"Youth Gambling and Drug Trading Exploited... Financial Supervisory Service Conducts Virtual Account Inspection at Banks"

As malicious crimes such as illegal gambling and drug trafficking targeting adolescents increase, cases have emerged where virtual accounts issued by banks and internet-only bank group accounts are misused as tools for crime, prompting the Financial Supervisory Service (FSS) to take action to block them.

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On the 18th, the FSS announced plans to block crimes using bank accounts through ▲inspection of virtual account issuance practices and improvement of work procedures at banks ▲advancement of detection of suspicious accounts involved in illegal transactions at internet banks ▲strengthening of internal controls related to anti-money laundering.

First, the FSS will inspect the operation status of virtual account issuance services at all banks and encourage improvements in deficiencies related to payment gateway companies (PG companies) and their sub-merchants management. In particular, virtual accounts opened by sub-merchants of PG companies are relatively more likely to be misused as tools for crime, so they will be inspected more meticulously.

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When banks enter into contracts with PG companies for virtual account issuance, they will verify whether the PG companies properly manage the business types and transaction histories of their sub-merchants. The FSS plans to immediately suspend account usage if abnormal signs are detected in virtual accounts and take swift actions such as contract termination if illegal transactions are suspected. Additionally, banks will continuously monitor virtual account issuance situations and ensure that PG companies manage virtual accounts thoroughly during this process, while periodically re-evaluating the qualifications for virtual account issuance based on monitoring results of PG company virtual accounts.

The FSS will also promote the advancement of pre-detection of suspicious accounts involved in illegal transactions. Considering the circumstances of each bank, the plan is to prioritize internet-only banks, where the possibility of illegal transaction use is high due to adolescent awareness and non-face-to-face account opening methods. The FSS plans for banks to select lists of suspicious accounts suspected of illegal use by utilizing external detection information and internal FDS (Fraud Detection System) abnormal transaction information, and to provide adolescents with guidance on legal violations and potential penalties before they attempt to transfer funds from their own accounts to suspicious accounts.

Furthermore, post-management after transfers to suspicious accounts will be strengthened, and internal controls on collection accounts will be enhanced. For example, when a minor executes a transfer from their own account to a suspicious account, procedures will be established to immediately notify legal guardians such as parents via text messages or app notifications. To block the possibility of illegal use of deposit and withdrawal accounts that are easy to collect funds from multiple users, measures such as limiting the number of issuances and setting grace periods before re-opening after account termination will also be pursued.

Internal controls for anti-money laundering will also be strengthened. Banks will be guided to conduct more thorough money laundering risk assessments on PG companies newly issued virtual accounts. In particular, the appropriateness of anti-money laundering management for PG companies’ sub-merchants will be considered a key item, and during contract changes and reviews, banks will check the fulfillment of customer identification obligations for PG company merchants to strengthen money laundering risk management.

Additionally, the FSS will enhance transaction monitoring by refining suspicious transaction reporting criteria (STR Rule) for products and services with high potential for criminal use, such as virtual accounts and group accounts, and will guide banks to review suspicious transactions as quickly as possible and report them to the Financial Intelligence Unit (FIU).

Han Gu, Director of the Bank Inspection Division 2 at the FSS, stated, "The FSS will strive to ensure that measures to prevent adolescent crime victimization are promptly implemented through industry meetings for opinion gathering," adding, "We will also closely cooperate with government ministries to eradicate malicious crimes targeting adolescents, such as illegal gambling betting and drug trafficking inducement."

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