Legislative Notice of Enforcement Decree of Special Financial Transactions Act Including Ban on 'Self-Listing'

From June 17 to July 26

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Park Sun-mi] Financial authorities have announced a draft amendment to the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information (hereinafter referred to as the "Specific Financial Information Act"), which includes key provisions such as prohibiting virtual asset service providers and their related parties from handling virtual assets they issue themselves.

On the 17th, the Financial Services Commission announced that it will publicly notify the draft amendment to the Enforcement Decree of the Specific Financial Information Act from today until July 26 to enhance transaction transparency of virtual asset service providers and prevent money laundering. This is a follow-up measure to the "Virtual Asset Transaction Management Plan" decided at the inter-ministerial vice-ministerial meeting on the 28th of last month.

The draft amendment includes a provision to prevent virtual currency exchanges from issuing so-called proprietary coins and "self-listing" them. Virtual asset service providers are required not to handle virtual assets issued by themselves or persons related under Article 34, Paragraph 4 of the Enforcement Decree of the Commercial Act, and virtual asset service providers and their executives and employees are prohibited from trading through the relevant virtual asset service provider to enhance transaction transparency.

These measures address issues where virtual asset service providers manipulate virtual asset prices or engage in illegal activities by inputting false data into their computer networks.

Additionally, the draft amendment clarifies matters related to the fulfillment of anti-money laundering obligations under the Specific Financial Information Act through article revisions. First, it clearly states that financial companies must conduct risk assessments on all customers, enabling financial companies to establish and operate a business system that differentiates management levels according to risk in line with the Financial Action Task Force (FATF) international standards.

Financial companies are required under Article 5 of the Specific Financial Information Act to conduct risk assessments on customers as an anti-money laundering measure. However, there had been concerns that the current enforcement decree might be misunderstood as requiring risk assessments only for the purpose of identifying "high-risk customers."

Furthermore, it clarifies that when the customer is a corporation or organization, the date of birth of the representative must be verified to distinguish between individuals with the same name. Until now, financial companies have been required to verify the name, date of birth, and nationality of the representative when the customer is a corporation or organization (Article 10-4 of the Enforcement Decree), but there was some confusion because the verification of the representative's date of birth was exempted in relation to confirming the actual owner of the customer.

A Financial Services Commission official stated, "We plan to complete the amendment promptly after the public notification period until July 26, consultations with related ministries, and reviews by the Regulatory Reform Committee and the Ministry of Government Legislation."

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