FIU Chief Cites Crypto Regulatory Arbitrage, Calls for Global Framework

South Korea’s Financial Intelligence Unit, the anti-money laundering arm of the Financial Services Commission, said differences in virtual-asset regulations across countries could weaken the effectiveness of anti-money laundering regimes and called for stronger international coordination.

The FIU attended the sixth plenary meeting of the 34th Financial Action Task Force session at the Organization for Economic Cooperation and Development headquarters in Paris, Newsis reported on June 22. The agenda included money laundering using virtual assets, terrorist financing and proliferation financing risks.

FIU Director Lee Hyeong-ju said differences among countries in licensing and registration requirements for virtual-asset service providers, supervisory approaches and frameworks for dealing with offshore operators were creating regulatory arbitrage. He added that a consistent and effective global regulatory framework should be established in a timely manner.

The FATF plans to publish a report reviewing how member jurisdictions are implementing anti-money laundering systems for virtual assets. It also adopted a new report on the risk that decentralized finance, or DeFi, platforms could be misused for money laundering and terrorist financing.

South Korea and many other member jurisdictions said money laundering risks linked to cross-border virtual-asset transactions are increasing. They called for expanding the scope of the travel rule and strengthening oversight of unregistered and offshore virtual-asset service providers.

The FATF also reaffirmed the need for continued monitoring of emerging financial services such as stablecoins and DeFi, along with international cooperation. Its next plenary meeting is scheduled for October in Paris.