South Korea’s Financial Services Commission (FSC) is seeking legal amendments that would make it mandatory for virtual asset service providers (VASPs) within the country to report the names of their customers.
According to a press release from the financial watchdog on Wednesday, a proposed update to the Act on Reporting and Using Specified Financial Transaction Information is aimed to help guard against money laundering.
The act defines VASPs as “business entities that engage in the purchase and sale of virtual assets, exchanges between virtual assets,” as well as custodians, digital wallet service providers and brokerages.
The changes will mean that VASPs are required to use real-name accounts in their financial transactions with customers.
Additional measures require VASPs to open real-name accounts with financial institutions, keep customers’ deposits separate from their own and obtain a data security certification from the Korea Information Security Agency.
VASPs must have no record of fines or other penalties within the previous five years and must “manage” customers’ transaction records. An assessment of money-laundering risks associated with VASPs by financial institutions will also be required.
Virtual assets like cryptocurrencies aren’t the only assets being targeted: Digital tokens that can’t be exchanged for fiat currencies, as well as e-money, electronically registered stocks, electric notes, commodities and more, will also be in the regulator’s sights.
However, prepaid cards, mobile gift cards and electronic bonds are to be excluded from the scope of virtual assets.
Per a September recommendation by the Financial Action Task Force (FATF), the intergovernmental money-laundering watchdog, over 200 member regulators should profile cryptocurrency users to better identify criminal activity. It also set regulatory standards last summer, including the “travel rule,” stipulating that VASPs must pass on transaction information to other entities above a set value threshold.
The FSC’s proposal is designed to impose AML requirements on VASPs in accordance with the FATF’s recommendations and are not intended to adopt virtual assets into financial regulatory regimes, the watchdog said.
While currently in a period of public comment, the FSC expects to enforce the amendments from March 25, 2021.