Background
A virtual asset exchange was fined approximately KRW 2 billion by the financial regulator (the Korea Financial Intelligence Unit, FIU) on the ground that it had failed to properly perform its know-your-customer (KYC) obligations. The amount was large, but for the exchange this was also a serious measure capable of affecting future business renewal reviews.
What Was at Stake
The key question was "who must prove that the exchange breached its obligations." A sanction such as an administrative fine cannot be imposed lightly, and the authority imposing it must prove the violation. Here, however, the authority had not adequately established that the customers it had identified actually presented any money laundering or comparable risk.
How Changchun Helped
Changchun (attorneys Donghwan Shin and Jeehye Hyun) led with the principles of legality and culpability applicable to sanctions, making clear that the burden of proving a violation rests with the authority and not the exchange. We then pinpointed the authority's failure to prove any money laundering risk in relation to the customers it had identified, and the absence of any investigation into that question.
The court accepted Changchun's arguments and revoked the approximately KRW 2 billion administrative fine. It is the first case in Korea in which a court has revoked an administrative fine imposed on a virtual asset exchange, and has become an important benchmark for the industry. (Related coverage: Money Today article) (Outcomes depend on the facts of each case and may differ.)