Korean Banks Fail Crypto Exchanges In The War Against Money Laundering

Major Crypto Exchanges in South Korea are voluntarily complying with the government’s anti-money laundering (AML) oversight. However, Korean banks have been blamed for lagging behind in this war. The country is on the way to improving its Crypto-related AML measures with their American counterparts.

The Banks’ Effort To Comply With AML Measures Not Enough

The current South Korean AML measures have given the banks a crucial role in the fight against money laundering. They are responsible for tracking and reporting these activities. The current AML directives, however, do not involve the Crypto-Exchanges directly. As a sign of compliance with the AML directives, most of the banks have boosted their compliance officers.

On Friday, the Korea Times reported that NH Nonghyup Bank had created a department that will only be dealing with compliance-related issues. The paper further revealed that the bank now has 23 employees working in the unit from 16 a few months ago. However, there is a feeling that the response of the banks is not enough. On Saturday, Joongang Daily reported that the Financial Supervisory Service [FSS] had blamed the banks for not improving their internal control systems sufficiently.

South Korea Working With The US

To intensify the war against money laundering, the Korean government has also collaborated with America. The Korea Times reported that the U.S. Treasury Secretary Sigal Mandelker has met with FSC Vice Chairman Kim Yong-beom to discuss ways to boost anti-money-laundering measures in the two countries. The discussion mainly revolved around Cryptocurrencies. The two leaders also talked about international cooperation measures.

The US has noted that the Korean banks’ AML measures are insufficient. On Friday, the Financial Services Agency (FSC), Korea’s main financial regulatory body, reported that the New York Department of Financial Services (NYDFS) wants to investigate New York-based Korean banks that are suspected of not complying with the measures.

The U.S. regulator has been unforgiving to the banks that fail to comply with anti-money-laundering measures. Joongang Daily reported that Nonghyup Bank was fined $11 million by the regulatory body for not complying with the new guidelines. The paper further added that NYDFS would be investigating six New York-based Korean banks before the end of this month or next month. The six banks were identified as Nonghyup Bank, Woori Bank, KB Kookmin Bank, Shinhan Bank, Industrial Bank of Korea and the Korea Development Bank.

The Korean banks are expected to be more serious in the fight against money laundering as any penalties by the New York DFS can adversely affect their reputation and that of entire Korea’ financial sector. The Korean financial regulators are encouraging the local banks to reinforce their compliance systems.

Crypto Exchanges On The Right Path In The War Against Money Laundering

The Financial Intelligence Unit (FIU) is the body that is in charge of money laundering prevention in the country. The authority also checks illegal cash flows, such as terrorist financing. The FIU and the FSS work together to ensure the banks comply with AML measures. Although the Crypto Exchanges are not under FIU and FSS, the regulators want to bring them under their authority.

Several Crypto Exchanges in the country have already enhanced their AML and internal control programs. For instance, Bithumb has restricted 11 countries on its platform. More exchanges are already working with the Korean Blockchain Industry Association.