Standards for reselling virtual accounts by payment gateway (PG) companies will be tightened going forward. PG companies must regularly monitor merchants' use of virtual accounts and suspend the transaction if an illegal transaction is suspected.
On the 29th, the Financial Supervisory Service announced the "virtual account reselling business processing standards." After a preparation period for PG companies to build systems and set detailed procedures, the standards will take effect in July.
A virtual account is a deposit-only account consolidated to a bank's master account and is used by merchants to receive payment for goods. PG companies provide merchants with accounts issued by banks and play an intermediary role by aggregating and settling deposited funds.
The problem has been a management vacuum. Because virtual accounts have been issued mainly under contracts between banks and PGs, responsibility for managing actual downstream merchants was unclear. Taking advantage of this gap, some accounts have reportedly been used for laundering illegal gambling funds, a criticism that has been raised consistently.
The core of the new standards is to hold PG companies responsible for the entire distribution process of virtual accounts. First, PG companies must establish internal screening standards and procedures to verify the existence, financial soundness, and fitness of purpose of merchants using virtual accounts. They must periodically check how virtual accounts are used and, if illegal conduct is suspected, consider suspending transactions or terminating contracts.
Anti-money laundering obligations are also imposed. PG companies must carry out customer due diligence (CDD) on merchants and re-perform customer verification while the transaction is maintained. This refers to procedures in which a financial company verifies the counterparty's identity and fund flows to prevent illegal money laundering. They are also obligated to report if an illegal transaction is suspected.
Fixed virtual accounts that allow repeated deposits will be issued only on a limited basis for specific purposes such as regular collections. Settlement methods will apply batch settlement or deferred settlement to block suspected illegal transactions in advance.
A Financial Supervisory Service (FSS) official said, "This measure is expected to prevent illegal activities using PG companies' virtual accounts and contribute to establishing a sound market order and preventing consumer harm."