We have entered the age of Fourth Industrial Revolution (4IR) where new technologies are impacting all disciplines, economies and industries. Rapid digitization is occurring in traditional industries, especially in the financial sector and we have witnessed the rise of Fintech in recent years where “finance” is fused with “technology”. Fintech is now found in payment and settlement system, money brokering services, risk management, data management and other areas where finance is combined with the latest technology to offer customers a new type of financial services and products.

The advent of Fintech brought about a major shift in paradigm as well. Financial institutions go beyond offering customers the traditional services and financial products. The traditional financial institutions now use the latest IT technology to develop and market new financial services to the customers. At the same time, large IT companies (bigtech) are entering the traditional financial industry armed with new IT technology. The Fintech landscape is further diversified by the increasing number of start-ups in the Fintech industry.

The paradigm shift is occurring in the legal and regulatory sectors as well. As the Fintech market is constantly changing in line with the development of new technology, new sets of laws such as the Act on Establishment and Operation of Internet-only Banks, the Act on Support for Financial Innovation and the Act on Online Investment-Linked Financial Business and Protection of Users have been promulgated in recent years. In addition, amendments to existing laws such as the Credit Information Use and Protection Act and the Electronic Financial Transactions Act are being reviewed by the National Assembly. It is anticipated that the flurry of legislative activities will greatly change the legal landscape.

The constant shift in paradigm and change of regulatory framework present a challenge to the financial industry. To respond to such challenge, Lee & Ko has launched the Digital Finance Team to provide precise and practical solutions not only to our traditional financial institution clients but to bigtech and start-up clients as well. Digitization of finance, through the unbundling and rebundling of financial function, is expected to change the focus of the financial regulatory efforts from institution-based regulations where financial institutions such as banks, investment companies, insurance companies and credit card companies were the targets of regulations to function-based regulations which considers financial product making, advertising, sales and other functionality as the object of regulation. That is, instead of a binary view which divides the industry into two camps of bigtech and financial institutions, the market needs to be approached from a different angle which will help draw out the cooperative efforts among the financial industry practitioners to create a financial platform that will be widely used by the users.

Our Digital Finance Team helped bigtech companies with financial platforms such as Naver, Kakao and Toss enter into financial businesses. At the same, we have assisted traditional financial institutions establish their financial platforms. We are also assisting market participants to establish a healthy and cooperative relationship between bigtech companies that have strength in financial platforms and traditional financial institutions that have a wealth of experience in financial products.

Rapid changes in law and regulatory environment require a “bespoke solution” that comes from “a paradigm shift” from a “market player’s viewpoint” rather than a passive interpretation of law. Such bespoke solutions can only be given when the solution provider, rather than just simply providing a mechanical interpretation of the law, tailors a precise and accurate legal advice that combines “an awareness of the legal and regulatory trends, in-depth knowledge of new technology, and full understanding of the policies of the regulatory and legislative authorities”.

Lee & Ko has launched the Digital Finance Team to respond to our clients’ need for a creative bespoke solution in an ever-changing market. Our Digital Finance Team includes financial regulatory experts who are well-known for their expertise in “electronic banking, banks, securities, insurance, credit card and other traditional financial regulations”, IT experts, cybersecurity and digital technology specialists, and leading experts in privacy/credit information, credit information industry, artificial intelligence and new digital business. Digital Finance Team also boasts a strong advisory group that includes advisors and consultants with prior experiences at regulatory authorities such as Financial Supervisory Commission and Financial Supervisory Service. Our advisory group also has consultants with real business experience such as at E-Bay and Ernst & Young and other digital and IT businesses. Our lawyers work closely with the advisory group as one team to provide seamless solutions to our clients. The Digital Finance Team also works in conjunction with our Intellectual Property Team, Litigation and Arbitration Group, M&A Team, Antitrust and Competition Team, Government Affairs Team, Criminal Team and other practice groups within Lee & Ko to provide a comprehensive service to our clients.

