Key Highlights
- The Financial Services Commission is expanding the Virtual Asset Travel Rule to transactions under ₩1 million to prevent money laundering.
- Major shareholders of virtual asset firms with serious criminal records (like drug or tax evasion) will now be prohibited from participation.
- The government plans to introduce a preemptive account freeze system and submit legislative revisions in the first half of next year.
Financial Services Commission (FSC) Chairman Lee Eok-won announced a series of measures aimed at curbing illicit financial activity in the cryptocurrency market, with a specific focus on combating money laundering. Speaking at the 19th Anti-Money Laundering Day ceremony on November 28, Lee revealed plans to lower the transaction threshold for the Travel Rule, a major anti-money laundering measure for virtual assets.
Chairman Lee stated that the existing Travel Rule regulation, sometimes referred to as the “coin real-name system,” will be expanded to include virtual asset transactions valued under ₩1 million (about $680).
Expansion of the Travel Rule
Currently, domestic virtual asset exchanges are only required to collect information, such as the sender’s and recipient’s names and wallet addresses, for deposit or withdrawal requests that exceed ₩1 million. The new measure is designed to prevent criminals from exploiting this loophole to bypass identification requirements.
The chairman emphasized the necessity of this stringent approach, declaring, “We will strictly crack down on money laundering activities that exploit virtual asset transactions.” In addition to tightening transaction rules, the FSC plans to block high-risk international transfers, stressing, “We will prevent virtual asset transactions with overseas exchanges that pose a high risk of money laundering.” The Travel Rule is a global standard for virtual asset transactions, and its initial domestic implementation required exchanges to collect specific sender and recipient information for transfers exceeding ₩1 million.
Stricter law enforcement
The expansion aims to close gaps that allow money laundering by fragmenting transactions to stay beneath the current reporting threshold. Furthermore, Chairman Lee noted the government’s effort to ensure integrity in the management of exchanges. As part of a new policy, individuals with criminal histories, specifically those convicted of crimes like drug use or tax evasion, will be barred from becoming major shareholders of virtual asset businesses.
This follows the principle outlined in an official release stating that major shareholders of virtual asset operators with prior drug or tax evasion convictions will not be permitted to participate, with preemptive account suspensions introduced.
Additionally, the system will be enhanced to include verification of financial status and social credit requirements during the virtual asset business operator reporting review. The announced policies will necessitate legislative changes and systematic overhauls. The FSC intends to formalize the plan in the first half of next year and submit a revision to the Specific Financial Information Act (Special Financial Information Act) to the National Assembly for approval.
Key operational changes
Key operational changes include introducing a ‘preemptive account freeze system’ by the FIU to secure criminal funds before they can be moved. To minimize public inconvenience and the side effects of account suspension, the Chairman clarified that this system’s application will be limited to serious crimes against the public, such as drug use and gambling.
To support these efforts, the organizational capacity of the FIU will be strengthened to ensure the system can be established quickly. On the international front, the nation plans to establish a cooperative system with Southeast Asian FIUs to combat transnational crimes. International cooperation measures focusing on cyber fraud and terrorist financing will also be a priority, particularly utilizing the platform provided by the upcoming Financial Action Task Force (FATF) ministerial meeting next year.
Domestically, cooperation with professional organizations such as lawyers, accountants, and tax accountants will be necessary to help establish and enforce anti-money laundering systems in relevant sectors. Chairman Lee Eok-won’s announcement signals a clear regulatory shift toward a stricter enforcement environment for virtual assets in South Korea.
Additionally, the ceremony acknowledged those who have contributed to these efforts, with Kakao Bank receiving the Presidential Citation and Acuon Savings Bank receiving the Prime Minister’s Citation among the seven organizations and 26 individuals honored for their contributions to preventing money laundering.
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