South Korea's Crypto Sector Braces for Tighter AML Supervision

South Korea's Financial Services Commission (FSC) and Financial Intelligence Unit (FIU) have proposed amendments to strengthen Anti-Money Laundering (AML) supervision in the country's crypto sector.

The proposed changes would redefine what constitutes a reportable event in cross-border crypto transfers, requiring domestic Virtual Asset Service Providers (VASPs) to classify overseas-linked transfers of 10 million won or more as suspicious transactions, regardless of perceived risk.

DAXA, representing 27 registered VASPs, including Korea's five largest exchanges Upbit, Bithumb, Coinone, Korbit and Gopax, has submitted comments warning that the proposal could drive an exponential rise in suspicious activity reports (SARs), overwhelming compliance systems and regulators.

The alliance notes that the proposed framework could compel exchanges to rework customer due diligence processes and transaction screening, adding obligations that may not align with current capabilities.