Suspicious Transaction Reports at Virtual Asset Exchanges Surge... 11,646 Cases Recorded by Q3

This year, the number of suspicious transactions related to virtual assets reported domestically has surged.

According to data submitted on the 30th by Yoon Young-deok, a member of the Democratic Party of Korea, from the Financial Intelligence Unit (FIU) under the Financial Services Commission, the number of suspicious transaction reports (STRs) filed by virtual asset service providers from the beginning of this year until September totaled 11,646. Last year, the total was 10,797, meaning that the number recorded up to the third quarter of this year has already surpassed last year's figure.

The current Act on Reporting and Using Specified Financial Transaction Information (Special Act on Financial Transactions, or "특금법") obliges reporting to the FIU when there is reasonable ground to suspect that a customer's financial transaction is linked to illegal assets, money laundering, or financing of public threats. This law was fully implemented starting October 2021, with 199 reports filed that year and exceeding 10,000 the following year.

Under Article 10 of the Special Act on Financial Transactions, the FIU reviews and analyzes STRs and provides them to law enforcement agencies only when deemed necessary for the investigation of specific criminal cases.

The increase in STRs from exchanges is attributed not only to the overall institutional stabilization but also to the controversy over lawmaker Kim Nam-guk's large-scale coin investment that occurred in May. Subsequently, the political sphere agreed on a full investigation of virtual asset holdings by members of the National Assembly, and the Anti-Corruption and Civil Rights Commission has been verifying the coin holdings of all lawmakers over a 90-day period since last month.

Exchanges have enhanced customer verification obligations under the Special Act on Financial Transactions for customers with high money laundering risks, requiring additional confirmation of the source and purpose of transaction funds. If any verified information appears suspicious, the authenticity must be confirmed through reliable documents. However, the Special Act's regulations require exchanges to incorporate methods for verifying authenticity into their operational guidelines.

Upbit, the leading domestic exchange by market share, has developed an AI-based Fraud Detection System (FDS) for continuous monitoring. Bithumb applies internal 'Anti-Money Laundering (AML) Work Regulations' concerning suspicious transactions related to the source of funds under the Special Act on Financial Transactions.

Bithumb applies simplified customer verification procedures for customers assessed as low risk for money laundering but excludes nationals from countries that have not adopted recommendations from the Financial Action Task Force (FATF).

Coinone's dedicated AML department conducts thorough investigations of customer transactions and continuously reviews information such as customer, business, risk assessment, and source of funds. If deemed inappropriate, additional customer verification, including clarification of the source of funds, is required.

Korbit's 'Anti-Money Laundering Work Manual' mandates monitoring of customer verification information through a dedicated department and stipulates that transactions with customers whose verification is insufficient must be refused.

Some voices have called for at least a minimum common guideline regarding AML customer verification and STR standards. There can be cases where one exchange deems a transaction suspicious while another considers it normal. In this regard, the Digital Asset Exchange Joint Council (DAXA), composed of the five major Korean won market exchanges?Gopax, Bithumb, Upbit, Korbit, and Coinone?has established an AML subcommittee and is developing common STR rule types across the industry.

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