South Korea and its financial institutions are taking specific steps to ensure that the likelihood of cryptocurrency being used for unscrupulous activities is considerably reduced.
South Korea's second largest financial institution by assets, Shinhan Bank, is now paying serious scrutiny to all its accounts which have some connection to cryptocurrency or cryptocurrency exchanges.
This is not to antagonize the sector but however to ensure that everyone, individuals and exchange firms alike, are fully-compliant with the financial laws of the nation.
Before 2018, traders who dealt in digital assets were not particularly required to give up certain information. However at the beginning of last year, one of the country's financial regulators, the Financial Services Commission (FSC), created and published a set of rules and guidelines to prevent shady transactions like money laundering.
The guidelines generally mandate every digital assets trader to have a regular bank account with the bank that handles financial transactions for the exchanges on which they trade. This was done in a bid to discontinue anonymity and to deter or easily finger traders who use cryptocurrency to commit financial crime.
Apart from requiring traders to lose their anonymity, the guidelines by the commission also specifically define the anti-money laundering rules for crypto traders. It also stipulates what qualifies as a suspicious transaction and revealed that only South Korean citizens would be allowed to open and operate these bank accounts to be used for crypto trading.
A few months later in June 2018, the commission further required banks to perpetually watch all accounts tied to cryptocurrency trading. The FSC also wanted to ensure that these banks separate customers’ deposits from funds used to run their day-to-day business.
Traders are Free to Trade
Allaying fears that the moves were made to stifle the growth of cryptocurrency in the country, the commission later last year, specifically stated through its leadership, that it is not unsupportive of crypto as long as rules are being followed.
The FSC also maintained that banks and other financial institutions will always be allowed to handle deposits for trading digital assets provided the rules, especially those set for Know-Your-Customer (KYC) compliance, were strictly adhered to.
The FSC Means Business
Following through with its decision to police the sector, the commission began to investigate Nonghyup Bank (NH) and Kookmin Bank due to allegations that these two institutions were not following stipulated rules. A little later, another regulatory body known as the Financial Supervisory Service (FSS), carried out an inspection of three banks including the two earlier mentioned and Hana bank, for pretty much the same reason.
Another regulatory body known as the Financial Action Task Force (FATF), also stiffened regulations as it demanded that South Korean cryptocurrency exchanges share certain information about their customers.
Possibly due to the stiff requirements by the different regulatory bodies, Kookmin Bank, South Korea's biggest bank by assets, suspended cryptocurrency related activity for a while. When this happened, traders moved over to Shinhan bank, which didn't stop its trading activities at all. At the moment, Kookmin bank has restored it's crypto related services.
Shinhan bank is now doing pretty much everything within its power to comply with anti-money laundering regulation. Infact, it is planning to recruit staff who will work tirelessly on this to not only ensure they stay in line but also to handle any possible breaches in the future.
Apart from recruiting more staff, Shinhan is also looking into the development of automated artificial intelligence systems to help fish out suspicious activity.
Bithumb, easily South Korea's biggest exchange firm is however unfazed by the news because they are largely untethered to Shinhan. According to a Bithumb staff:
“The Korean government allowed Bithumb to use NH Bank only. Therefore, we have nothing to do with Shinhan Bank, and it is not relevant to our operations.”