KoFIU Announces AML/CFT Policy Agendas for 2026

The Korea Financial Intelligence Unit (KoFIU) held a policy advisory committee meeting on anti-money laundering and countering the financing of terrorism (AML/CFT) and announced key policy agendas for 2026 on February 5.

At the committee meeting, KoFIU Commissioner Lee Hyung Ju said that it has been 25 years since the AML framework was first introduced in Korea pursuant to the Act on Reporting and Using Specified Financial Transaction Information ("the Act" hereinafter). In this regard, Commissioner Lee talked about the need to strengthen AML response capacity against newly emerging types of fraudulent activities, especially with regard to transborder crimes.

To this end, the KoFIU plans to pursue four major policy agendas as follows-(a) strengthening the capacity to respond to serious public livelihood infringement crimes and transborder crimes, (b) bolstering the AML framework in the virtual asset industry, (c) improving financial companies' AML capacity, and (d) enhancing regulatory consistency with global standards.

Background

Since its establishment in 2001, the KoFIU has been examining and analyzing specified financial transaction information to be provided to law enforcement agencies and supervising and overseeing the AML duty of financial companies. Over the past 25 years, the volume of both suspicious transaction reports (STRs) and analysis of information being shared with law enforcement agencies has increased significantly. In 2023-2024, the use of KoFIU's analysis data led to the uncovering of major tax and customs violations cases.

In 2021, the KoFIU adopted a registration system for virtual asset service providers (VASPs) and made them subject to the AML duty, thereby employing inspections and sanctions tools to help strengthen the AML capacity of VASPs. The KoFIU was the first in the world to adopt the travel rule for VASPs, requiring them to transmit and hold originator and beneficiary information in virtual asset transactions.

Nonetheless, the Korean society still remains exposed to various types of money laundering threats originating from public livelihood infringement crimes and cash- and virtual asset-involved scams, which require enhanced risk management.

The existing AML framework also exhibits certain limitations. With the introduction of the current legal framework 25 years ago, the regulatory tools need to be upgraded to be able to more agilely respond to newly emerging types of money laundering threats. Moreover, the organizational size of the KoFIU remains relatively small and the screening and analysis infrastructure outmoded even when the volume of STRs and other types of information handled by the organization is greater than in some other jurisdictions.

Against this backdrop, the KoFIU has prepared the following AML policy agendas for 2026 to (a) facilitate the freezing and confiscating of criminal proceeds more swiftly and effectively, (b) bolster the AML capacity of financial companies, and (c) make domestic regulations more consistent with global standards.

Key Policy Agendas

a) Strengthening response capacity against serious public livelihood infringement crimes and transborder crimes

Under the current regulatory framework, there exists no legal basis to freeze the accounts suspected to be involved in criminal activities (criminal proceeds) without a court decision except for specific cases linked to voice phishing scams. Therefore, the KoFIU will seek to adopt a rule under the Act to be able to freeze the accounts suspected to be linked to serious public livelihood infringement crimes to more effectively cut off the flow of criminal proceeds and prevent further damages. With the newly adopted rule in place, the KoFIU will be able to make decisions on freezing account activities when requested by investigation authorities for certain types of serious public livelihood infringement crimes involving narcotics, illegal gambling, terrorism financing, etc.

In addition, to be able to more effectively respond to transborder crimes, international criminal organizations will be newly added to the list of entities that can be designated for prohibition of financial transactions under the Act on Prohibition against the Financing of Terrorism, which currently restricts the list to terrorism- and proliferation-related entities.

Moreover, the screening and analysis function of the KoFIU will be strengthened to better process information originating from STRs. A strategic analysis team will be operated on a permanent basis to bolster the organization's response capacity on pending issues, and an AI-driven screening and analysis system will be adopted. With the introduction of Chainalysis (for analyzing virtual assets) and enhanced training, the organization's professional capacity and expertise for screening and analysis will be improved.

