The financial authorities will tighten the internal control evaluation criteria to prevent illegal money laundering through financial companies. A focused inspection of vulnerable institutional sectors, especially the virtual asset industry recently identified as a laundering channel, is expected.
According to the financial authorities on the 2nd, the Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC) is discussing ways to strengthen the evaluation criteria by forming a task force (TF) with industries subject to assessment of anti-money laundering (AML) implementation, including banking, securities, insurance, virtual assets, lend, and electronic financial services.
The financial authorities conduct twice-yearly evaluations of more than 5,000 financial firms and others to determine how exposed they are to money laundering risks and whether internal controls to prevent laundering are functioning properly. If vulnerabilities are found in the evaluation or an industry or company is classified as high risk, it becomes a target for intensive inspection by the financial authorities, and if violations are detected during the inspection, fines are imposed.
The financial authorities are said to be discussing a plan to deduct points if the money laundering management score falls below a certain threshold. They are also reported to be reviewing a plan to classify some 200 criteria used to assess exposure to money laundering risk into four levels by importance and assign different weights by level. The financial authorities plan to finalize and apply the new evaluation criteria as early as the first quarter of next year.
Once the new evaluation criteria take effect, the virtual asset industry is expected to come under strict management and supervision. With indications that a Cambodian crime ring used a domestic virtual asset exchange as a laundering tool, the industry says a strong response is needed. Lee Eog-weon, chair of the Financial Services Commission (FSC), said at the anti-money laundering day ceremony on the 28th last month, "We will sternly crack down on money laundering that exploits virtual asset transactions."
Earlier, the FIU conducted an on-site anti-money laundering inspection of Dunamu, which operates Upbit, the nation's largest virtual asset exchange, uncovered 8.6 million violations of the Act on Reporting and Use of Certain Financial Transaction Information, and imposed fines of 35.2 billion won.
The financial authorities expanded anti-money laundering obligations from traditional financial firms to electronic financial and lend businesses, online investment-linked finance (P2P) operators, and virtual asset operators. In particular, in Mar. 2022, they became the first in the world to mandate the travel rule, requiring exchanges to verify sender and recipient information when a user requests virtual asset deposits or withdrawals of 1 million won or more. In May, they also implemented amendments to the anti-money laundering work regulations to clearly divide the roles and responsibilities of financial institutions' anti-money laundering officers.
An official at the financial authorities said, "Because staff and time are limited, we set inspection plans at the end and start of the year," and noted, "The intent is to give priority to inspecting places with insufficient AML implementation evaluation results."