Despite the high risks for misuse of virtual asset transactions for money laundering and terrorist financing, there has been an absence of legal framework to prevent such risks in Korea due to the anonymity of virtual asset transactions.
The G20 countries have agreed on the need for international cooperation to regulate virtual asset transactions. In June 2019, the Financial Action Task Force (“FATF”), a global money laundering and terrorist financing watchdog, also recommended member countries to establish regulatory frameworks to regulate misuse of virtual asset transactions for money laundering and terrorist financing.
In response, numerous bills to amend the Act on Reporting and Use of Specific Financial Information (the “Act on Specific Financial Information”) have been introduced in Korea. On November 22, 2019, the National Policy Committee’s Subcommittee on the Deliberation of Bills examined the revised bill, which the Korean National Assembly then passed on March 6, 2020 (the “Amendment”).
The Amendment will be enforced one year after the date of promulgation.
We provide below a brief overview of the key provisions of the Amended Act on Specific Financial Information.
- Definition of virtual assets and virtual asset businesses; explicit inclusion of virtual asset transactions in financial transactions
- Financial companies and other entities’ obligation to verify virtual asset businesses and reject or terminate transactions with virtual asset businesses
- Offshore application of the Act on Specified Financial Transaction Information
- Virtual asset business reporting and non-acceptance
- Cancellation of report and business suspension
- Newly added criminal punishment for virtual asset businesses
- Other Relevant Requirements
- Overall Significance & Need for Further Monitoring
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