A South Korean financial authority has warned two major domestic banks about their lack of management of cryptocurrency transactions and Anti-Money Laundering (AML) regulation.
The Financial Supervisory Service (FSS) has reviewed Kookmin Bank and Nonghyup Bank and found “unreasonable elements related to virtual [currency] handling business.”. The banks have also received orders for improvement and must submit the redress to the FSS within three months.
However, it was argued that the regulatory standards are not clear and the FSS’s order applies only to some accounts that have been associated with a real-name verification service. It does not apply to crypto counterparty (exchange) accounts.
The FSS further cited that “If the FSS considers that the content is insufficient, the FSS will be able to impose more direct sanctions in the future.”. Besides, it was stated that there is a problem with the so-called “suspicious transaction extraction standard of Kookmin Bank’s virtual currency handling business.”
The FSS has also asked the National Agricultural Cooperative Federation (NACF), which owns Nonghyup Bank, to improve the related system so that suspicious transaction can be tracked. This applies even to entities who have not signed a real name verification service contract with the NACF.
Earlier this year, the FSS and the Financial Intelligence Unit (FIU) inspected six of the country’s major banks, including Kookmin Bank and Nonghyup Bank. This inspection was to decide whether the institutions “carried out their obligations to prevent money laundering in managing virtual accounts.”
During the same phase, South Korean financial authorities created a task force to oversee and inspect cryptocurrency exchange compliance with the existing regulations.
Later on, three domestic banks, including Kookmin and Nonghyup, were inspected again by the Financial Services Commission (FSC) to ensure the banks were following the new anti-anonymity regulations.
Following the inspection, the FSC released revised Anti-Money Laundering (AML) guidelines for virtual currencies to ensure that there were no suspicious transactions and issues with payment processing.
We are at the crossroads wherein we see two separate paths divided between embracing cryptocurrency and sticking on to conventional forms of transaction. As discussed in this report, the productivity gain of digital coins has to slowly reach the masses.
When financial watchdogs step in and introduce new norms, we will steadily see this complex technology as safe, also efficient in time to come.