On 5 March 2020, South Korea passed an amendment to the Act on the Reporting and Use of Specific Financial Transaction Information. It came into effect in March 2021 and extended AML/CTF rules to virtual asset service providers. How can you prepare for the changes? Let’s take a look at some important aspects.
The new law covers the activity of virtual asset service providers (VASP) who are involved in the following business activities:
These activities mainly relate to cryptocurrency exchanges, custodian wallet providers and Initial Coin Offering (ICO) projects.
Now, all crypto service providers must transform their AML/KYC systems and register with the Korean financial regulators before they start their activity.
These measures are not completely new and were introduced by the Financial Services Commission (FSC) in 2018. However, until recently, they have not been mandatory: only the 4 biggest Korean exchanges—Bithumb, Upbit, Coinone, and Korbit have implemented them back then.
The amended Act forces all Korean crypto businesses to meet the following requirements.
Deadlines. The law came into effect in March 2021. All Korean crypto service providers had to become fully compliant by September 2021.
Sanctions. In the case that you don’t have an authorized bank account, sanctions can amount to a 5-year prison sentence for the company’s owners or a 50 million Korean Won fine (around 43,000 USD).
The new Korean legislation has made AML/CTF requirements mandatory for a wide range of virtual asset service providers. This step creates a safer economic environment, with financial regulators finally gaining access to data regarding crypto transactions. To avoid sanctions, crypto businesses must be fully compliant with the new law.
You can find all the details in the Enforcement Decree of the Act on the Reporting and Use of Specific Financial Transaction Information.