South Korea at FATF Plenary: "Regulatory Gaps in Virtual Assets Must Be Closed"... Calls for Stronger Global Cooperation

Lee Hyungjoo, Director of the Korea Financial Intelligence Unit, Attends FATF Plenary
Emphasizes Expansion of the Travel Rule and Response to Offshore Unregistered Service Providers

South Korea emphasized the need to address cross-border regulatory arbitrage and strengthen global cooperation to combat emerging financial crimes such as money laundering involving virtual assets and decentralized finance at the Plenary Meeting of the Financial Action Task Force (FATF).

Lee Hyungju, head of the Financial Intelligence Unit, spoke at the 34th 6th plenary meeting of the Financial Action Task Force (FATF) held in Paris, France from the 15th to the 19th. Provided by the Financial Intelligence Unit (FIU) under the Financial Services Commission.

According to the Financial Services Commission on June 22, Lee Hyung-joo, Chief of the Financial Intelligence Unit, made these remarks while attending the 6th Plenary Meeting of the 34th FATF, held in Paris, France, from June 15 to 19.

During this meeting, FATF and Financial Action Task Force-Style Regional Bodies (FSRB) member countries reviewed the implementation status of international anti-money laundering standards for virtual assets and virtual asset service providers. They concluded that overall progress by individual countries remained insufficient. There was also a shared recognition of the need for stronger implementation measures, in light of the risks of money laundering associated with decentralized finance, new crimes related to virtual assets, and emerging threats based on artificial intelligence (AI).

Lee welcomed the adoption of the Decentralized Finance Risk Report and the Report on the Status of Virtual Asset Regulation Implementation at this meeting. He pointed out, "Licensing and registration requirements, supervision methods, and approaches to offshore virtual asset service providers differ by jurisdiction, resulting in regulatory arbitrage." He also emphasized, "Such regulatory gaps may weaken the effectiveness of anti-money laundering and counter-terrorism financing measures," and stressed the importance of "establishing a consistent and effective global regulatory framework in a timely manner."

He further stated that, as the risks of money laundering through cross-border virtual asset transactions continue to grow, South Korea and several other member countries see the need to apply the Travel Rule to both sending and receiving virtual asset service providers, and to widen the mandatory scope to include even small transactions. The Travel Rule requires verification of sender and recipient information during fund transfers. The Financial Intelligence Unit plans to expand the application of the Travel Rule to virtual asset transactions under 1 million won.

Lee also suggested that, given the increasing number of cases where criminal organizations exploit offshore or unregistered virtual asset service providers, it is necessary to strengthen customer due diligence requirements and to consider restrictions on transactions with high-risk unregistered virtual asset service providers.

Additionally, he reaffirmed the importance of ongoing monitoring and global cooperation regarding emerging risks associated with stablecoins and decentralized finance.

Meanwhile, the FATF adopted a range of strategic initiatives at this Plenary, including reports on public-private partnership (PPP) and data protection frameworks. It also maintained the high-risk status of North Korea, Iran, and Myanmar—countries not in compliance with international standards—and issued a revised statement urging swift action against illicit financial risks related to cyber scam organizations in Myanmar.

This content was produced with the assistance of AI translation services.