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South Korea Tightens Review of Major Shareholders in Crypto Firms, Mandates Advance Filing for Changes
Summary
- Authorities said they will strengthen criminal-record checks and reviews of major shareholders’ financial condition and social credibility at virtual-asset service providers starting Aug. 20.
- Under the revised Act on Reporting and Using Specified Financial Transaction Information, regulators will verify requirements related to major shareholders’ financial condition, social credibility and internal-control systems during the filing review stage.
- Changes involving major shareholders will shift from a post-change filing to a prior filing 30 days before the change, and authorities said the soundness of operators and their major shareholders must be reviewed from the market-entry stage to preserve trust in the virtual-asset market.
Forecast Trend Report by Period
South Korean regulators will tighten their review of major shareholders at virtual-asset service providers starting Aug. 20.
The Financial Intelligence Unit, under the Financial Services Commission, said on Aug. 13 that it will finalize and implement a revised filing manual to coincide with amendments to the Act on Reporting and Using Specified Financial Transaction Information taking effect on Aug. 20. The FIU and the Financial Supervisory Service updated the manual to reflect revisions to the law, its enforcement decree and supervisory regulations introduced in January.
The authorities also held a briefing the same day to explain the changes to the industry. Participants included the Digital Asset eXchange Alliance, or DAXA, and 28 virtual-asset service providers registered under the law.
The amended law expands criminal-record screening in the registration review process to major shareholders from the current scope of chief executives and executives. It also requires regulators to check at the filing review stage whether applicants meet standards on financial condition, social credibility, and the organizations, personnel, facilities and internal-control systems needed to carry out anti-money laundering duties.
The revised manual provides practical guidance on how firms should prepare for and comply with those requirements when filing. Under the new manual, checks on legal violations, financial condition and social credibility will extend to major shareholders, in addition to the firms, their representatives and executives already subject to review.
Filing documents must include all major shareholders subject to the reporting requirement, along with their legal names, nationalities, and shareholding and equity ownership status. Changes involving major shareholders will also move from a post-change filing within 14 days to a prior filing 30 days before the change.
Ha Ju-sik, head of system operations planning at the FIU, said the virtual-asset market now has a greater impact on the public and financial markets than it did in 2021, when the reporting regime was introduced. To maintain trust in the virtual-asset market, authorities need to thoroughly review the soundness of operators and their major shareholders from the market-entry stage, he added.
