Rules Change Approved to Strengthen Registration and Anti-Money Laundering Requirements of VASPs

The Financial Services Commission announced that the government approved a revision bill for the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information (the “Act” hereinafter) at the cabinet meeting held on August 11. With the revised rules in place, virtual asset service providers (VASPs) will be subject to stricter registration requirements and enhanced anti-money laundering (AML) duty in their handling of virtual asset transfers.

The rules change provide details regarding the registration requirements of VASPs, the notification of sanctions imposed on retired employees, the strengthened AML duty for virtual asset transfers (travel rule transactions), and the enhanced customer due diligence (CDD) requirement.

I. Enhanced Entry Rules and Registration Requirements

The scope of major shareholders falling under the scrutiny for the entry registration of a VASP will be expanded to include the chief executive officer or controlling shareholder of the company, and the largest shareholder and company representative if the largest shareholder is a corporate entity.

Conditions for non-acceptance of registration

First, VASPs should meet the following financial soundness and social credibility requirements for registration or otherwise face non-acceptance of registration.

More specifically, VASPs (a) should maintain a debt ratio of 200 percent or below, (b) should not have been in default in the past three years, and (c) should not have been identified as an insolvent financial institution or have had its operating license or registration revoked in the past in violation of financial laws.

Executive officers (including CEOs) of VASPs need to meet specific qualifications prescribed under the Act on Corporate Governance of Financial Companies.