NongHyup Bank Temporarily Demands Suspension of Coin Deposits and Withdrawals at Bithumb and Coinone
Concern Over Anti-Money Laundering Responsibility... Seeks Safety Measures
Expected Impact on Real-Name Account Certification Renewal
[Asia Economy Reporter Kim Jin-ho] With the deadline for reporting under the Act on Reporting and Using Specified Financial Transaction Information (the Specified Financial Transaction Information Act, or Specified Act) just over two months away, a shift in dynamics is being observed between major commercial banks and cryptocurrency exchanges. This comes as some banks have proposed to exchanges that they temporarily restrict coin transfers due to the obligation to conduct risk assessments to prevent money laundering. This has led to speculation that banks, judging that the drawbacks outweigh the benefits, may be distancing themselves even from their existing partner exchanges.
According to the financial sector on the 5th, NH Nonghyup Bank recently requested Bithumb and Coinone to temporarily block coin deposits and withdrawals. This is a proposal to restrict coin movements between exchanges until the 'Travel Rule' system is established.
The Travel Rule is a regulation imposed by the Financial Action Task Force (FATF) that requires businesses (exchanges) to collect information on both the sender and receiver when transferring virtual currencies to prevent money laundering. Although the Travel Rule is set to be applied from March 25 next year, Nonghyup Bank proposed to halt coin transfers well ahead of that date.
Nonghyup Bank took this proactive measure due to 'risk' factors. It was a decision made to preemptively block any potential money laundering-related risks. A Nonghyup Bank official explained, "Since all responsibility related to anti-money laundering ultimately falls on the bank, we proposed to establish safeguards."
Shinhan Bank, which is partnered with Korbit, is reportedly in a similar situation. With Nonghyup Bank taking the lead, Shinhan Bank is said to be considering requesting similar measures.
Within the banking sector, there are forecasts that re-contracting for real-name account issuance will become more difficult. A representative from a commercial bank said, "From the bank's perspective, there is nothing more sensitive than money laundering issues," adding, "There are talks that if the Travel Rule is not implemented, re-contracting for real-name account issuance could also be challenging."
The reason banks are reacting so sensitively is largely due to the rejection of their 'exemption requests' that would absolve them of responsibility even if incidents such as money laundering occur at cryptocurrency exchanges. This has created a situation where banks must take a more conservative approach.
Financial Services Commission Chairman Eun Sung-soo firmly rejected the exemption requests proposed by the Korea Federation of Banks earlier last month, stating, "The primary responsibility for money laundering lies with the banks." Even if exemption standards are established, they would only apply domestically and cannot serve as a means to avoid sanctions from foreign governments or financial authorities. Chairman Eun pointed out, "Even if the financial authorities grant exemptions, would it be acceptable if banks are fined for money laundering in the U.S.?" and added, "There could be cases where domestic banks are unable to conduct transactions in New York due to money laundering issues."
Meanwhile, the four major exchanges partnered with major banks for real-name accounts must complete their reporting by September 24, when the Specified Act's grace period ends. Under the Specified Act, cryptocurrency exchanges must meet requirements such as obtaining Information Security Management System (ISMS) certification and establishing partnerships for real-name account issuance to submit reports to the Financial Intelligence Unit (FIU) and continue their operations.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
