South Korea eases mandatory reporting rule for digital asset transfers over 10 million won

South Korea's financial authorities have decided to ease a plan that would have required virtual asset service providers to file suspicious transaction reports on all transfers of 10 million won (about $6,540) or more. Rather than mandating blanket reporting to the Financial Intelligence Unit (FIU) based solely on transaction size, the revised approach will require each provider to establish and operate its own anti-money laundering (AML) risk management framework.

According to financial authorities Friday, the FIU gathered industry feedback on proposed amendments to the enforcement decree and supervisory regulations of the Act on Reporting and Using Specified Financial Transaction Information at a meeting held Thursday, attended by chief executives and compliance officers from domestic digital asset exchanges.

The FIU has settled on a direction that would have each provider build its own risk management framework under a risk-based approach, rather than automatically treating all transfers of 10 million won or more as suspicious transactions. The risk-based approach refers to a method in which supervisory authorities and financial institutions flexibly identify and assess money laundering risks and take proportionate measures accordingly.

However, the change does not eliminate reporting obligations for transfers of 10 million won or more. Providers will still be required to identify high-risk transactions using their own criteria and determine whether each qualifies as a suspicious transaction. "We plan to monitor the AML management frameworks that providers put in place," an FIU official said.

Earlier, the Financial Services Commission published a proposed amendment to the enforcement decree and supervisory regulations in March. The original draft required domestic virtual asset service providers to report any transfer of 10 million won or more to or from an overseas virtual asset service provider or an unhosted wallet as a suspicious transaction, regardless of the actual risk level.

The industry had pushed back, arguing that requiring blanket reporting based solely on a monetary threshold was inconsistent with the nature of the suspicious transaction report regime. Unlike currency transaction reports, which automatically flag transactions above a set amount, suspicious transaction reports require filers to document the grounds for suspicion and the reasoning behind the determination. Concerns had mounted that classifying any transfer above 10 million won as suspicious would burden exchanges operationally and drive retail investors away.

The plan to expand the travel rule — the information-sharing obligation previously applied only to transfers of 1 million won or more between domestic virtual asset service providers — to cover transfers below 1 million won will remain in place. The Financial Action Task Force (FATF) standards include no blanket exemption for low-value transactions, and South Korea's upcoming FATF mutual evaluation in 2028 was a key consideration.

"FATF evaluation standards have been tightening with each cycle," an FIU official said. "We need to follow international recommendations." At Thursday's meeting, the industry was said to have broadly agreed on the need to expand the travel rule.

The scope of enhanced customer due diligence requirements will also be partially relaxed. Authorities had previously mandated enhanced due diligence — including verification of the source of funds and the purpose of transactions — whenever a case was classified as a high-risk suspicious transaction. Under the revised draft, providers will apply enhanced due diligence only when they independently determine that a suspicious transaction carries a particularly elevated risk level.

Technical infrastructure standards for AML systems are also set to be adjusted. Equipment handling uniquely identifying personal information and personal credit data subject to protection under the Personal Information Protection Act will be required to remain in South Korea, but overseas cloud services will be permitted for other systems.

The revised draft has not been finalized. The FIU said it will continue discussions if additional feedback is received. The amendment is expected to be finalized after review by the regulatory rationalization committee and the Ministry of Government Legislation.

Earlier, a meeting between the FIU and virtual asset exchanges to discuss the proposed amendments to the Act on Reporting and Using Specified Financial Transaction Information had been postponed, as concerns over the draft continued to grow.

특금법 개정안 우려 고조…FIU·거래소 회의도 무산 [크립토360]

https://biz.heraldcorp.com/article/10736863