Japan’s Financial Watchdog Orders Hacked Exchange Zaif to Improve Business

Japan’s financial regulator, the Financial Service Agency (FSA), has issued a business improvement order to Japanese investment firm and Zaif crypto exchange operator Fisco.

According to Cointelegraph Japan, the FSA has identified shortcomings in Fisco’s internal control systems — such as anti-money laundering measures — and found it to be insufficiently compliant with local laws and regulations.

As previously reported, Fisco assumed ownership of Japanese exchange Zaif in fall 2018, shortly after the platform was hacked to the tune of ~$59.7 million.

The FSA’s action has reportedly been taken under the provisions of the country’s Act on Settlement of Funds.

The regulator said Fisco’s management failed to recognize the importance of legal compliance, and ordered it to improve risk management systems. It must also establish more robust internal management, outsourcing, accounting, and auditing.

Moreover, the FSA has reportedly identified shortcomings in the platform’s customer verification systems, noting that:

“In the section where users can enter identity verification information, they can select “other” if it is not possible to check their occupation or purpose of the transaction. When “other” is selected, the account can be opened without entering anything.”

As Cointelegraph Japan reports, twelve of the nineteen crypto exchange businesses registered for on-site FSA inspections have now been completed. Of the remaining seven, up to four have reportedly not yet launched. The remaining await a survey by the regulator.

This April, Cointelegraph cited unconfirmed reports that the FSA had conducted investigations into both Fisco and Huobi Japan — the local off-shoot of China-born exchange Huobi — to check their customer protection and legal compliance.

This May, the Japanese House of Representatives officially approved a new bill to amend the national laws governing crypto regulation — specifically the Act on Settlement of Funds and the Financial Instruments and Exchange Act.

The revised acts aimed to protect users by means of regulating crypto derivatives trading and improving exchange security standards are expected to go into effect April 2020.