Park Won-sik Highlights Major Voice Phishing Money Laundering Case in Seoul

On March 19, Park Won-sik, head of the criminal affairs division at Seoul’s Jungnang Police Station, showcased the criminal proceeds seized during a significant investigation into a 311.3 billion won voice phishing money-laundering operation. The case underscores the growing sophistication of money laundering activities linked to cryptocurrency, as authorities grapple with the challenges of tracing illicit funds in an increasingly complex digital landscape.

Surge in Cryptocurrency Money Laundering: A Growing Concern for South Korean Authorities

Seoul, South Korea — In a striking display of law enforcement’s ongoing battle against financial crime, Park Won-sik, head of the criminal affairs division at Seoul’s Jungnang Police Station, unveiled a staggering 311.3 billion won in criminal proceeds linked to a major voice phishing money-laundering case on March 19. This operation highlights the alarming rise of specialized money laundering organizations that are increasingly using cryptocurrency as a tool for illicit activities.

The case centers around a man identified only as A, who ran an unregistered virtual asset exchange in Seoul. A adeptly recruited customers through internet blogs and social media, offering to convert their cash into cryptocurrency. Over a mere four months, A facilitated 1,493 transactions totaling 8.7 billion won, with funds flowing in from various criminal activities, including voice phishing and stock-tip fraud. In May, the Seoul Northern District Court sentenced A to 10 months in prison, suspended for two years, for violating the Act on Reporting and Using Specified Financial Transaction Information.

The Evolution of Money Laundering

As cryptocurrency becomes increasingly intertwined with various crimes, including drug trafficking and gambling, money laundering has evolved from a mere “side business” of criminal organizations into a specialized field. Recent trends indicate that dedicated money laundering organizations are emerging, handling proceeds from multiple criminal enterprises in a division-of-labor structure. This shift complicates law enforcement efforts, making it more challenging to trace fund flows and identify the actual operators behind these schemes.

Data from the National Police Agency reveals a stark contrast between the surge in detected cryptocurrency money laundering cases and the relatively stagnant number of arrests. In 2023, police reported only three cases, but by the first half of this year, that number skyrocketed to 1,214. Meanwhile, arrests remained low, with only 42 individuals apprehended during the same period.

A New Criminal Landscape

The landscape of cryptocurrency-related crimes is shifting. In 2022, investment fraud cases vastly outnumbered money laundering cases, with 3,108 detected fraud incidents compared to just eight money laundering cases. However, in the first half of 2023, the trend reversed dramatically, with money laundering cases far exceeding investment fraud cases. This indicates that cryptocurrency is increasingly being used as an infrastructure for processing criminal proceeds rather than merely a tool for individual crimes.

A prime example of this trend is the recent dismantling of a voice phishing money laundering organization by the Jungnang Police Station. From October to March, the group allegedly set up an unregistered cryptocurrency exchange in Seoul’s Myeong-dong, converting cash obtained through voice phishing into Tether (USDT) and transferring it to overseas digital wallets. Authorities arrested 21 individuals involved and seized a variety of assets, including cash, Tether, and gold bars.

Law Enforcement’s Response

In response to the growing threat of money laundering organizations, police have established specialized cryptocurrency tracking units and unregistered cryptocurrency brokerage crackdown teams across five metropolitan and provincial police agencies. With an annual budget of approximately 1 billion won dedicated to drug fund tracking and analysis, these units are collaborating with blockchain analysis firms to enhance their investigative capabilities.

However, the challenges remain formidable. The complex web of transactions often involves overseas unregistered exchanges, multiple digital wallets, and borrowed-name accounts, making tracing funds a time-consuming process. Critics argue that existing laws are insufficient to effectively combat unregistered cryptocurrency exchanges, particularly when transactions occur over-the-counter using cash and personal wallets.

A Call for Regulatory Reform

As the scale of money laundering on global blockchain networks continues to rise—growing from $10 billion in 2020 to over $82 billion last year—there are increasing calls for a more nuanced regulatory framework. Advocates suggest expanding the current virtual asset service provider (VASP) reporting system to include currency exchangers and implementing stricter obligations for qualified exchangers, such as know-your-customer (KYC) requirements and suspicious transaction reporting.

The emergence of specialized money laundering organizations underscores the urgent need for law enforcement and regulatory bodies to adapt to the evolving landscape of financial crime. As authorities work to combat this growing threat, the collaboration between law enforcement and the cryptocurrency industry will be crucial in safeguarding the integrity of financial systems.