South Korea Expands Anti-Money Laundering Measures in Crypto Transactions

News

  • South Korea will extend its crypto Travel Rule to include all transactions under 1 million won to close reporting loopholes.
  • High-risk offshore exchanges and individuals with drug or tax crime records will face new operational and ownership restrictions.
  • Authorities will strengthen tax evasion investigations with home searches and potential seizure of offline crypto storage devices.

South Korea is set to implement an overhaul of its Anti-Money Laundering (AML) framework, with a primary focus on crypto transactions. The new measures aim to close loopholes that have allowed illegal activities like money laundering to thrive on virtual asset platforms. The changes, which target transactions below 1 million won (approximately $680), are expected to strengthen the country’s regulatory grip on cryptocurrency exchanges and users.

Tighter Reporting Requirements for Small Transactions

The Financial Services Commission (FSC) announced that it will extend its crypto Travel Rule, which requires exchanges to collect and share the identities of the sender and receiver. This rule, previously applied to larger transactions, will now cover all crypto transfers under $680. This move addresses concerns that criminals could break up large transactions into smaller ones to bypass identity reporting.

The main goal of the new measures is to tackle increasing illicit activities, including tax evasion, drug trafficking, and cross-border payment schemes. The FSC emphasized that the changes are designed to combat the use of cryptocurrencies for illegal financial activities. By expanding the Travel Rule, the government aims to prevent criminals from exploiting these platforms for unlawful purposes.

As part of the crackdown, South Korea will increase its scrutiny of Virtual Asset Service Providers (VASPs). Exchanges deemed high-risk, especially those operating offshore, will face stricter regulations. These platforms will be banned from interacting with South Korean users. In addition, exchanges will undergo more thorough financial health reviews to ensure they meet stringent standards before receiving approval to operate.

Preventing Criminal Influence in Crypto Firms

Also, the new regulations go after the ownership structure of VASPs. Individuals with criminal records, especially those who have committed drug or tax crimes, will not be allowed to hold significant shares in companies that have a license. The reason for this limit is to stop the ugly influence from people who have engaged in illegal activities before. To make sure that the money that is not supposed to be there does not disappear during the investigation, South Korea will apply the measure of pre-emptive account freezing for serious crimes. 

This step will allow law enforcement to keep the asset safe while the unlawful activities are under investigation. The FSC is looking to send legislative changes to the National Assembly around the middle of 2026 as a final step in these alterations. Besides, the administration will work more closely with international institutions such as the Financial Action Task Force (FATF) to augment the worldwide AML measures. The government’s actions against tax evasion are becoming more vigorous as well. In fact, recently South Korea’s National Tax Service (NTS) has made it public that it will be conducting home searches and will seize cold storage and hard drive of individuals suspected of keeping their crypto assets offline.  The NTS will also use crypto-tracking tools to identify individuals attempting to conceal assets to avoid tax obligations.

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