South Korea Pushes FATF to Tighten the Travel Rule for Smaller Crypto Transfers

South Korea’s Financial Intelligence Unit (FIU) has urged the Financial Action Task Force (FATF) to widen Travel Rule requirements so they capture smaller cryptocurrency transfers, warning that criminals are exploiting current reporting thresholds. The proposal was put forward during recent FATF discussions on virtual asset regulation.

At the centre of the FIU’s case is a technique known as smurfing, where a large transfer is broken into several smaller transactions that fall below reporting limits and escape identity checks. South Korea currently applies Travel Rule obligations to crypto transfers above 1 million won, roughly 650 to 700 US dollars. Under those rules, virtual asset service providers must collect and share information about both the sender and the recipient of a transaction.

Closing the smurfing loophole

The FIU wants those obligations extended to smaller transfers. It has also proposed that Travel Rule duties apply to both the originating and the receiving crypto service provider, alongside tougher oversight of offshore and unregistered platforms.

FIU Commissioner Lee Hyung Ju welcomed the acceptance of a DeFi-related report during the FATF talks, while noting that much regulatory arbitrage stems from differences in licensing, supervision and oversight across offshore jurisdictions. He indicated that South Korea would share the policy and practical experience it has built up while tackling fraud and money laundering tied to organised scam compounds in Southeast Asia, with the aim of strengthening the FATF’s collective response to such crime.

The direction of travel for providers is becoming clearer. Regulators have previously signalled plans to lower the domestic Travel Rule threshold and increase scrutiny of cross-border crypto transactions, after identifying attempts to sidestep AML controls through smaller transfers. If the FATF takes up the proposal, VASPs could face data-sharing duties on a far broader set of transactions.

Shufti provides AML screening and KYC built for virtual asset service providers operating under the Travel Rule, combining identity verification, sanctions and watchlist screening, and ongoing monitoring across 240+ countries and territories. With a proprietary AI stack and no third-party dependencies, the platform helps crypto firms surface structuring and smurfing patterns and keep pace with tightening reporting thresholds. To see how Shufti supports Travel Rule compliance, request a demo.