Lastly, the KoFIU will make continuous efforts to strengthen international cooperation to more actively respond to transborder crimes. There are ongoing discussions to step up regional cooperation, and the designation of a point person for each country will help to ensure the continuation of joint responses against transborder crimes. Moreover, the KoFIU will actively participate in relevant projects on trasnborder crimes initiated by the Financial Action Task Force (FATF) and strive to bolster the role of Korea in the Asia-Pacific region.

b) Bolstering AML framework in virtual asset industry

Under the current regulatory framework, the transfer of virtual assets taking place between domestic VASPs in the amount of KRW1 million or more is subject to the travel rule, requiring the originating exchange to transmit originator and beneficiary information to the recipient exchange. The KoFIU will seek to expand the application of this travel rule to virtual asset transactions worth below KRW1 million, and the recipient exchange will also be made subject to the duty of maintaining originator and beneficiary information. For virtual asset transactions taking place between a domestic exchange and a personal wallet or overseas exchange service provider, the KoFIU will only permit low-risk type transactions when the originator and the beneficiary are the same entity to make transactions more transparent.

The KoFIU will also work to upgrade AML regulations in preparation for the impending regulations on stablecoins. In this regard, the issuers of stablecoins will be required to adhere to an equivalent level of AML duty that is currently mandated for financial companies. In their transactions with personal wallet or overseas exchange service providers, the issuers of stablecoins will be required to take appropriate measures according to the risk-based approach.

Since the vast majority of VASPs have small-scale operations, there are concerns about inadequate capacity to comply with the AML duty. Thus, the KoFIU will proactively carry out examinations on small-scale service providers and recommend management improvement where deemed necessary, while employing strict sanctions on rule-breakers.

c) Improving AML capacity of financial companies

The KoFIU will take steps to improve the AML capacity of financial companies. In this regard, a clear line of responsibility regarding the AML duty of financial companies will be established to ensure an enhanced level of accountability. More specifically, an executive officer of financial company will be required under the Act to oversee and take the responsibility concerning the AML duty of the financial company. Additionally, there will be an integration of rules and regulations currently scattered around to more effectively regulate financial companies' operational guidance and clearly indicate sanctions for violation.

The semi-annual AML implementation evaluation currently taking place for financial companies on a voluntary basis will be made mandatory. The KoFIU will also seek to introduce a regulatory basis to impose sanctions if financial companies submit false data or fail to submit report.

Lastly, there will be measures to upgrade AML inspections and sanctions. The KoFIU plans to bolster inspections on the financial companies that are considered as high-risk for money laundering. To more widely embrace the risk-based approach in AML inspections and sanctions, the KoFIU will bring strict sanctions against high-risk violation cases, while considering to adopt a more flexible approach against low-risk violations (a system where a corrective action is recommended to avoid sanction at first but a punitive sanction will follow in case there is a failure to follow through on the recommended corrective action).

d) Enhancing regulatory consistency with global standards

The KoFIU will seek to upgrade domestic regulations in line with the global standards recommended by the Financial Action Task Force (FATF). In order to prevent money laundering taking place through paper companies, the KoFIU will seek to establish a database management and utilization framework to keep close tabs on ultimate beneficial owners of corporate entities.

Making use of suspicious transactions information filed by financial companies, the KoFIU will first build a database for ultimate beneficial owners of corporate entities, and this database will be utilized for cross-checking information in the future by corporate entities themselves, financial companies, and investigation agencies.

In addition, the KoFIU plans to introduce AML requirements for attorneys, certified public accounts, and tax accountants as recommended by the FATF. Currently, there are only two FATF member countries (including Korea) that have yet to adopt this rule, thus it requires an urgent action to upgrade relevant rules. In this regard, the KoFIU will have consultations with related professional groups and discuss detailed plans for adopting key FATF-recommended AML requirements, such as customer due diligence (CDD) and STR.

Lastly, the KoFIU plans to set up and operate a joint response team with officials from related government ministries to thoroughly prepare for a mutual evaluation on AML/CFT with the FATF scheduled to be held in March 2028. The joint response team will seek to draw up regulatory reform measures in line with international standards.

Further Plan

The KoFIU will take steps to swiftly implement the measures that require no revision to existing laws, while preparing revision proposals to be summited to the National Assembly in the first half of this year to carry out the agenda items requiring legislative action. Meanwhile, subordinated regulations will be quickly updated in the first half of this year to ensure prompt implementation of measures.

With the 2026 AML/CFT policy agendas, the KoFIU will work to safeguard the country from the threat of money laundering and help to contribute to the safety of the public.

* Please refer to the attached PDF for details.