South Korea is preparing one of its strictest anti-money laundering (AML) crackdowns to date, as the government plans to expand its crypto Travel Rule to include transactions below 1 million won ($680).
According to Yonhap News, Financial Services Commission (FSC) Chairman Lee Eok-won announced the plans to the National Assembly’s Legislation and Judiciary Committee, emphasizing that the government will act against money laundering exploiting cryptocurrency.
“We will crack down on crypto money laundering […] expanding the Travel Rule to transactions under 1 million won,” Lee said.
This move closes a loophole that allowed users to split transfers into smaller amounts to bypass identity reporting requirements. With the update, exchanges must now collect and share sender and receiver information for crypto transfers under $680.
Targeting Tax Evasion, Drug Trafficking, and Offshore Schemes
The FSC stated that the expanded rule aims to curb the growing use of cryptocurrencies for tax evasion, drug trafficking, and overseas payment schemes.
Alongside the Travel Rule changes, the government plans to:
- Block high-risk offshore exchanges from serving South Korean users.
- Conduct stricter financial reviews of exchanges.
- Expand criteria for Virtual Asset Service Provider (VASP) registration.
- Prohibit individuals with criminal records for drug or tax offenses from holding major shares in licensed crypto firms.
- Grant the Financial Intelligence Unit (FIU) pre-emptive account freezing powers in serious cases to prevent disappearance of illicit funds.
Officials aim to finalize the framework in the first half of 2026, submit legislative amendments, and expand collaboration with international bodies, including the Financial Action Task Force (FATF).
Part of Broader Crackdown on Crypto Tax Evasion
This expansion is part of South Korea’s ongoing efforts to combat tax evasion. In October, the National Tax Service (NTS) announced that it would conduct home searches and seize cold wallets or hard drives of individuals suspected of hiding crypto assets offline.
The NTS is also using crypto-tracking programs to identify tax delinquents attempting to conceal assets, reinforcing the country’s growing focus on regulating the crypto space.