Mandatory KYC Verification May go Against Privacy Laws in South Korea
As the South Korean government is preparing to implement the compliance processes of Know Your Customer (KYC) and Anti-Money Laundering (AML), it has prompted confusion amongst legal experts as to whether it is in contradiction with other laws. As reported by Digital Today, the existing Personal Information Protection Act would be contravened by the new requirements. The former stipulates that local companies are not legally allowed to request social security numbers. This measure is also applicable to financial institutions, but it is possible for them to request it under some exceptional circumstances, such as for conducting notable banking transactions.
It is expected that the Enforcement Decree of the Special Payments Act will be put into effect from March 2021. Under it, all ‘virtual asset providers’ will be required by law to get the real names of their customers by using personal data, such as social security numbers, for verification purposes. The Financial Information Analysis Institute made a special note for addressing the current situation of ambiguity related to the upcoming KYC-AML bill on cryptocurrency exchanges. It argued that exchanges cannot be considered financial institutions because they are purely hosted on the internet and are more like ‘mail-order sellers’.
It said that virtual asset operators couldn’t be given the same status as that of financial business operators and the revised special money law couldn’t consider them institutional financial companies either. According to local legal experts who specialize in the crypto industry, the ambiguity that has been created by the upcoming AML-KYC compliance measures means that even if they add such content in the Virtual Asset Business Rights Act, there is still a long way to go. With an implementation date set for March of next year, the crypto bill requires all existing crypto exchanges to fulfill the requirements for a real-name account, along with ISMS authentication.
Plus, they will be required to report their applications within six months of the law being implemented. However, according to legal experts, this issue needs to be discussed as soon as possible. It is essential to clarify the status of the crypto exchanges within the new KYC-AML measures being introduced. They need to discuss if it is possible to give crypto exchanges legal exemptions in regard to asking clients to provide social security numbers. There is a possibility that many users may not be willing to do so because they don’t wish to disclose their identity.