South Korea Tightens Crypto AML Rules Amid Growing Smurfing Concerns

• South Korea expands crypto Travel Rule covering all small transfers.
• High-risk overseas crypto platforms are blocked to prevent money laundering.
• The FIU can preemptively freeze accounts linked to serious crimes.

South Korea is tightening its anti-money laundering regulations, extending the crypto Travel Rule to cover transactions under one million won ($680). Previously, the rule applied only to transfers above this threshold. The change targets “smurfing,” where criminals split large transfers into smaller amounts to evade reporting requirements. Exchanges will now need to collect and verify sender and recipient information for all transfers, regardless of size.

The move reflects growing concerns about crypto being exploited for illicit activities. By closing the loophole for small transactions, regulators aim to create a more transparent virtual asset environment. Local exchanges will face stricter financial checks and reporting obligations. The Financial Intelligence Unit (FIU) will gain authority to preemptively freeze suspicious accounts, stopping funds from leaving the system before investigations conclude.

Also Read: Why Crypto Adoption Is Surging in High-Inflation Economies in 2025: Report

Crypto Crackdown Blocks Overseas Risk Platforms

Authorities are also addressing threats from vulnerable overseas exchanges. Platforms considered vulnerable to money laundering will be blocked from interacting with South Korean users. This restriction aims to prevent cross-border schemes involving drug trafficking, tax evasion, or cyber fraud.

The government restricts significant ownership in VASPs to persons with no record of crimes related to drugs, tax evasion, or other serious offenses. Share ownership requirements form part of wider efforts to ensure that VASPs are not taken over or controlled by persons of questionable character. Lawyers, accountants, and tax experts shall help in ensuring compliance.

Officials also plan to strengthen the FIU’s investigative capacity. The unit will collaborate with global agencies such as the Financial Action Task Force (FATF) in dealing with money laundering and cybercrimes that involve crossing nations. Southeast Asian partnerships will further help in the above aspects.

Timeline And Broader Regulatory Context

The amended Travel Rule and accompanying regulations are expected to be finalized in the first half of 2026. The government would make changes to the Specific Financial Information Act and request approval from the National Assembly. Pre-emptive freezes will apply to “serious offenses” like drug trafficking or gambling in order to cause less inconvenience to the public, government officials said.

This regulatory overhaul follows earlier measures by South Korea’s National Tax Service. Taxpayers who have been shielding money in cryptocurrencies offline are expected to face selective enforcement by the relevant authorities. Cold wallets, hard drives, or any kind of storage devices can be seized based on tax evasion suspicions.

Also Read: Nina Rong Joins BNB Chain to Solve Liquidity Discovery Challenges in 2025