South Korea’s Financial Intelligence Unit (FIU) has formally urged the Financial Action Task Force (FATF) to eliminate all minimum transaction thresholds from the crypto Travel Rule, warning that fragmentation allows regulatory arbitrage and weakens anti-money laundering (AML) efforts across borders. FIU Director Lee Hyung-joo made the proposal at the 34th FATF plenary session in Paris from June 15 to 19, where over 200 member jurisdictions reviewed virtual asset AML compliance.
The Korean delegation presented three linked recommendations: first, the Travel Rule—which requires exchanges to verify and share sender and recipient information—should apply to both sending and receiving virtual asset service providers (VASPs); second, its scope must extend below existing thresholds to cover even small-value transactions, preventing “smurfing” techniques that split transfers to avoid checks; third, FATF members should consider outright transaction restrictions against high-risk, unregistered VASPs while strengthening customer due diligence. Lee highlighted that differing licensing, supervision, and offshore approaches across jurisdictions create gaps that undermine AML and counter-terrorism financing measures.
Domestically, Korea is already removing the threshold. An amendment to the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information, set for August, will lower the Travel Rule trigger from 1 million won (about $730) to all transactions. After exchanges opposed an earlier plan for mandatory reporting of transfers above 10 million won, the FIU adopted a risk-based approach following consultations with the Digital Asset Exchange Joint Council (DAXA), allowing operators to set their own criteria.
The FATF acknowledged South Korea’s concerns and plans a seventh assessment of jurisdictional compliance, with preliminary results showing the highest-volume crypto markets among the least compliant. The plenary also discussed Emerging DeFi and stablecoin risks, with delegates calling for stronger cross-border cooperation amid rising stablecoin issuance outside traditional frameworks. New threats from AI-assisted laundering and cybercrime were noted, alongside ongoing monitoring of DeFi protocols’ susceptibility to illicit finance. An FATF report on public-private financial intelligence partnerships is due in July.
If FATF members follow Korea’s example, exchanges worldwide would face hefty compliance costs—requiring identity verification infrastructure for every microtransaction—and users would encounter more verification steps. The FATF retained high-risk designations for North Korea, Iran, and Myanmar, and urged action against cyber scams in Myanmar.
