FIU loses appeal over Hanbitco fine… Court says it is "hard to conclude a violation"

YM Lee

Summary

The court said it rejected the FIU’s request regarding the roughly 2 billion won administrative fine, following the first-instance ruling, and also did so on appeal.
The court held that it was difficult to conclude the customers in question would engage in money laundering or terrorist financing, in assessing whether there was a breach of customer due diligence obligations under the Act on Reporting and Using Specified Financial Transaction Information.
Although the FIU refused to accept Hanbitco’s change notification for a won-market operator and imposed the fine, Hanbitco prevailed in an administrative lawsuit, undermining the validity of the sanctions.

*Photo=Korea Financial Intelligence Unit (FIU)*

The Korea Financial Intelligence Unit (FIU), an affiliate of the Financial Services Commission, also lost on appeal in a case concerning an administrative fine of about 2 billion won it imposed on crypto exchange Hanbitco Korea.

According to the legal community on the 19th, the Seoul Central District Court rejected the FIU’s claim in the appeal challenging the administrative fine of about 1.9942 billion won imposed on Hanbitco Korea. The court had previously ruled in Hanbitco’s favor at first instance on Nov. 29, 2024.

After signing a contract in June 2023 with Gwangju Bank for real-name verified deposit and withdrawal accounts, Hanbitco submitted to the FIU a change notification for a won-denominated market operator. However, in January 2024 the FIU imposed the fine, citing violations of the Act on Reporting and Using Specified Financial Transaction Information, on the grounds that Hanbitco failed to properly fulfill customer due diligence obligations for 197 customers.

The FIU also refused to accept the change notification for the won market operator, prompting Hanbitco to file a separate administrative lawsuit. Hanbitco proceeded with steps to apply for business closure in 2024, but won the administrative suit in November of the same year.

At the time, the court found that, under the Act on Reporting and Using Specified Financial Transaction Information, the obligation to verify customer identity applies where there is concern about money laundering or terrorist financing. It held that it was difficult to conclude the relevant customers would engage in such conduct, and therefore difficult to view the case as a legal violation.

The FIU appealed after losing at first instance, but the appeal was also dismissed. The FIU and Hanbitco were scheduled to appear at a hearing date in November last year, but it was postponed, and the FIU submitted explanatory materials in January this year.