Network Separation Rules Pose Problems for South Korea

24 June, 2021

By Somang Yang | June 24, 2021, 1.00pm

Photo by Clint Adair on unsplash

South Korean organizations are grappling with arcane network separation rules that inhibit remote work and the migration to cloud services. The financial sector and public sector, in particular, have not been able to function remotely even during the peak of the pandemic when the government was urging people to work from home.

The network separation regulation requires the separation of internal workloads connected to the internal networks (intranet) from the external communication network, such as the internet. The reason for the separation is security. Initially implemented in the public sector, after a large-scale computer network scare, it was introduced in the financial sector.

For the financial sector, this requirement is codified in the Electronic Financial Transactions Act[1]. This is to prevent the internal business systems containing customer personal information or transaction details from being exposed to risks such as external hacking.

Financial companies have criticized the regulation for being unreasonable in the cloud era. An official from the Fintech Industry Association said, “Cloud services such as Amazon Web Services (AWS) are becoming common and non-face-to-face WFH is becoming more common due to the prolonged COVID-19. It is unreasonable to comply with such unrealistic regulation, so there are very few fintech companies that strictly comply with the regulation.”[2]

In fact, two of the country’s biggest fintech giants, Viva Republica (Toss) and KakaoPay have been fined this year for violating network separation rules.

Developers from the financial sector have long complained about the inconvenience of having to perform major tasks only through the internal network. There are many IT developers who leave the financial industry as their productivity suffers from lack of access to essential development tools such as open source and API.

In the public sector, certain agencies are taking matters into their own hands. The Korea Customs Service announced in April that it will convert the operating environment of the existing 4G national customs network (Unipass) system, accessible only from the administrative network, to an internet-based resource sharing (cloud) environment that can be accessed anytime, anywhere. Until today, the system has been a ‘closed’ one that could only be accessed through on-premise devices with network separation. This did not allow people to work from home, and each employee had to have 2 computers at the office, one for internal work loads and another for accessing the internet.

While the crisis is forcing some public sector organizations to move forward with loosening the network separation rules, and the financial regulator signalled it plans to ease the rules with amending the Electronic Financial Transactions Act, the fact remains that the country’s notion of security is stuck in the pre-cloud era, rooted in concepts such as network separation and data residency, rather than who has access to data, how data can be restored quickly and risks managed appropriately.

[1] https://elaw.klri.re.kr/kor_service/lawViewMultiContent.do?hseq=38503

[2] https://www.hankyung.com/economy/article/2021052627331

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