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On January 23, 2018, the Financial Supervisory Service and the
Financial Service Commission published additional guidelines to regulate
banking and financial transactions involving cryptocurrency exchanges (each, an
"Exchange"). The key points of these guidelines are summarized below.
Real Name" Transactions
Effective January 30, 2018, the "virtual bank
account" system previously utilized by the Exchanges will be replaced by
the "real name" system for future deposits to, and withdrawals from,
the Exchanges. This is intended to enable banks to conduct KYC/AML screening
procedures on the users of the Exchanges.
As previously noted in our newsletter dated December 29,
2017 (Virtual Currency – Enhancement of Control over Korean Cryptocurrency
Exchanges), the Korean government will require the "sameness" of the
bank accounts of individual users and each Exchange, pursuant to which a user
must maintain a bank account in their name at the same bank as that of the
Exchange. Users who do not comply with
this requirement will only be able to withdraw funds from the Exchange. In
order to deposit additional funds in, or create new accounts at, an Exchange, a
user must have a bank account at the same bank as the Exchange.
In addition, the Korean government reiterated its
previous position that foreigners and minors cannot access the Exchanges.
Following the implementation of the "real name"
system, commercial banks in Korea will independently determine whether they
will offer Exchange-related deposit and withdrawal services to its customers.
All banks which are currently offering "virtual bank
accounts" to Exchanges will introduce the "real name" system as
of January 30, 2018. As of January 23, 2018, Shinhan Bank, Nonghyub Bank, The
Industrial Bank of Korea, Kookmin Bank, KEB Hana Bank and Gwangju Bank have
already implemented the "real name" system related to cryptocurrency
transactions.
Anti-Money Laundering Procedures
Pursuant to the Act on Reporting and Using Specified
Financial Transaction Information, Korean financial institutions, including
banks (each, a "Financial Institution"), are required to report
"suspicious transactions" of its customers, including Exchanges
(each, a "Customer"), to the Korea Financial Intelligence Unit (the
"KoFIU") where there exists reasonable grounds to suspect money
laundering. In the event that a
Financial Institution is unable to verify the identity of a Customer due to
such Customer’s refusal to provide personal identifying information absent
justifiable cause, the Financial Institution is required to either reject or
suspend the transaction and make a "suspicious transaction" report to
the KoFIU.
Effective January 30, 2018, financial transactions (which
include the withdrawal and remittance of funds, among others) between an
Exchange and a Customer with the following characteristics will be deemed to be
a "suspicious transaction" under the Guideline on Anti-Money
Laundering Regarding Virtual Currency, requiring further investigation by the
relevant banking institution to determine whether such financial transactions
constitute money laundering activities:
-
(Initiator of Financial Transactions) – When a
Customer who is a corporation or association conducts financial transactions
related to cryptocurrency with the Exchanges. -
(Financial
transaction involving cash) – When there is no financial record of a Customer
depositing funds to an Exchange, but there occurs withdrawals from an Exchange
to a bank account which in turn is mostly withdrawn from the bank account in
cash. -
(Distributed
Financial Transactions) – When a Customer pools funds from a large number of
individuals and remits such funds to an Exchange, and the Customer later
returns funds to the individuals after receiving the funds from the Exchange
after a certain period of time. -
(Foreign
Exchange Transactions) – When a Customer, who previously had no record of overseas
remittances and further has no record of importing business equipment such as
computers, transfers funds to the account of a foreign entity in the name of
the importation of business equipment. -
(Financial
Transaction Amount) – When a Customer makes a financial transaction in excess
of KRW 10 million per day or KRW 20 million over a seven-day period (or where
the financial transaction amount is below the aforementioned limits but the
Financial Institution determines that there is a risk of money laundering based
on its customer due diligence procedures). -
(Frequency
of Financial Transactions) – When a Customer engages in financial transactions
in a frequency greater than five times per day or seven times in a seven-day
period (or where the transaction frequency is below the aforementioned limits
but the Financial Institution determines that there is a risk of money
laundering based on its customer due diligence procedures). -
(Split-financing
transaction) – When a Customer is reasonably suspected of engaging in the
"splitting" of financial transactions to avoid the aforementioned
limits on amounts and frequency.
This update is intended as a summary news
report only, and not as advice. For legal advice, please inquire with your
contact at Bae, Kim & Lee LLC, or the following authors of this bulletin:
Sky
YANG
82.2.3404.0143
Jae In
LEE
82.2.3404.6537
David
Soohyun JOO
82.2.3404.0277
Eu Gene
PARK
82.2.3404.6971