South Korea sees sharp 2023 increase in suspicious crypto transactions

South Korean authorities have reported a notable increase in suspicious cryptocurrency transaction reports in 2023.

According to the Financial Intelligence Unit (FIU), there was a 48.8% rise from the previous year, totaling 16,076 instances. 

These transactions were flagged for potential links to illegal activities such as money laundering, market manipulation, and illegal drug trades. This uptick is attributed to the FIU’s proactive engagement with local cryptocurrency service providers, encouraging them to report suspicious activities as part of a broader strategy to combat financial crimes involving digital assets.

The FIU’s efforts have led to increased reports and a significant jump in cases forwarded to law enforcement agencies for further investigation, which saw a 90% increase compared to the prior year. As part of its ongoing initiatives to enhance the detection and prevention of financial crimes, the FIU is developing a system designed to immediately suspend suspicious virtual asset transactions pending further investigation, with plans to finalize preliminary research by March this year.

To combat the misuse of virtual assets in illegal foreign exchange transactions, the Korea Customs Office has revealed that a substantial portion of such activities now involve cryptocurrencies. This revelation has prompted a dedicated team to target cryptocurrency-related crimes.

Further detailing its strategic approach, the FIU’s “2024 Work Plan” outlines several key focus areas. These include strengthening financial companies’ anti-money laundering (AML) capabilities, enhancing virtual asset operators’ oversight to ensure market health and user protection, and improving the mechanisms for screening and analyzing virtual asset transactions.

A crucial element of the FIU’s strategy will involve fostering closer cooperation with financial institutions and law enforcement to enhance the quality and effectiveness of suspicious transaction reporting. This includes categorizing financial flows associated with virtual asset crimes to streamline the detection process. The FIU has reportedly made significant advancements in its analysis systems, incorporating functions allowing a more detailed examination of virtual asset transactions, including tracking wallet addresses and transaction histories.

Looking ahead, the FIU intends to bolster its capabilities to address new and emerging financial crimes. This will involve leveraging current resources and systems to focus on crimes involving virtual assets, illegal private finance, drugs, and gambling. The FIU also plans to enhance its manpower and technical systems, including developing a virtual asset analysis system for more sophisticated tracking and analysis of virtual asset transactions.

The recent announcement on intensified scrutiny of virtual asset exchanges by South Korean authorities follows an earlier declaration regarding plans to block unlicensed cryptocurrency platforms. This move is part of South Korea’s ongoing efforts to enhance regulatory compliance and protect investors in the rapidly evolving digital asset market.