South Korean Crypto Exchanges Face AML Probes as Regulators Test Compliance
South Korean regulators are set to probe the nation’s four biggest crypto exchanges to test their anti-money laundering (AML) capabilities.
The exchanges – Korbit, Upbit, Coinone, and Bithumb – are the only trading platforms that operate fiat KRW markets and received their operating permits from the Financial Intelligence Unit (FIU) late last year. The latter is an agency that answers to the Financial Services Commission (FSC), the top financial regulator.
Per Money Today and GetNews, the FSC and FIU are keen to discover if the trading platforms have successfully integrated AML solutions that allow them to communicate data to one another, as well as the regulators, and effectively flag suspicious-looking transactions.
AML protocols are a new development for most exchanges, who were told to start complying with regulations as of September 2021, after the government passed the nation’s first piece of crypto-specific legislation in 2020.
The audit does not appear to have been scheduled, but over 100 other “digital and electronic” financial services providers working in the field of conventional finance will also be checked for their own AML compliance.
The regulators, along with the Financial Supervisory Service (FSS), will test “common risk factors,” as well as assess the adequacy of AML risk evaluation, in addition to factors such as transaction size, frequency, and more.
The probe will also focus on the implementation of customer verification protocols (also known as Know-Your-Customer, or KYC), the establishment of trading platforms’ internal control systems, and the systems used to notify other parties of potential AML violations.
Interestingly for the sector, perhaps, the bodies will also check to see how effectively the crypto exchanges are preparing for the implementation of the Financial Action Task Force’s much-maligned Travel Rule – which is set to be enshrined into South Korean law later this year.
All four of the exchanges have revealed they are working on their Travel Rule solutions. Upbit has developed its own solution, which operates via its operator Dunamu’s blockchain subsidiary, while the remaining three have co-developed their own Travel Rule compliance platform.
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