Even as anti-money laundering regulation grows stricter, an administrative fine must be premised on satisfaction of the statutory requirements and on proof of that satisfaction. On February 19, 2026, the Seoul Central District Court ruled that no administrative fine would be imposed in respect of the entirety of the fine levied by the Commissioner of the Korea Financial Intelligence Unit on the virtual asset service provider Hanbitco Korea Co., Ltd. (2024Gwa50186). We are pleased to introduce the case commentary on that ruling contributed by attorney Jeehye Hyun of Law Firm Changchun LLC to Lawtimes on March 28, 2026.
1. Overview of the Case and Procedural History
Around November 2023, the Commissioner of the Korea Financial Intelligence Unit imposed administrative fines of approximately KRW 1.99 billion on Hanbitco Korea Co., Ltd., which operates the virtual asset exchange "Hanbitco," on the grounds of article 5-2(1)2 (breach of the enhanced due diligence obligation) and article 8 (breach of the obligation to impose transaction restrictions) of the Act on Reporting and Use of Certain Financial Transaction Information. The Seoul Central District Court ruled that none of those fines would be imposed — the same conclusion reached in its summary ruling of November 29, 2024.
2. Requirements for the Enhanced Due Diligence Obligation
Article 5-2(1) of the Act divides the customer due diligence obligation into ordinary customer due diligence (CDD) and enhanced due diligence (EDD). EDD is triggered only where the heightened requirement that "there is a risk that the customer may engage in money laundering or in the financing of public intimidation" is met, and the court declined to find any violation at all on the ground that this heightened requirement had not been made out. That conclusion is consistent with the rationale of the risk-based approach.
3. Distinguishing Enhanced Due Diligence From the Risk Assessment That Precedes It
The imposing agency argued that, by verifying transaction purposes and sources of funds at the sign-up stage, Hanbitco Korea had itself classified every customer as subject to EDD. The court rejected this, making clear that collecting information for a risk assessment (RA) and classifying customers as subject to EDD on the basis of its results are separate procedures. Collecting information proactively for the sake of a thorough risk assessment cannot itself serve as the basis for a finding that customers were classified as subject to the EDD obligation.
4. Practical Implications: Is "Non-Face-to-Face Virtual Asset Trading" Inherently High-Risk for Money Laundering?
The imposing agency argued that the mere fact of non-face-to-face virtual asset trading made every user subject to EDD. The court did not accept this. Non-face-to-face transactions have already become an ordinary mode of financial dealing, and the ruling confirms a principle already reflected in both international and domestic standards — that money laundering risk assessment must take a range of factors into account, including country risk and customer-type risk.
Closing
This ruling reaffirms that even amid tightening anti-money laundering regulation, an administrative fine must be premised on satisfaction of the statutory requirements and on proof of that satisfaction. It reminds us once again that regulators are strictly bound by the requirements the statute lays down, and that financial institutions and others must likewise operate their customer due diligence systems in a manner faithful to the essence of the risk-based approach.
For details of the case commentary, please see the link below.
Enhanced Due Diligence (EDD) Should Apply Only Where the Statutory Requirements Are Met