The Financial Services Commission (FSC) which is also the main financial agency of South Korea, has recently revealed a new positive regulatory framework and guidelines that link to the anti-money laundering (AML) and Know Your Customer (KYC) requirements for crypto exchanges.
In the new guideline that is mostly targeted at crypto exchanges, the FSC tightened the existing regulations on transactions and user monitoring. It requested that the Korea Financing Intelligence Unit (KFIU), which is the national financial watchdog, should strictly oversee all of the cryptocurrency transactions and user activity.
The FSC also ordered authorities to investigate into three major banks including Nonghyup, Hana Bank and Kookmin that have all been providing banking services and virtual accounts linked to crypto exchanges.
Most importantly, the cryptocurrency exchanges in the future will be required to conduct Customer Due Diligence (CDD) and Enhanced (EDD) as well as perform detailed background checks, all in order to ensure that:
- Foreigners are not using local cryptocurrency exchanges to buy and sell digital assets
- Criminals are not using personal accounts of individuals secretly to launder money
- Prevent suspicious transactions and payment processing
The second policy is related to preventing the re-emergence of suspicious fund movements (as seen in the “Kimchi Premium”) in and out of cryptocurrency exchanges and banking accounts.
All in all the new policies have demonstrated the willingness of the government in South Korea to improve the AML and KYC systems of the local exchanges and further regulate the cryptocurrency market.
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