Regulators Shift Focus to Companies’ System Security Following Coupang Data Breaches

Lee Chan-jin, Governor of the Financial Supervisory Service, speaks at a press conference in Yeouido, Seoul, on December 1. [FSS]

In the wake of significant data breaches affecting major companies like Upbit and Coupang, South Korean financial authorities are advocating for legal reforms aimed at bolstering the security frameworks of businesses. Governor Lee Chan-jin of the Financial Supervisory Service (FSS) emphasized this point during a press conference on December 1, stating that enhancing system security is vital for the survival of companies in an increasingly digital landscape rife with cyber threats.

Governor Lee announced plans to implement amendments to establish a regulatory and sanctions framework parallel to the Financial Investment Services and Capital Markets Act. This proposed legal structure is intended to elevate system security to a core element of business operations. According to the Governor, discussions are underway with financial regulators to overhaul existing laws to fortify consumer protection measures, particularly in areas of cybersecurity that have traditionally been overlooked.

The urgency behind these amendments is underscored by recent hacking attempts that compromised personal information of over 33 million users at Coupang, alongside a notable breach at Upbit, South Korea’s largest cryptocurrency exchange, which allegedly resulted in the theft of 44.5 billion won ($30.4 million) in cryptocurrency. Such incidents demonstrate a worrying trend, as several other firms, including SK Telecom and Lotte Card, have also fallen victim to significant data breaches this year.

In addressing the current landscape, Governor Lee highlighted the inadequacy of investments in cybersecurity within the industry, noting that many businesses fail to recognize the potential risks associated with data breaches. He reiterated that investments in security should be treated as essential operational costs, as these breaches could lead to catastrophic failures for companies.

The Governor also outlined plans for forming a task force to improve the transparency of governance in financial institutions. This initiative seeks to mitigate concerns regarding conflicts of interest related to executive appointments. He articulated concerns about executives who may manipulate board compositions in their favor and stressed the need for public oversight in these processes to uphold integrity.

Additionally, Governor Lee commented on the challenges posed by the weakening South Korean won against the dollar. He indicated that the FSS plans to evaluate whether financial companies are providing clear explanations related to risks of overseas investments, such as credit borrowing and exposure to foreign exchange fluctuations. This initiative is part of a broader strategy to stabilize the currency amid recent volatility.

The importance of the National Pension Service (NPS), recognized as the world’s third-largest pension fund, has also come under scrutiny during discussions regarding the foreign exchange market. Governor Lee described the NPS as having considerable weight in this market, cautioning about potential societal implications that could arise from its significant influence, including risks of asset polarization.

In light of recent record penalties exceeding 2 trillion won imposed on five banks for mis-selling equity-linked securities products, which are closely tied to Hong Kong’s Hang Seng China Enterprises Index, Governor Lee labeled these actions as a critical assertion of the antitrust regulator’s dedication to consumer protection.

These developments reflect a growing acknowledgment among regulatory bodies of the pressing need for enhanced cybersecurity measures and public confidence in the integrity of financial institutions in South Korea. As businesses move increasingly online, the push for robust security frameworks becomes not just a regulatory necessity, but a fundamental aspect of corporate survival in the face of escalating cyber threats.

BY JIN MIN-JI [[email protected]]