Lee & Ko offers a one-stop, comprehensive service on all aspects of digital finance. Our unrivaled pool of experts, together in close cooperation with other practice groups from our firm, advices clients on all phases of digital finance from actualization of new technology and business to interpretation of law, liaising with authorities, support on legislative consulting, regulatory audit of financial IT and response to regulatory sanctions. We approach the issue from the client’s perspective to formulate and deliver “the solution that the client needs most”.

One team, One solution

Attorneys and professionals of our Digital Finance Team have been advising clients on digital finance since the introduction of digital finance in Korea. Our team has advised on regulatory issues on data protection, litigation and administrative proceedings, consulting and other legal issues on digital finance for a long time and have built up a strong human network in the industry.

Our unrivaled capability allows us to analyze and formulate a solution for all digital finance issues from financial regulations, data protection and cybersecurity to new technology and emerging business all within Lee & Ko without the need to bring in outside expertise. This includes not only continuing legal advice and advisory services on compliance and financial IT audit and sanctions but also advisory services relating to civil and criminal matters, administrative proceedings and communications with regulators and government affairs consulting to respond to changes in the legislative environment. In addition, we have the expertise to advise on cross-border financial platform matters (applicability of domestic and foreign laws, foreign exchange transaction and other cross-border legal issues) in this digital age.

Our Digital Finance Team professionals have unrivaled expertise from know-how accumulated through years of legal representation of numerous domestic and foreign clients.

Our know-how has been gained not just from giving advice based on the strict reading of the law but from a proactive support of legislative and government work. Our professionals have better understanding of the domestic and foreign regulatory trend than any other firm.

Expertise

[Advisory Services related to Digital Finance (including Fintech), Electronic Finance, Payment and Settlement]

We advise companies engaged in digital and electronic financial businesses on various legal issues regarding their business models and service offerings. We also advise clients on legal issues related to the establishment of and investments in joint ventures, business partnerships, outsourcing of business functions to third parties, foreign exchange issues, and more.
We advise on platform operation by IT companies, brokerage and advertising of financial products, business cooperation and outsourcing, foreign exchange and other legal issues.
We advise on issues that arise in the course of providing digital finance service such as electronic signature and electronic document.

[Advisory Services Related to Credit Information and Credit Information Business]

We offer comprehensive advice on permits and licenses, compliance and other legal issues that arise in the course of providing services that utilize credit information such as MyData and credit information business.

[Agency Work for Permits, Licenses and Registration, Response to Financial Authority and Legal Advice Related to Electronic Financial Business and Credit Information Business]

Advice on registration of electronic financial business (prepayment, PG etc.), MyData and Credit Information Business permits, other permits and licenses and related advice.

[Advice on Financial IT and Data Privacy, Review and Advice on Security Compliance, Response to Hacking and Other Incidents]

We offer services to continuously monitor financial and IT information security compliance for financial institutions, electronic financial businesses, and more. We also offer comprehensive support for the management of administrative/criminal/civil risk related to the occurrence of security incidents and data breaches.
We advise on response to financial IT audit and sanctions against financial institutions and electronic financial business operators.

[Advisory Services related to Cloud Computing and Outsourcing of Data Processing]

We provide financial institutions and bigtech companies a comprehensive review and diagnosis of compliance policies, including reporting to financial authorities, cybersecurity and personal credit information related compliance issues, which may be triggered from the use of cloud computing, and outsourcing of data processing to third parties.

[Internet-only Banks, Special Act on Support for Financial Innovation, P2P Financing and Emerging Businesses]

We advise clients through all phases of their business models and on any legal issues which may arise relating to financial regulatory sandboxes, internet-only banking, P2P financing, and other emerging technologies impacting the digital financial sector.

[Virtual Assets, NFT, Blockchain, Fractional Investment]

We provide comprehensive advisory services on new businesses related to digital assets such as blockchain-related businesses involving virtual assets, NFT, DAO, DeFi and fractional investment projects. We also advise on applications for regulatory sandbox and whether to fall within security category, and represent clients for litigations and disputes.

