South Korea to introduce crypto crime investigation unit

South Korean regulators are proactively addressing the rise in crypto crimes by considering establishing a permanent investigation unit.

According to a local report, the country’s Ministry of Justice and the Ministry of Internal Affairs and Security will begin discussing the establishment of the Joint Virtual Asset Criminal Investigation Unit as an official department in early May.

The unit currently operates as a temporary organization supervised by the Seoul Southern District Prosecutor’s Office. The new regulation will raise the status of this institution through the appointment of new prosecutors and budget allocation.

The unit consists of 30 experts from seven different financial and tax authorities and was launched last July as the country’s first body to focus solely on crimes related to digital assets.

South Korea has witnessed a significant increase in crypto crimes in the past year. According to a report published by the country’s Financial Intelligence Unit (FIU) in February, 16,076 suspicious crossings were flagged by the watchdog. The number of crimes has increased by 48.8% since 2022, the FIU said.

The transactions were linked to numerous illegal activities, including money laundering, market manipulation and illegal drug dealing.

The main driver of growth was attributed to the Financial Intelligence Unit’s relationship with local cryptocurrency service providers, with calls for these organizations to report suspicious activity. These efforts also led to a 90% increase in crypto cases referred to law enforcement for investigation.

One of the latest cases in which law enforcement intervened saw the Haeundae Police Station in Busan, South Korea arrest two fraudsters responsible for stealing 5.5 billion won, equivalent to $4.1 million in the name of cryptocurrency investments. Scammers guaranteed a 70% return for a monthly investment of 1 billion won.

Meanwhile, South Korea is preparing to implement its first crypto regulatory framework on July 19. The law will prescribe stricter penalties for those manipulating the crypto market, even life imprisonment depending on the severity of the crime.

The “Virtual Asset Users Protection Act” was first passed in July 2023 with a one-year grace period. Immediately after the law came into force, the Joint Virtual Asset Criminal Investigation Unit was launched.