"Prepare for the Financial Consumer Protection Act"... Non-face-to-face Services Gradually Suspended

[Asia Economy Reporter Kiho Sung] Ahead of the enforcement of the Financial Consumer Protection Act (FCPA) on the 25th, the financial sector is beginning full-scale preparations. In particular, they are strengthening protection processes to avoid being the 'first violator of the FCPA,' such as by reducing non-face-to-face services.

According to the financial sector on the 24th, NH Nonghyup Bank announced that it will suspend non-face-to-face new subscriptions for fund portfolio products and pension savings fund accounts starting from the 25th. The resumption date for sales has not been announced. Nonghyup Bank explained that some fund services have been suspended to comply with regulations related to the enforcement of the FCPA.

KB Kookmin Bank will temporarily suspend the service of opening deposit and withdrawal accounts at Smart Teller Machines (STM) from the 25th until the end of April. STM is an intelligent ATM that allows customers to issue bankbooks and change passwords by scanning ID cards without visiting bank counters. Until now, terms and product brochures were shown and passed over, but with the enforcement of the FCPA, product brochures must be directly provided to customers. Considering the difficulty of delivering product brochures by printing alone, Kookmin Bank has decided to upgrade its system to enable delivery via email, among other methods.

Hana Bank also announced that it will temporarily suspend new transactions for 'HiRobo' from the 25th until May 9th. 'HiRobo' is a deep learning AI robo-advisor, which is also a non-face-to-face service. Hana Bank plans to temporarily suspend new subscriptions, rebalancing, and diagnostic transactions for HiRobo general funds and personal pension funds, while continuing services such as viewing existing HiRobo funds held by customers, additional deposits, and individual redemptions.

The FCPA expands the 'six major sales regulations (principles of suitability and appropriateness, duty to explain, prohibition of unfair business practices, improper solicitation, and false or exaggerated advertising)' that previously applied only to certain financial products to all financial products.

If financial companies violate these regulations, they may be subject to 'punitive surcharges' of up to 50% of the related product revenue. Fines have increased from a maximum of 50 million KRW to 100 million KRW, and penalties have been raised from imprisonment of three years or less and fines up to 100 million KRW to imprisonment of up to five years and fines up to 200 million KRW.

The banking sector is concerned about the possibility of paying fines worth hundreds of millions of won if they violate the FCPA and is carefully considering their response. A banking industry official said, "The most important thing on the ground is the enforcement rules, but they have not yet been announced," adding, "There are still many uncertainties in applying them on the ground, so we are taking as conservative a service approach as possible."

This content was produced with the assistance of AI translation services.