Upbit, South Korea’s Largest Exchange, Faces Potential Record-Breaking Fines and Suspended Operations of Up to Six Months due to KYC and Anti-Money Laundering Violations.
According to local media reports, Upbit, the largest cryptocurrency exchange in South Korea, has been ordered to suspend its operations by the Financial Intelligence Unit (FIU) of the Korean Financial Services Commission. The exchange is accused of violating the FIU’s Know Your Customer (KYC) requirements and failing to fulfill its anti-money laundering obligations. Specifically, during the period of suspension (up to 6 months), Upbit will be restricted from engaging in any new customer-related business. Under the Specific Financial Transactions Information Act, the maximum penalty for violating KYC regulations is a fine of up to 100 million Korean won per violation. The Crypto Pocha Channel has revealed that Upbit has around 500,000 to 600,000 instances of non-compliant KYC, which could result in a substantial fine.
Upbit, which holds a market share of over 70% in South Korea, is facing a possible suspension of its operations. The news reports state that Upbit, the largest virtual asset exchange in South Korea, has received a notice of suspension for allegedly violating the KYC requirements and failing to fulfill its anti-money laundering obligations. The Financial Intelligence Unit (FIU), a subsidiary of the Financial Services Commission, notified Upbit on the 9th that it may impose sanctions primarily in the form of a suspension of operations. If this sanction is confirmed, Upbit will be restricted from engaging in any new customer-related business during the period of suspension, which can last for up to 6 months.
However, it is understood that the suspension mainly restricts new customer registrations, and existing users can still trade on Upbit. Currently, Upbit accounts for over 70% of the trading volume in the South Korean virtual asset trading market. Upbit will submit a response to the FIU before the 20th. The FIU plans to hold a sanction review meeting on the 21st to finalize the details of the suspension period and other sanctions.
Upbit is facing a potentially record-breaking penalty for non-compliant KYC practices. It is understood that the maximum penalty for violating KYC regulations is a fine of up to 100 million Korean won per violation. In South Korea, exchange licenses are renewed every three years, and Upbit’s license expired in October last year. In late August last year, the FIU began inspecting Upbit’s application for license renewal and found suspected non-compliance with KYC procedures.
Upbit is also accused of trading with unreported overseas digital asset operators, resulting in sanctions related to anti-money laundering rules. However, Upbit officials stated that it is not easy to identify unreported overseas exchanges on the blockchain in advance, and this was not done intentionally. Upbit’s parent company, Dunamu, has also issued a statement clarifying the facts according to the procedure and reiterating that the sanction will not affect existing users.
The decision on the sanctions will be made on the 21st. In a previous case involving Hanbitco, which had 197 instances of non-compliant KYC, a fine of 2 billion Korean won ($1.37 million) was imposed. However, the decision of the court was deemed invalid due to unclear investigation.
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