Strict Regulations Force South Korean Banks to Stop Servicing Cryptocurrency Exchanges

Following the inspections of six major banks this week, South Korean regulators have uncovered some inadequate internal controls for handling cryptocurrency exchanges. Given the government’s strict rules, some banks have decided to stop providing services to cryptocurrency exchanges instead of overhauling their systems further to comply with the regulations.

Also read: South Korea Urges 23 Countries, EU, and IMF to Collaborate on Curbing Crypto Trading

Banks’ Inadequate Internal Controls

The South Korean Financial Intelligence Unit (FIU) and the Financial Supervisory Service (FSS) jointly conducted on-site inspections of the country’s six major banks on Monday, as previously reported.

Strict Regulations Force South Korean Banks to Stop Servicing Cryptocurrency ExchangesWoori Bank, KB Kookmin Bank, Shinhan Bank, Nonghyup Bank, Korea Development Bank (KDB), and Industrial Bank of Korea (IBK) are being inspected. The aim of the audits is to ascertain whether these banks have fulfilled their anti-money laundering obligations, as mandated by the government’s cryptocurrency regulations.

The inspection period was originally from January 8 to 11 but the agencies extended it on Thursday to January 16, Money Today reported. An FSS officer was quoted saying:

We have extended the period since we need to identify and respond to more precise conditions through inspections of inadequate internal controls found during the on-site inspection process.

Banks Dropping Out

On Friday, local publications reported that some banks have withdrawn from implementing the government mandated, real-name verification system. The regulators are working on creating this system to end the practice of anonymous trading which is currently possible through the use of virtual accounts. These accounts are issued by banks for crypto exchanges; each consists of a large number of sub-accounts. Crypto exchanges Read More Here