Virtual asset business owners such as Bithumb applied with the Special Act, and fines for negligence in violation of internal control

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Internal control obligations, data preservation obligations, and action obligations of operators have been added to the items imposed on administrative fines for virtual asset providers such as Bithumb and Upbit, which are cryptocurrency trading sites that are subject to the revised Specific Financial Information Act (Special Act). In addition, a provision to reduce fines by 50% for violations of the Special Act was also newly established, and the limit on fines reduction, which was recognized up to 50% for small business establishments, will be abolished.

On the 10th, the Financial Services Commission announced that it was announcing the change of the’Inspection and Sanction Regulations on Reporting of Specific Financial Transaction Information, etc.’ The period is from the 11th to the 20th of next month.

In the Special Money Act, a person who sells, buys, exchanges, transfers, stores, manages, brokers, or acts as an agency for virtual assets is defined as a’virtual asset business operator’.

According to the Financial Services Commission, internal control obligations, data preservation obligations, and virtual asset business operators’ obligations to take action were added as new items to be imposed on the basis of the penalty calculation criteria.

Internal control obligations included the obligation to take measures such as designating a person in charge of reporting suspicious transactions and high-value cash transactions, writing work guidelines, and training employees. The obligations of virtual asset providers include separate management of transaction details for each customer, and transactions only with customers that have been verified by customers.

The estimated penalty amount was calculated as 60% of the legal maximum, 50% for normal, and 40% for minor, if the result of the violation was significant and the motive was deliberately judged. In addition, 50% of the legal maximum amount, usually 40%, and in minor cases, 30% will be applied if the motive for the violation is determined as negligence and the result of the violation is significant.

Among the standards for imposing fines, reasons for reduction were also supplemented.

In particular, the’Comprehensive Reduction Regulations’ that can reduce the fines by 50%, taking into account the fairness with the regulations on inspection and sanctions of financial institutions, and taking into account the realistic burden of violators, the content and circumstances of the violation, has been newly established.

The reduction limit was abolished because of concerns that the amount of fines for negligence may be excessively burdened for small business owners. Under the current regulations, if the estimated fine for negligence exceeds 10% of the size of the business operator (capital or total capital), reduction is allowed within the excess, but the limit is only recognized up to 50% of the planned amount. The criteria for calculating the size of business operators were classified into financial companies, general companies, and private businesses.

In addition, the regulations related to fines were also integrated into the’Inspection and Sanction Regulations on Reporting of Specific Financial Transaction Information’.