back in case a platform stops operating. Thanks to this new plan, transactions made using unverified accounts will be terminated.
The Commission is taking this measure due to many complaints from crypto exchange users. They don’t feel the money held by these platforms is protected by authorities. In fact, only four of 60 exchanges have real-name accounts authorized by banks. The unit is requiring financial institutions to file reports if large transactions are made by not identified accounts.
“Banks are essentially forced to take responsibility for issuing real-name accounts. It, therefore, is reasonable that there should be some immunity for undertaking the dangerous and costly task.”Industry official
The Korea Financial Intelligence Unit (FIU), which is part of the FSC, had a meeting with the directors of Korean crypto exchanges earlier this month. FIU informed them of the new decree that calls them to register with the intelligence unit by September 24, 2021. In order for their registrations to be complete, the virtual platforms must meet certain requirements.
Crypto exchanges have to partner with commercial banks for the registration to be valid. Their anti-money laundering and know-your-customer systems must also be approved by the FIU. All those that won’t pass the registration phase will be shut down, and those breaking the new regulations will face heavy fines from the government.