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'Banks responsible for crypto irregularity screenings'

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Financial Services Commission (FSC) Chairman Eun Sung-soo speaks during the National Policy Committee meeting at the National Assembly on Yeouido, Seoul, Thursday. Yonhap
Financial Services Commission (FSC) Chairman Eun Sung-soo speaks during the National Policy Committee meeting at the National Assembly on Yeouido, Seoul, Thursday. Yonhap

By Lee Kyung-min

Banks should ensure that their virtual currency exchange clients have anti-money laundering safeguards in place, as one of their key responsibilities to screen and monitor for irregularities concerning the operators of digital assets, the country's top financial regulator said Thursday.

"The responsibility falls on banks first and foremost to detect any irregularities of crypto exchanges, including conducting anti-money laundering activities," Financial Services Commission (FSC) Chairman Eun Sung-soo said during the National Policy Committee meeting at the National Assembly on Yeouido, Seoul.

The comments seek to divert criticism that the FSC is refusing to take full responsibility for cryptocurrency regulation and monitoring, amid the rapid surge in popularity of digital currencies, especially among young people.

Many frame the issue as Eun and the FSC forcing banks to do most of the legwork, and thereby altogether postponing or refusing to take responsibility and step in.

But banks bear the primary responsibility for identifying what could later become suspicious financial transactions, as evidenced by them having to report bank transfers of over 10 million won to the Korea Financial Intelligence Unit (KoFIU), he said.

"Banks are aware that they are to maintain extreme caution because of severe penalties, a practice shared by banks around the world. Banks should allow exchanges to open real-name accounts, only if they judge they can withstand the possible consequences. If they think the risks are beyond their capacity, they should not be in the business of banking."

The comments are in line with a previously outlined policy, in which banks are to identify high-risk clients, as well as strengthen financial transaction monitoring and user ID verification procedures.

This guideline is a regulatory action seeking to protect customers against fraud and allow them to recover their investments, in the event that some exchanges become disqualified to run and are shut down.

Currently, operators can set up exchanges without major regulatory hurdles such as user ID verification responsibilities and real name-based exchange accounts.

Exchange operators seeking to keep running will have to submit a request for a license by Sept. 24, after which the intelligence unit will begin a three-month review of their trading activities.

Eun denied that the financial policy regulator is reviewing ways to limit crypto management responsibilities for banks. A coalition of banks had submitted a request for a rule that exempts them from punishment in cases of financial crimes with no premeditation at play.

"I have never had a conversation regarding the issue, nor have I heard about the said exemption rule," he said.


Lee Kyung-min lkm@koreatimes.co.kr


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