Financial authorities to investigate all virtual asset exchanges for expedient honeycomb accounts

[Digital Today Correspondent Moon Jeong-eun] The financial authorities are conducting a full investigation into virtual asset exchanges that use so-called ‘honeycomb accounts’ as expedient methods.

The Financial Intelligence Unit (FIU) of the Financial Services Commission held the first meeting of the ‘2021 Commission of Inspection Institutions Council’ at the Federation of Banks on the morning of the 9th with 11 inspection agencies, including the Financial Supervisory Service, which entrusted the inspection of the anti-money laundering system.

The 11 inspection agencies are the Ministry of Public Administration and Security, the Ministry of SMEs and Startups, the Korea Customs Service, the Postal Service Headquarters, the Jeju Provincial Office, the Financial Supervisory Service, the Agricultural Cooperatives, the Fisheries Cooperatives, the Credit Cooperatives, the Forestry Cooperative, and the Saemaul Geumgo Central Association.

First, the Financial Supervisory Service will strengthen monitoring of third-party and fake accounts of virtual asset operators, including virtual asset exchanges.

In accordance with the enforcement of the Specific Financial Information Act (Special Provisions Act) in March, virtual asset exchanges must be issued a ‘real-name confirmation deposit and withdrawal account (real-name account)’ and report the business by September 24.

Exchanges, which have not been issued real-name accounts from commercial banks, have operated the won market using collection accounts, that is, so-called ‘honeycomb accounts’. It has been operating in a way that there are multiple customer personal accounts under the corporate account of the exchange.

As commercial banks strictly supervise and restrict the opening of honeycomb accounts after the enforcement of the Special Provisions Act, the financial authorities explained that some virtual asset exchanges are operating mutual finance and small financial company accounts as honeycomb accounts. It is said that the account of a small financial company such as mutual finance, which has weak monitoring unlike banks, was used as a honeycomb account.

According to the financial authorities, some virtual asset exchanges operated honeycomb accounts under the names of disguised affiliates and affiliated law firms rather than their own. Some also allow virtual assets to be traded only with electronic gift certificates sold by partner companies such as gift certificate service businesses, effectively operating partner companies’ accounts as honeycomb accounts.

Financial authorities also noted that the risk of diverting customer deposits is increasing by temporarily operating until the expiration of the special payment law reporting deadline.

Accordingly, the FIU, together with 11 inspection entrusted agencies, will strengthen monitoring of the beehive accounts of virtual asset operators who do not use real-name accounts.

From this month, the FIU will be notified of the full investigation into all financial companies, including virtual asset business disguised accounts and beehive accounts under the names of others, from this month. The aggregated information will be shared with entrusted institutions, related institutions, and financial companies, and joint response measures will be taken.

The financial authorities also plan to reject and terminate financial transactions for accounts disguised as virtual asset business operators or accounts operated differently for the purpose of the transaction. Suspicious transactions such as large amounts of deposits transferred from the virtual asset operator’s honeycomb account to another person’s account or personal account will also be reported to the FIU.

In addition, the FIU plans to strengthen supervision and inspection, noting the increase in money laundering crimes such as fraudulent loans, embezzlement of investment, and illegal operation of custodial assets linked to internal employees of financial companies.