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South Korea Cracks Down on Crypto Money Laundering

The country’s financial regulator wants to implement penalties for crypto companies that aren’t doing enough to combat anti-money laundering.

2 min read
South Korea and Bitcoin. Image: Shutterstock

In brief

  • South Korea's top regulator is introducing new rules against crypto companies that aren't doing enough against anti-money laundering.
  • The rules, though not yet in effect, may already be affecting the crypto market.

South Korea’s leading financial regulator today introduced penalties for cryptocurrency exchanges that don’t implement stringent anti-money laundering laws.

The country’s Financial Services Commission (FSC) announced that starting April 20, crypto exchanges and other companies that facilitate crypto transactions will face fines of between $26,000 to $52,000, or 30% and 60% of the maximum legal penalties.

Companies will have to pay fines if they don’t report suspicious transactions, keep data on said transactions and maintain a log of customer transactions. Smaller companies would have to pay smaller fines.

The introduction of the regulation could explain why Bithumb, one of South Korea's largest crypto exchanges, on Tuesday restricted crypto accounts on countries that haven’t implemented anti-money laundering measures. 

The Financial Action Task Force (FATF) has identified 21 such countries, including South Korea’s authoritarian neighbor, the militaristic North Korean regime.

“The company will continue improving its system to protect investors, and enhancing transparency in the crypto market,” said a Bithumb official, reported The Korea Herald.

South Korea would not be the first to crack down on anti-money laundering. FATF has introduced a recommendation: order) for member countries (among them South Korea) to implement more stringent anti-money laundering policies. While not legally binding, FATF could blacklist members who ignore these recommendations.

This includes the so-called Travel Rule, a rule that would require crypto companies to share personal information with other crypto companies whenever anyone sends more than $3,000. Crypto companies are rushing to work out how to do this before FATF expects countries to get their act together. 

Last April, FATF said that South Korea has a “sound legal framework” to prevent money laundering, but that the country “needs to do more to stop government and public officials from laundering the proceeds of corruption.”

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