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Proposed Amendment to the Regulation on Audits and Sanctions on Financial Institutions


On January 19, the Financial Services Commission (“FSC”) announced a proposed amendment to the Regulation on Audits and Sanctions on Financial Institutions (the “Regulation”) to protect the rights and interests of the regulated parties and provide incentives for financial institutions to rectify unlawful practices.  The major changes that have been proposed are as follows: 

1.    Establishment of Standard Audit Processing Periods and Reporting of Prolonged Cases to the FSC

For each type of audit, a standard processing period will be established.  Cases exceeding the applicable standard processing periods will be reported, along with the reasons for delay, to the FSC on a quarterly basis, thereby expediting the processing of audit results. 

The standard processing period for each type of audit is as follows: 

Comprehensive Audit  Partial Audit
Compliance Audit  Soundness Audit 
180 days 152 days 90 days 

2.    Extension of the Advance Notice Period

For comprehensive audits, the advance notice period will be extended from one week to one month in order to allow financial institutions to be fully prepared. 

3.    Easing of Regulations on Minor Violations

A new system will be introduced whereby those who have committed minor violations due to their unawareness of applicable laws/regulations or due to their simple negligence, are exempt from sanctions on condition that they complete regulatory compliance training. 

4.    Encouragement for Voluntary Efforts in Rectifying Violations

For financial institutions and their officers/employees, who put in voluntary efforts to rectify violations or cooperated with the FSC by voluntarily reporting any violation, the amount of an administration penalty or fine will be reduced by up to 50%. 

The proposed amendment to the Regulation is scheduled to take effect in March 2020 after advance notice of the change has been given (between January 23, 2020 and March 2, 2020) and the FSC approves the change (in March 2020).