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South Korea Urges FATF to Eliminate Travel Rule Threshold, Expanding Crypto AML Compliance
South Korea’s Financial Intelligence Unit (FIU) has formally requested that the Financial Action Task Force (FATF) remove the minimum transaction threshold that currently applies to the Travel Rule for virtual asset transfers. The request was made during the FATF’s 34th plenary session in Paris, which ran from 15 to 19 June. The Korean delegation’s proposal would require all virtual asset service providers (VASPs) to share sender and recipient information for every transfer, regardless of value.
The Travel Rule, a FATF recommendation that obliges VASPs to verify and transmit identity data for cross‑border transfers, has traditionally applied only to transactions above a set threshold. In South Korea, the threshold has been 1 million won (about $730). The FIU’s proposal would lower that threshold to zero, meaning that even micro‑transactions would trigger identity checks. The Korean delegation also suggested that the rule should apply to both the sending and receiving VASPs and that FATF members consider outright restrictions on high‑risk, unregistered VASPs.
Lee Hyung‑joo, director of the FIU, cited regulatory fragmentation as a key driver for the proposal. “Licensing and registration requirements, supervision methods, and approaches to offshore virtual asset service providers differ by jurisdiction, resulting in regulatory arbitrage,” he said, according to the Asia Business Daily. The fragmentation, he argued, weakens anti‑money‑laundering (AML) and counter‑terrorism financing (CTF) measures across borders.
South Korea is already preparing to implement the lower threshold domestically. An amendment to the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information will take effect in August. The amendment removes the 1 million won minimum and requires the Travel Rule to apply to all virtual asset transactions, including those below that amount.
The August revision was not without controversy. In March, the FIU had also proposed mandatory suspicious‑transaction reporting for any virtual asset transfer above 10 million won to overseas exchanges or personal wallets. Major domestic exchanges, represented by the Digital Asset Exchange Joint Council (DAXA), objected, arguing that a fixed‑amount reporting requirement would create excessive compliance burdens and operational confusion. After consultations with DAXA, the FIU abandoned the fixed‑amount reporting rule and is now moving toward a risk‑based approach, where operators set their own criteria.
The FATF plenary highlighted global compliance gaps. Preliminary findings from the seventh assessment of jurisdictions’ implementation of FATF Recommendation 15 (the Travel Rule) and overall supervision of exchanges indicate that compliance remains low. Jurisdictions with the highest virtual asset trading volumes are among those with the least consistent implementation, according to Chosun Biz.
The meeting also addressed emerging risks in decentralized finance (DeFi). FATF members discussed a new assessment of money‑laundering and terrorist‑financing risks in DeFi, noting that the use of virtual assets for illicit purposes is becoming more diverse and increasingly intertwined with cybercrime and weapons financing. Stablecoins were treated separately, with delegates stressing the need for enhanced cross‑border cooperation given the growing issuance and use of stablecoins outside traditional regulatory frameworks.
In addition, FATF adopted a report on public‑private partnerships for financial intelligence cooperation, scheduled for release in July. The report will analyze how different jurisdictions collaborate between regulators, law‑enforcement agencies, and the private sector to improve fraud and money‑laundering detection.
If FATF member states follow South Korea’s example and eliminate the threshold, exchanges worldwide will face a substantial increase in compliance costs. Every transaction would require the collection and transmission of identity information for both sender and receiver, a process that is expensive for exchanges operating in multiple jurisdictions.
South Korea’s implementation deadline is just weeks away, and local exchanges have already adapted their systems following industry‑wide consultations with DAXA earlier this year. The FATF has retained a high‑risk assessment for North Korea, Iran, and Myanmar and has issued a public statement calling for action against financial crime associated with cyber scams in Myanmar.
The outcome of the FATF plenary will shape the regulatory landscape for crypto transfers in the coming months. Exchanges, regulators, and market participants will need to monitor whether the FATF adopts the Korean proposal and how it will affect global compliance obligations.
The Travel Rule, a FATF recommendation that obliges VASPs to verify and transmit identity data for cross‑border transfers, has traditionally applied only to transactions above a set threshold. In South Korea, the threshold has been 1 million won (about $730). The FIU’s proposal would lower that threshold to zero, meaning that even micro‑transactions would trigger identity checks. The Korean delegation also suggested that the rule should apply to both the sending and receiving VASPs and that FATF members consider outright restrictions on high‑risk, unregistered VASPs.
Lee Hyung‑joo, director of the FIU, cited regulatory fragmentation as a key driver for the proposal. “Licensing and registration requirements, supervision methods, and approaches to offshore virtual asset service providers differ by jurisdiction, resulting in regulatory arbitrage,” he said, according to the Asia Business Daily. The fragmentation, he argued, weakens anti‑money‑laundering (AML) and counter‑terrorism financing (CTF) measures across borders.
South Korea is already preparing to implement the lower threshold domestically. An amendment to the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information will take effect in August. The amendment removes the 1 million won minimum and requires the Travel Rule to apply to all virtual asset transactions, including those below that amount.
The August revision was not without controversy. In March, the FIU had also proposed mandatory suspicious‑transaction reporting for any virtual asset transfer above 10 million won to overseas exchanges or personal wallets. Major domestic exchanges, represented by the Digital Asset Exchange Joint Council (DAXA), objected, arguing that a fixed‑amount reporting requirement would create excessive compliance burdens and operational confusion. After consultations with DAXA, the FIU abandoned the fixed‑amount reporting rule and is now moving toward a risk‑based approach, where operators set their own criteria.
The FATF plenary highlighted global compliance gaps. Preliminary findings from the seventh assessment of jurisdictions’ implementation of FATF Recommendation 15 (the Travel Rule) and overall supervision of exchanges indicate that compliance remains low. Jurisdictions with the highest virtual asset trading volumes are among those with the least consistent implementation, according to Chosun Biz.
The meeting also addressed emerging risks in decentralized finance (DeFi). FATF members discussed a new assessment of money‑laundering and terrorist‑financing risks in DeFi, noting that the use of virtual assets for illicit purposes is becoming more diverse and increasingly intertwined with cybercrime and weapons financing. Stablecoins were treated separately, with delegates stressing the need for enhanced cross‑border cooperation given the growing issuance and use of stablecoins outside traditional regulatory frameworks.
In addition, FATF adopted a report on public‑private partnerships for financial intelligence cooperation, scheduled for release in July. The report will analyze how different jurisdictions collaborate between regulators, law‑enforcement agencies, and the private sector to improve fraud and money‑laundering detection.
If FATF member states follow South Korea’s example and eliminate the threshold, exchanges worldwide will face a substantial increase in compliance costs. Every transaction would require the collection and transmission of identity information for both sender and receiver, a process that is expensive for exchanges operating in multiple jurisdictions.
South Korea’s implementation deadline is just weeks away, and local exchanges have already adapted their systems following industry‑wide consultations with DAXA earlier this year. The FATF has retained a high‑risk assessment for North Korea, Iran, and Myanmar and has issued a public statement calling for action against financial crime associated with cyber scams in Myanmar.
The outcome of the FATF plenary will shape the regulatory landscape for crypto transfers in the coming months. Exchanges, regulators, and market participants will need to monitor whether the FATF adopts the Korean proposal and how it will affect global compliance obligations.
