On November 30 2018, the Act on Prevention of Transfer
of Criminal Proceeds was amended in order to introduce new
methods of verifying the identity of customers. The Act aims to
prevent services provided by specified business operators under
the Act, such as financial institutions, from being used for
money laundering by criminal organisations.
Overview of the Act before amendment
Under the Act, specified business operators are required to
verify the identity of customers with whom they engage in
transactions. For example, banks are required to verify the
identity of customers before opening accounts for them.
The methods of verification are also prescribed in the Act.
The method of verifying the identity of customers in the case
of a non-face-to-face transaction was the receipt and
confirmation of certain verification documents, such as a
driver's licence or passport, by mail, and sending
transaction-related documents to the address of the customers
by registered mail, and so on. The problem with this method was
that specified business operators had to bear the costs of
printing and mailing. In addition, given the development of
fintech business and the increase in online transactions, there
was a hope that more efficient methods of verification that
were better suited to fintech businesses would be
Newly introduced methods of verification – online
Through the revision of the Act, four new methods of online
identity verification were introduced for the circumstances
mentioned above: (i) the receipt of facial photos and
verification document images; (ii) the receipt of facial photos
and IC chip storage information; (iii) the receipt of
verification document images or IC chip storage information and
enquiries at the banks at which the customers hold accounts,
and so on; and, (iv) the receipt of verification document
images or IC chip storage information and the transfer of a
specified amount of money to the customers' accounts.
By using these newly introduced methods, the verification of
customer identity can be completed by way of the internet
alone; for instance, when opening bank accounts via the
internet. In particular, methods (i) and (ii) above are likely
to be very convenient, since the verification process can be
completed immediately via the relevant application
('application' here includes apps for smart phones).