Japan’s FSA Orders Zaif Crypto Exchange To Improve Its Business System
Japanese cryptocurrency exchange Fisco, owners of Zaif crypto exchange, has received a business improvement order by the country’s financial regulator. The Japanese authorities have once again demonstrated that they take law compliance of virtual currency exchanges seriously after the order.
The regulator ordered Fisco to enhance its business management systems following and in-depth investigation by the nation’s financial watchdog. According to a press statement released by the Financial Services Agency (FSA) the financial watchdog took the action after an onsite inspection conducted at the offices of the Exchange in February this year.
Cointelegraph reports that the inspection has revealed a set of law violations by the company concerning its business management. For instance, the Board of Directors did not discuss important management issues such as business plans. There were also problems with the risk management system for anti-money laundering and terrorism financing, and the external management system concerning outsourcing.
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.
Orders According To Settlement Funds Act
According to the FSA, the orders have been issued in accordance to the requirements of Japan’s Settlement of Funds Act.
As per the orders Fisco Cryptocurrency Exchange will have to establish a sound management system, which can guarantee the full operations of the internal management department and the audit department. Further, the company will have to establish a risk management system for anti-money laundering and terrorism financing, as well as an outsourcing management system.
The company will also have to develop and put in place a management system for the safety management of user information. Apparently, the regulator identified various shortcomings on how the exchange verified the customer details, noting that:
“In the section where users can enter identity verification information, they can select “other” if it is not possible to check their occupation or purpose of the transaction. When “other” is selected, the account can be opened without entering anything.”
A business improvement plan will have to be submitted in writing by July 22, 2019.
According to Cointelegraph, FSA has conducted on-site inspections in twelve crypto exchanges remaining with 7 as there are 19 registered exchanges in the country. However, four exchanges are yet to be established while three are awaiting the regulator to inspect them.
The FSA was said to also be investigating Huobi Japan alongside Fisco, according to a Reuters report in April to establish their customer protection and legal compliance. However, no public statement has so far been made by the agency on any conclusions.
Japan’s authorities have been on an onslaught on rogue exchanges following a spate of hacks leading to losses of huge amounts of money. Last month, the country’s House of Representatives enacted a new law to enhance the powers of agencies supervising the crypto markets. The new law aims at protecting the users through regulating the crypto derivatives trading as well as enhancing exchange security standards.
Do you supportJapan’s FSA decision to order Fisco to enhance its business systems? Share with us in the comments section.