South Korean Banks Have New Requirements For Crypto Exchanges Due To FATF Guidelines

Several cryptocurrency exchanges in South Korea have mentioned that they’re facing issues renewing their agreements with local banks due to a change of internal policies. According to market insiders, banks are now starting to follow the new FATF guidelines which facilitate much stricter Anti Money Laundering rules for both crypto exchanges as well as other sectors of the financial industry.

The Financial Action Task Force has been a scary watchdog and every local authority approaches with caution when it comes to regulating the crypto industry. FATF has the strongest authority, capable of limiting the financial industry in a single country. It is not surprising that in making any decision, the regulator of each state carefully weighs all the risks.

As it became known earlier in June, the FATF adopted its new rules on crypto assets and published its updated Guidance on Virtual Assets and Virtual Asset Service Providers. Under these new measures, crypto service providers are to implement the same requirements as traditional financial institutions, despite many circumstances, widely discussed by the crypto enthusiasts and engaged companies.

More than that, FATF also announced that it will examine the actions that countries are taking during the following 12 months, engaging industry to enhance compliance with its standards:

“The FATF will monitor implementation of the new requirements by countries and service providers and conduct a 12-month review in June 2020.”

The aftermath is here already

According to some South Korean bank representatives, the accounts that crypto exchanges held with them went through renewal every six months without any significant issues, but now that the new FATF guidelines place responsibility directly onto the banks themselves, there’s no other way but to implement stricter regulations. The responsibility placed on these banks is in direct accordance with the transaction history of their customers, regardless of their retail or institutional users. Therefore, should crypto exchanges be accused of money laundering, banks would find themselves caught in the flames as well.

No matter how user-friendly a company wants its platform to be, if it hurts the reputation, and most importantly revenue, there’s no way they’d stand idly by and let it happen. South Korean banks believe that the new compliance standards do not hurt the profitability of crypto exchanges, nor the essence of blockchain, it’s simply a method to weed out any unlawful activities.

Those who were trustworthy from the beginning, won’t have any issues complying with the new guidelines, but those who had money laundering cases in the past, will most likely protest and oppose it, according to several banking experts in South Korea.

However, there still are problems which couldn’t be immediately solved. As Chainanalysis company reported back in April, for example, exchanges cannot send KYC information to recipient platforms whenever there is a transaction, noting that some recipients do not possess the infrastructure needed. They also noted there is currently no way of telling whether a beneficiary uses a “virtual asset services provider” (VASP) or their own personal wallet.

Fears have been expressed by many representatives of the crypto industry, among whom are official representatives of the exchanges, such as John ROTH from Bittrex and Mary Beth BUCHANAN from Kraken. According to them, the compliance will require a fundamental restructuring of the blockchain technology or the establishment of a global system among more than 200 exchanges in the world. American exchanges are discussing such a system, but so far there is no technological solution that would allow full compliance with FATF rules.

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