South Korea has seen a significant uptick in cryptocurrency trading activity and, concurrently, a notable increase in reports of suspicious transactions. In 2023, the country’s Financial Intelligence Unit (FIU) recorded a 49% rise in alerts from crypto service providers over the previous year, with a total of 16,076 transactions suspected of being linked to illegal activities such as money laundering, market manipulation, or illicit drug trading.
This surge in suspicious transaction alerts is attributed to enhanced collaboration between the FIU and domestic companies, with the latter being encouraged to report potentially illicit activities. The volume of reports specifically related to suspected crypto-related crimes saw an even steeper increase, jumping by about 90% compared to 2022.
While the FIU’s paper did not delve into the specifics of these alerts due to restrictions under the Specified Financial Information Act, it highlighted the involvement of unregistered crypto loan enterprises. The National Tax Service and the National Police Agency have been notified of 100 such cases, identified through suspicious transaction data collected between December 2023 and January 2024.
In response to these developments, the FIU plans to roll out a new system aimed at halting suspicious virtual asset transactions before they can be investigated by local prosecutors. This system, expected to undergo preliminary testing by March 2024, signifies a proactive approach to regulating the crypto space.
These measures coincide with South Korea’s broader efforts to tighten regulatory oversight following several high-profile failures within the cryptocurrency sector in 2023. Recent legislative changes now require senior public officials to declare their digital asset holdings, enhancing transparency and accountability.
Additionally, the Korea Customs Office reported that a significant portion of illegal foreign exchange transactions, approximately 88%, involved digital assets, often used to circumvent tax obligations. To combat this trend, a specialized team has been established to address cryptocurrency-related crimes, marking a comprehensive approach to monitoring and regulating the evolving digital asset landscape in South Korea.
