Korean fintech players and cryptocurrency exchanges come under their first audit by the country’s top financial authority which would mostly examine traces of money laundering.

The Financial Services Commission (FSC) said Sunday that its Financial Intelligence Unit (FIU) from February will carry out on-site inspections on 124 electronic financial service providers and 60 peer-to-peer players with focus on whether their internal risk management system are working to detect money laundering risks.

Those subject to the inspection are big tech-backed financial service providers such as Naver Financial and Kakao Pay as well as virtual asset service providers like cryptocurrency exchanges.

It is the first time for the untraditional financial players to receive on-site inspection for compliance with anti-money laundering (AML) regulations. For crypto exchanges, full inspection will begin with the top four – Upbit, Bithumb, CoinOne, and Korbit – that will start trading operation in Korean currency next month. Only partial inspection will be conducted on others deemed at high risk.

The FIU is also resuming AML screening on nine casino businesses after a temporary halt due to their Covid 19-induced closures.

The inspection will focus on the target companies’ compliance with the customer due diligence rule, internal control system and timely reports on any suspicious transaction, according to FSC’s announcement.

For example, Naver Financial, the fintech service arm of internet giant Naver, is required to collect the personal identification information of all those using its financial services. Also, Kakao Pay, the mobile payment and digital wallet linked to the country’s dominant chat app Kakao Talk, must report any suspicious financial activities to the FIU.

The financial regulator will reportedly pay closer attention to any case of abusing the prepaid debit card system for possible money-laundering activities. A prepaid debit card refers to a financial product that allows user to store money on the card and spend it, without going through a financial institution’s management network.

Any company that does not comply with the AML law may receive a penalty of full or partial business suspension for up to six months. A person may receive a jail term of up to five years or penalty up to 100 million won ($83,829) for violation.

By Yoon Won-seop and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]