South Korean Exchanges Say Proposed AML Rules Would Push Suspicious Reports Up 85x

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South Korea’s crypto industry is pushing back against proposed anti-money laundering rules targeting overseas virtual asset transfers. The changes would force exchanges to report all cross-border transfers above 10 million won (roughly $6,800) as suspicious, regardless of actual risk signals. Industry groups say the volume would make compliance unworkable.

DAXA Says the Rules Would Push Reports From 63,000 to 5.4 Million

The Digital Asset eXchange Alliance (DAXA) submitted formal comments on the proposed changes to the Enforcement Decree of the Specific Financial Information Act, according to a Yonhap News report on Sunday. DAXA represents 27 registered VASPs, including the five major exchanges: Upbit, Bithumb, Coinone, Korbit, and Gopax.

DAXA estimates the proposal would push suspicious transaction reports from the five largest exchanges up roughly 85 times, from about 63,000 cases last year to more than 5.4 million. The group argued that flagging every overseas transfer above the threshold as inherently suspicious would overwhelm compliance teams and dilute the reporting system’s value.

DAXA also challenged a proposed requirement for exchanges to verify the accuracy of customer information. The group said the obligation goes beyond what the underlying law authorizes and is being introduced through lower-level rulemaking without a clear statutory basis.

The Draft Rules Require Reporting on All Overseas Transfers Above $6,800

The Financial Services Commission (FSC) and the Financial Intelligence Unit (FIU) published the draft amendments on March 30 and opened a public comment period running through May 11. Under the proposal, any domestic VASP transferring virtual assets to an overseas VASP would have to file a suspicious transaction report for amounts of 10 million won or more.

The rules do not require exchanges to assess whether a transaction actually poses a risk. The threshold alone triggers the reporting obligation. Regulators expect to finalize the rules in July after completing legal and regulatory review.

Upbit, Bithumb, and Coinone Are All Challenging FIU Sanctions in Court

The regulatory pushback arrives as several of the same exchanges challenge existing AML sanctions imposed by the FIU.

Upbit operator Dunamu won a first-instance ruling on April 9 that canceled a three-month partial business suspension. The FIU had tied the sanction to alleged failures in customer due diligence and transactions with unregistered foreign VASPs. The regulator appealed the decision on April 30, according to Yonhap.

Bithumb secured court relief on Friday. The Seoul Administrative Court suspended enforcement of a six-month partial business suspension until the main case is decided. The FIU had imposed the sanction after finding alleged violations of the Financial Information Act tied to unregistered VASP transactions.

Coinone received a three-month suspension and a 5.2 billion won fine over alleged AML failures. The exchange also secured a reprieve after challenging the sanctions. Local reports linked the case to customer verification issues and transactions with unregistered overseas providers.

A Widening Gap Between Regulators and Exchanges

South Korean exchanges are now contesting the FIU’s enforcement authority in court while warning that the next round of rules would push reporting volumes far beyond manageable levels.

The combination points to a growing disconnect between how regulators want to tighten crypto AML oversight and what the industry says it can absorb operationally. The May 11 deadline for public comments closes the input window before the rules move to final review.