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Changes to FSS Audit Procedural Rules


On May 13, 2020, the Financial Services Commission (the “FSC”) amended the Regulation on Audits and Sanctions on Financial Institutions and its Detailed Enforcement Rules to better protect the rights and interests of financial institutions and their officers/employees.  Outlined below are the key details of the amendment. 

1.   Enhance protection of rights and interests of financial institutions and their officers/employees: 

  • To reduce the uncertainty caused by lengthy time to receive the audit/sanction result, the amendment establishes a standard processing period for each type of audit (e.g., 180 days for a comprehensive audit), and stipulates that any cases exceeding the applicable standard processing period shall be reported, along with the reasons for delay, to the FSC on a quarterly basis. 

  • Extend the advance notice period for comprehensive audits from one week to one month prior to the audit starting date. 

  • Introduce a new system that exempts sanctions for minor violations, on condition that the offending party completes regulatory compliance training. 

  • Extend the period for viewing the Financial Supervisory Service’s record on alleged violation and proposed sanction from three days to five days prior to the meeting of the Review and Sanction Committee. 

  • Allow industry and market experts to attend and state their opinion at the Review and Sanction Committee meeting by submitting an application. 

  • Introduce a system where a rights protection officer (a Director at the Anti-Corruption and Civil Rights Commission of Korea was appointed) serves the role of hearing the opinion from and defending financial institutions independently from the financial authorities, in the sanctions process. 

  • Add the category of consumer experts to the parties eligible to be appointed as a private-sector member of the Review and Sanction Committee. 

  • Codify the obligation of notifying the sanctioned party of the review/sanction results upon completion of the Review and Sanction Committee meeting. 

2.   Facilitate the implementation of effective internal controls:

  • Allow financial institutions and their officers/employees that are found to have made voluntary efforts to rectify violations to get the benefit of reducing administrative penalties and/or fines. 

  • Set an objective standard for reducing institutional sanctions imposed on financial institutions with good internal control practices.

[Korean version]