Japanese authorities deny registration of virtual currency business FSHO
Inadequate AML procedures and a poor protection system for clients are among the reasons for the denial.
In a sign of the toughening approach of the Japanese authorities regarding virtual currency businesses, the Financial Services Agency (FSA) today announced it denies the registration of virtual currency exchange business FSHO Co., Ltd. The company falls into the category “a corporation that has not established a system to properly and reliably carry out virtual currency exchange activities”.
FSHO applied for a registration in September last year, with the application followed by a number of on-site inspections conducted by the Japanese authorities. The inspections uncovered irregularities with concerning customer protection, risk management and anti-money laundering (AML) procedures. The business got business improvement orders but, according to the regulators, the measures taken are not sufficient to justify a nod of approval.
The Japanese authorities have been tightening their oversight over the cryptocurrency segment. The latest company to get a business improvement order was Everybody’s Bitcoin Inc. The administrative sanctions were imposed following on an on-site inspection conducted by the Japanese Financial Services Agency (FSA). The check concerned the risk management system of the company. The inspection has detected a series of non-compliance issues, including problems with keeping statutory books, insufficient provision of information to clients, AML issues, lack of control over system risks, as well as problems with internal audits.
The Japanese regulators have issued a raft of business improvement orders over the last months following the theft of cryptocurrency from Coincheck. GMO Coin, the virtual currency business of GMO Internet Inc. (TYO:9449), was among those companies targeted by such orders. GMO Coin was instructed to establish an effective system risk management system.
Coincheck was eventually acquired by online trading services provider Monex Group, Inc. (TYO:8698), with the JPY 3.6 billion deal completed on April 16, 2018.