SOUTH KOREA Law and Practice Contributed by: Jongbaek Park, Seungil Hong, Seyeong Im and Eric Jeong, Bae, Kim & Lee LLC
without any licence. However, for a licensed bank to provide these services, it may have to file a report in relation to it as an incidental business engaged in by the bank. 2.14 Impact of AML and Sanctions Rules In Korea, the AML Act governs AML as described in 2.9 Gatekeeper Liability . As these rules apply to “financial companies” as defined under the same Act, particular fintech com - panies, such as VASPs and P2P lending platform operators which are classified as “financial compa - nies” under the Act, should satisfy the applicable reg - ulations under the Act. However, unregulated fintech companies who do not fall under the scope of “finan - cial companies” are not directly subject to the Act. 2.15 Financial Action Task Force (FATF) Standards As a member of the Financial Action Task Force (the “FATF”), Korea has established its AML and counter - ing the financing of terrorism (CFT) framework based on FATF Recommendations. These requirements are codified in the AML Act, which is the primary legisla - tive basis for Korea’s AML/CFT regime. Under this regime, financial institutions have to carry out key compliance measures, including KYC, STR and large cash transaction reporting. 2.16 Reverse Solicitation While the concept of reverse solicitation is generally recognised in Korea, the extent of its application var - ies across different industries and within different sec - tors of the financial industry in Korea. For example, under the FSCMA, foreign investment dealers or brokers do not have to obtain a Korean licence if they do not engage in solicitation or adver - tising in Korea or towards Korean residents and merely engage in dealing or brokering transactions in response to reverse enquiries initiated by Korean residents. In contrast, most other Korean financial regulatory laws do not explicitly address reverse solicitation, and market practices regarding its interpretation differ by
sector. For example, in the virtual asset sector, a for - eign service provider is considered to be engaged in business or marketing activities towards Korean users if it offers a Korean-language website, conducts mar - keting campaigns targeting Korean users or enables Korean customers to purchase virtual assets using credit cards. 3. Robo-Advisers 3.1 Requirement for Different Business Models Robo-advisers must satisfy the prescribed require - ments to become an “electronic investment advice device” under the FSCMA and pass a screening test. However, there is no requirement for different busi - ness models to be adopted for different asset classes. 3.2 Legacy Players’ Implementation of Solutions Introduced by Robo-Advisers Many traditional financial companies have developed a robo-adviser system. In addition, they are also actively implementing solutions developed by other fintech companies specialised in robo-adviser busi - ness. Since the introduction of the robo-adviser system, the number of consumers using robo-adviser services has gradually increased. 3.3 Issues Relating to Best Execution of Customer Trades There are currently no “best execution” obligations applicable to robo-advisers. However, a financial company utilising a robo-adviser in providing financial services owes a duty of care to its customers in the same way, generally speaking, a financial company does under the FSCMA.
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