Japanese Financial Regulators Warn FISCO Exchange To Improve Business Practices
Japanese crypto exchange, FISCO, based out of Osaka has been asked for an administrative action by Financial Services Agency (FSA). There was an onsite inspection conducted by the watchdogs at the offices of the Exchange in Feb 2019 which revealed a set of law violations by the company pertaining to its business management.
An example of the ill business practice noticed by the FSA was that the Board of Directors did not discuss important management issues like business plans. Additionally, there were also problems with the risk management system for anti-money laundering and terrorism financing, and the external management system concerning outsourcing.
FSA told the company to take 9 steps and submit the improvement plan by 22nd July. The 9 steps were:
- Establishment of a management system (including establishment of a system in which the functions of the internal management department and the audit department can be fully realized)
- Construction of a legal compliance.
- Construction of risk management system for laundering and financing of terrorism
- Construction of system risk management system
- Construction of outsourcing management system
- Construction of risk management system concerning new handling of virtual currency
- Construction of book document management system
- Construction of management system for safety management of user information
- Construction of audit system
Last year saw tightening of the regulatory environment for virtual currency exchanges in Japan. There were a number of business improvement orders issued. Notably, Fisco took over the ownership and management of Japanese exchange Zaif in 2018, a few months after the exchange was hacked leading to a loss of cryptos worth $59.7 million. FSA has done on-site inspections in 12 crypto exchanges with 7 remaining. However, four exchanges are yet to be established while three are awaiting the regulator to inspect them.