"Criminal Records of Major Shareholders Also Reviewed" Entry Regulations for Virtual Asset Service Providers Strengthened

Amendment to the Specific Financial Information Act Passed by National Assembly

From now on, during the review process for virtual asset service provider registration, the criminal records of major shareholders will also be subject to scrutiny.

According to the Financial Services Commission on January 29, the National Assembly passed an amendment to the "Act on Reporting and Use of Certain Financial Transaction Information" (the Specific Financial Information Act) during its plenary session on this day. The main points of the amendment are to strengthen entry regulations for virtual asset service providers and to introduce a provision for notifying disciplinary actions against retirees. The amendment is scheduled to take effect around August, six months after the law is promulgated.

According to the amendment, the scope of review and applicable laws have been expanded so that, during the registration review process for virtual asset service providers, the criminal records of major shareholders-which were previously excluded from review-can now be examined. Previously, only representatives and executives were subject to review, but from now on, major shareholders will also be included.

The applicable laws have also been expanded. Previously, they included the Specific Financial Information Act, the Act on Regulation and Punishment of Criminal Proceeds Concealment, the Act on Prohibition of Financing for Offenses of Public Intimidation, the Foreign Exchange Transactions Act, and the Capital Markets Act. Now, the scope will also cover the Narcotics Control Act, the Monopoly Regulation and Fair Trade Act, the Punishment of Tax Offenses Act, the Act on the Aggravated Punishment of Specific Economic Crimes, the Virtual Asset User Protection Act (for offenses punishable by a fine or higher), and other laws (for offenses punishable by imprisonment or higher).

In addition, it will now be possible to review whether a virtual asset service provider has a sound financial status, social credibility, and appropriate organizational structure, personnel, IT systems, and internal control systems to comply with relevant laws such as the Specific Financial Information Act and the Virtual Asset User Protection Act. Furthermore, even when accepting a registration, there is now a legal basis to attach binding "conditions" for anti-money laundering and user protection.

The amendment also introduces a provision allowing the Financial Intelligence Unit to notify the heads of financial companies and similar entities of disciplinary actions against employees who violated the Specific Financial Information Act and retired before the sanctions were imposed. The heads of these companies are required to inform the retired employees of the disciplinary actions and to record and maintain this information.

The Financial Services Commission stated, "With this amendment to the Specific Financial Information Act, the entry of unqualified virtual asset service providers into the market will be effectively blocked, which will help establish a sound order in the virtual asset market and contribute to user protection." The commission also expressed expectations that "the provision allowing notification of disciplinary actions to retired employees will enhance the effectiveness of sanctions." The Financial Intelligence Unit plans to revise subordinate regulations before the law comes into effect.