South Korea new AML rules for digital currency comes into effect

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Senior officials in South Korea have approved measures that will introduce a raft of new anti-money laundering provisions for digital currency companies, after accepting proposed amendments to the measures.

According to the Financial Services Commission (FSC), the Korean cabinet gave the thumbs up to the amended measures, which are due to come into force from March 25.

The new rules impose more onerous conditions on digital currency businesses and other Virtual Asset Service Providers (VASPs) in managing money laundering risks, including an obligation for registered VASPs to report suspicious transactions and to verify customer identities from March 25.

Digital currency companies will also be required to register with the FSC, with sanctions coming into force for non-compliance from September. The package of measures has been brought forward in an attempt to align Korean regulation with the requirements set out by the Financial Action Task Force (FATF).

However, the measures have faced opposition within South Korea, most notably among experts claiming gaps in the rules could put domestic digital currency firms at a competitive disadvantage.

Summing up the concerns, tech lawyer Koo Tae-eon said smaller digital currency firms were already finding it difficult to establish banking relationships, as a result of the incoming measures.

“Since the promulgation of the law a year ago until now, so many crypto exchanges have tried to abide by the new law by getting real-name accounts from the local banks, but it didn‘t work. Even those that are equipped with an information security management system and have CEOs with no criminal records were not able to forge a partnership with banks.”

There are also concerns the new laws create an undue burden on smaller firms, which could undermine competition in South Korea’s digital currency sector.

Nevertheless, the measures are already in effect starting this week.

See also: CoinGeek Live panel, Digital Currency & Global Compliance: Tools & Tips for Exchanges, Wallets & Other Service Providers