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Major Cases

[Digital Finance (including Fintech Service), Electronic Finance, Payment and Settlement]

Advised on Amendment to the Electronic Financial Transactions Act.
Advised on the Electronic Financial Transactions Act requirements relating to electronic signature certification business and reform of identity certification services.
Advised on the Electronic Financial Transactions Act requirements and compliance issues relating to various platform businesses.
Advised on simplified payment service, mobile payment and e-commerce payment issues.
Advised on compliance of electronic finance related to new digital business.
Advised domestic bank on creation of digital business division and establishment of internal compliance system.
Advised on foreign currency wire transfer and foreign exchange business (small foreign currency wire transfer business).
Advised on personal asset management (robo advisor, etc.).
Advised on issues related to adoption of electronic signature and electronic documents.

[Credit Information and Advisory Services Related to Credit Information Business]

Advised on issues related to personal credit information management business (MyData).
Advised on issues related to the operation of credit information businesses (credit rating companies, credit bureaus).
Advised on legal issues under the Credit Information Use and Protection Act related to the use of big data analysis and the sale of company credit information.
Advised mobile network operator on legal and regulatory issues related to the use of communications data for credit search services.
Advised on reporting obligations of credit information management officers.
Assisted in responding to customer information leakage incidents.

[Agency Work for Permits, Licenses and Registration, Response to Financial Authorities and Legal Advice Related to Electronic Financial Business and Credit Information Business]

Advised on required licenses, assisted in responding to financial authorities’ actions and acted as agent in the filing of registration documents to engage in the business of issuing and managing electronic prepayment means (points, mileage, etc.), electronic payment and settlement business, escrow business, electronic bill payment and presentment (EBPP) and other electronic financial businesses.
Advised on required licenses, assisted in responding to financial authority’s actions and acted as agent in filing for permits and licenses for MyData business and credit information business.

[Advisory Services related to Financial IT, Information Security and Compliance and Response to Security Incident such as Hacking]

Diagnostic analysis of financial institutions’ IT / information protection organization structure, policies and operation status.
Performed propriety diagnosis and analysis from technical and operational perspectives.
Advised financial institution on the response actions, and preparation and review of supporting documentations, in connection with the comprehensive regulatory audit and IT audit by the Financial Supervisory Service of the client’s electronic financial business.
Advised on identity authentication requirements related to the use, issuance, and renewal of means of access for electronic financial transactions under the Electronic Financial Transactions Act.
Advised financial institutions (insurance companies, securities companies, etc.) on regulatory issues related to the use of financial data.
Advised on contractual issues related to provision of online services involving financial data.
Advised platform business operator on regulatory issues related to the sharing of credit information.
Advised insurance company on regulatory issues related to the use of scraping technology when providing financial services.

[Advisory Services related to Cloud Computing and Outsourcing of Data Processing]

Advised financial institutions on the Regulations on Supervision of Electronic Financial Transactions requirements and related laws on the adoption of cloud computing.
Advised on the requirements and compliance issues relating to subsidiary electronic financial business entities.
Advised financial institutions on Financial Supervisory Service and Financial Services Commission reporting obligations triggered by the outsourcing of the processing of credit information to third parties.
Advised on provision of cross-border financial services using cloud computing services.
Advised payment settlement companies on the adoption of one-time password (OTP) system based on cloud technology.
Advised IT companies on operation of Fintech platform and utilization of cloud computing services.

[Internet-only Banks, Special Act on Support for Financial Innovation, P2P Financing and Other Emerging Businesses]

Advised on issues related to the establishment and operation of internet-only banks.
Advised Fintech companies and financial institutions on the use of financial regulatory sandboxes.
Advised on issues related to investments in P2P loans.
Advised on issues related to registration of P2P business.
Advised on issues related to crowdfunding.

[Virtual Assets, NFT, Blockchain, Fractional Investment]

Advised virtual asset companies on Korea Financial Intelligence Unit reporting requirements.
Advised virtual asset companies on regulatory requirements relating to new business model and overseas expansion.
Advised on of the review of whether to fall within the security category of cryptocurrencies, white paper and SAFT (Simple Agreement for Future Tokens).
Advised on responding to legal disputes and litigation in connection with hacking of cryptocurrencies.
Advised on regulatory issues and implications under the (tentatively called) Digital Asset Framework Act.
Advised on whether to fall within the security category and on regulatory sandbox application in relation to fractional investment.