South Korea's FSC tightens rules on crypto exchange bank accounts

In order to address increasing money laundering cases, South Korea's financial regulator has decided to tighten the monitoring of bank accounts related to cryptocurrency exchanges in the country.

The Financial Services Commission (FSC) announced on Wednesday that domestic banks which offer services to cryptocurrency exchanges must now monitor all those accounts held by an exchange.

The new amendment will initially be in effect only for a year, however, it may increase further depending on the response by the banks.

As reported by Coindesk, the FSC explained that they recently investigated three institutions - Nonghyup Bank, KB Kookmin Bank and KEB Hana Bank - and found that these exchanges had moved their assets from investors' depositing accounts to their own operating accounts.

Typically, an exchange has to keep their exchange's traders fund in a depositing account, while another operating account holds the investors' depositing account.

Normally, an exchange can have several such accounts to keep clarity in transactions. However, by shifting the funds from one account to another, the above-mentioned exchanges directly violated the guidelines issued by the government to keep investors' assets separate from their own.

So far, banks had to monitor only investors' depositing accounts at crypto exchanges. However, the absence of monitoring on several accounts may result in banks laundering money or evading taxes by using their operating accounts to buy cryptocurrencies from foreign exchanges.

In order to avoid this, an amendment which will require banks to monitor the different accounts of cryptocurrency exchanges has been implemented by the government. If any suspicious activity or transaction takes place by the crypto exchanges, then the banks must share that information with the FSC.