South Korean Crypto Exchanges Face Regulatory AML Probes

South Korean regulators will examine the country’s four largest cryptocurrency exchanges to test their anti-money laundering (AML) capabilities.

The floors South Korean crypto exchange faces regulatory AML probes

The exchanges — Korbit, Upbit, Coinone, and Bithumb — are the only trading platforms operating the fiat-KRW market and received their operating license from the Financial Intelligence Unit (FIU) late last year. Then there is the Financial Services Commission (FSC) Response Unit, the leading financial regulator.

Per Money Today and GetNews, the FSC and FIU want to investigate whether or not trading platforms can successfully integrate AML solutions that allow them to transfer data between themselves, as well as effective flag and regulatory authorities for suspicious transactions.

AML protocols are a recent development for most exchanges, which must begin compliance from September 2021 after the government passed the first national cryptocurrency law in 2020.

Besides the 4 major exchanges, other exchanges are also being audited for AML compliance

The audit is unlikely to be scheduled, but over 100 other “digital and electronic” financial service providers operating in the conventional finance sector are also under review for their own AML compliance.

Regulators will work with the Financial Supervisory Service (FSS) to examine “common risk factors” and assess the adequacy of the AML risk rating in addition to factors such as size, transaction frequency, etc.

The investigation also focuses on the implementation of customer verification protocols (aka know-your-customer or KYC), the establishment of the trading platform’s internal control systems and systems used to notify other parties of potential AML violations.

Perhaps of interest to the sector, authorities will also examine how effectively crypto exchanges are preparing to implement the strained financial mandate of the armed forces’ travel rule — which is set to be incorporated into Korean law later this year.

All four exchanges have announced that they are working on their travel rule solutions. Upbit has developed its own solution that works through operator Dunamu’s blockchain subsidiary, while the other three have co-developed their own Travel Code-compliant platform.

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