1 hour ago
1
South Korea’s Financial Intelligence Unit (FIU) has called for an extension of the Financial Action Task Force’s (FATF) crypto Travel Rule, arguing for stronger anti-money laundering (AML) controls for virtual asset transfers and more consistent implementation by countries worldwide.
Specifically, the FIU—South Korea’s money laundering and illegal fund flow watchdog—proposed expanding Travel Rule requirements to cover transfers below the current KRW 1 million (US$650) threshold and enhancing information sharing and cooperation between the private sector and authorities, in response to “emerging risks.”
The crypto Travel Rule was instituted in 2019 by the FATF, an intergovernmental organization designed to combat money laundering, terrorist financing, and other threats to the global financial system. The rule extended the FATF’s long-standing banking “Travel Rule” to virtual assets. Henceforth, virtual asset service providers (VASPs) and financial institutions were required to obtain, hold, and transmit specific originator and beneficiary information immediately and securely when transferring digital assets.
FATF does not directly carry out the enforcement of the rule. Rather, it is left to the relevant authorities of the over 200 jurisdictions worldwide—including leading crypto markets such as China, India, the European Union, the United States, and South Korea—that have committed to following FATF standards.
In South Korea, this body is the FIU, which, at a meeting of the FATF general assembly in Paris last week, voiced its concerns that the Travel Rule was not being implemented effectively.
“Our delegation mentioned that each country must resolve regulatory gains and strengthen coordinated responses to emerging risks such as the expansion of virtual asset abuse and decentralized finance,” the FIU said. “To this end, it emphasizes the essential requirements to restrict transactions with unregistered overseas businesses, expand travel rules (such as small transactions), and enhance information sharing and cooperation between the private sector and authorities.”
Tightening rules
The current FATF recommendation for the crypto Travel Rule uses a de minimis threshold of USD/EUR 1,000 (or equivalent in local currency) for virtual asset transfers.
Under this threshold, VASPs are generally only required to obtain and transmit basic information about the originator and beneficiary (e.g., names and wallet/account identifiers), with full verification not required unless there is suspicion of money laundering or terrorist financing.
For transactions over the threshold, the originating VASP must obtain, hold, and transmit more complete originator and beneficiary information to the receiving VASP, which often includes the originator’s name, wallet/account number, physical address, ID, date and place of birth, beneficiary’s name, and beneficiary’s wallet/account number.
The South Korean delegation suggested lowering the threshold for the more rigorous information sharing, but didn’t specify a preferred number.
Beyond this, Lee Hyung-joo, Head of the FIU, reportedly emphasized the importance of establishing “a consistent and effective global regulatory framework in a timely manner,” hinting at concerns that the FATF standards are not being implemented consistently across all 200 signatory jurisdictions.
Furthermore, citing concerns about increasing cases of criminal organizations abusing offshore and unregistered VASPs, he also urged applying the Travel Rule to both remittance and receipt VASPs; strengthening customer verification obligations; and considering restrictions on transactions with high-risk, unregistered VASPs.
According to the FIU, “many member countries” shared South Korea’s concerns and agreed with its proposals.
One rule for you
In terms of what South Korea’s proposed extension and tightening of the FATF Travel Rule would mean in practice, certain significant digital asset jurisdictions already have their own standards and thresholds, despite being signatories and/or members of the FATF.
For example, the European Union has no de minimis threshold for CASP-to-CASP transfers, with information required for all transfers under the Transfer of Funds Regulation, while in the U.S., the FinCEN wire transfer rule sets the threshold at $3,000.
With countries applying FATF standards in principle but not to the letter, it is unclear whether an expansion of the travel rule would have the desired impact if it were not applied consistently everywhere.
Nevertheless, South Korea’s proposal demonstrates a growing desire to clamp down on the anonymous and pseudo-anonymous transfer of funds flowing through the digital asset space.
Watch: Blockchain revolution in big banks
English (US) · 