FIU to Audit Crypto Exchanges, Aiming to Reduce Money Laundering

  • Richard Marley
  • January 18, 2022
  • 2 minutes read
  • 1607

Financial Intelligence Unit under Financial Services Commission to audit Korea’s cryptocurrency exchanges, aiming to prevent money laundering activities. 

Growing concerns regarding cryptocurrency exchanges’ involvement in money laundering have opened the eyes of financial watchdogs. Due to this, the country’s digital currency firms will come under inception by the regulatory body for the first time.

At the start of next month, the Korea Financial Intelligence Unit (FIU) under the Financial Services Commission will be auditing Upbit, Bithumb, Coinone, and Korbit, which are the top four virtual asset service providers in the crypto exchange market, inspecting whether they have anti-money laundering systems and other precautionary measures in place.

While working with Financial Supervisory Services, the FIU will keep an eye on operators whether they have made improvements that they had demanded when they were registering themselves as cryptocurrency companies. The examination will also verify that digital currency exchanges have incorporated Know Your Customer (KYC) systems that can identify and authenticate customers’ identities when opening an account and maintaining their status. The financial watchdog will also investigate whether the operators are precisely reporting suspicious transactions.

However, the operators that fail to comply with regulatory obligations will be subject to strict scrutiny in the second half of the year. FIU will determine whether the exchanges will require currency transaction reports to curb money laundering. In addition to this, staying put with FATF’s travel rule is also necessary, as it mandates virtual assets service providers to gather and share clients’ transaction data. The cryptocurrency businesses may face regulatory penalties and a maximum fine of 100 million ($84,000) per violation. 

Naver Financial, Kakao Pay, and Toss will most likely be examined by FIU this year, as part of the inquiry into 124 cryptocurrency businesses. The financial watchdogs are all set to comprehensively examine business whether they have internal control systems along with robust KYC mechanisms in place. In addition to this, the FIU will also incept 60 private money lenders and nine gambling operators on whether they are complying with regulations

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