Foreign firms criticize Korea's cumbersome name verification system

Financial Services Commission Vice Chairman Kim So-young speaks in a meeting with CEOs of foreign financial companies operating in Korea in central Seoul on Monday. [FSC]

Foreign financial firms raised the need for Korean regulators to review a local system that requires them to verify the names of their clients, a system they argue hinders their operations.

The firms said the name verification process makes business operations more challenging in Korea as it is difficult to confirm all the names of their clients, which are largely institutional investors, according to the Financial Services Commission (FSC).

The proposal was raised in a meeting between the FSC Vice Chairman Kim So-young and CEOs of foreign financial firms operating in Korea, including HSBC, JPMorgan Chase and Societe Generale, in central Seoul on Monday.

Financial companies in Korea are required to verify the names of their clients based on the Anti-Money Laundering Act and the real-name financial transaction system.

The firms also emphasized the need to review the regulatory screening required whenever they decrease capital and raised concerns about the prohibition preventing workers from simultaneously holding roles in a bank and brokerage firm.

The FSC “will continuously put in diverse efforts to create an environment for foreign financial companies to operate in Korea,” said Kim in a prepared statement, while noting the stagnant growth of the financial sector triggered by uncertainties, including real estate project financing loans, household and corporate debts, low growth and intensified competition.

“Foreign financial companies could contribute to raising international competitiveness and the overseas entrance of Korean financial companies, and could also help turn key cities in Korea into a financial hub,” Kim added.

He said the regulators will push to improve regulations based on the proposals the foreign financial firms raised and asked them to bring out innovative products and services based on the improved regulations.

“In the mid-to-long term, the internationalization of finance will be once again emphasized as a key factor to sustainable growth. In that sense, securing future growth engines through the globalization of Korean finance is one of the key tasks of the finance industry,” Kim added.

BY JIN MIN-JI [jin.minji@joongang.co.kr]