Seoul moves to tighten oversight of digital assets with stricter reporting, wider VASP controls, and new measures to curb tax evasion and illicit flows.
South Korea Introduces Stricter Anti-Money Laundering Standards
South Korea is preparing a major overhaul of its Anti-Money Laundering (AML) regulations, with authorities set to extend the nation’s crypto Travel Rule to include transfers below 1 million won (around $680). The initiative, revealed during a parliamentary meeting by Financial Services Commission (FSC) Chairman Lee Eok-won, aims to close a loophole that allowed users to split large transfers into smaller transactions to avoid reporting requirements.
Under the forthcoming changes, exchanges will be obligated to collect and share sender-and-receiver information even for low-value transfers — a significant expansion of current compliance responsibilities. Policymakers say this step is critical to curbing abuse of digital assets for drug trafficking, overseas tax evasion, and illicit payment channels.
Crackdown on High-Risk Exchanges and VASP Ownership
As part of the expanded AML framework, regulators will also enforce new restrictions on “high-risk” offshore crypto platforms. These exchanges, identified as posing heightened money-laundering threats, will be barred from servicing South Korean users.
Authorities plan to tighten financial and operational assessments for Virtual Asset Service Provider (VASP) registrations, broadening the criteria firms must meet before receiving approval.
A key provision will ban individuals with past drug or tax-related convictions from becoming major shareholders of licensed VASPs, aiming to prevent bad actors from securing influence inside regulated firms.
The Financial Intelligence Unit (FIU) will additionally implement preemptive account-freezing measures, enabling investigators to lock suspicious funds before they are moved or obscured during criminal probes.
Framework to Be Finalized by Mid-2026
Government officials expect to complete the updated AML structure during the first half of 2026, followed by formal legislative submissions to the National Assembly. South Korea also intends to broaden cooperation with international watchdogs, including the Financial Action Task Force (FATF).
The initiative marks the most extensive tightening of digital-asset oversight since the 2021 revision of the Special Financial Information Act, underscoring the government’s renewed focus on preventing illicit crypto flows.
Tax officials plan to use advanced analytics and tracking tools to identify delinquents, warning that anyone found concealing crypto holdings will face aggressive enforcement actions.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.