South Korea’s largest cryptocurrency exchange, Upbit, is under investigation for alleged violations of Know Your Customer (KYC) requirements.
South Korea’s largest cryptocurrency exchange, Upbit, is under investigation by the Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC) for alleged violations of Know Your Customer (KYC) requirements.
Upbit is under scrutiny
The investigation is being conducted as part of Upbit’s regular business license renewal process. During the investigation, the regulatory agency identified at least 500,000 to 600,000 suspected cases of improper KYC procedures during the review process.
Results of FIU investigation
The FIU began an on-site review of Upbit in late August, after the exchange applied for a renewal. Initial findings show that many cases of unclear or incomplete identification documents provided by users were still accepted when creating accounts.
Accordingly, under the KYC process designed to prevent money laundering (AML) and counter-terrorism financing (CTF), exchanges are required to verify users’ identities through government-issued IDs before allowing trading.
However, the FIU has identified cases of using blurred or incorrectly recorded details, such as names or registration numbers, to open accounts. Such shortcomings increase the risk of accounts being misused for illegal activities.
Potential Outcomes
The scale of the suspected breach has drawn attention to the potential penalties Upbit could face. Under South Korea’s Specified Financial Transaction Information Reporting and Utilization Act (commonly known as the Special Financial Transactions Act), violations of KYC obligations can result in fines of up to 100 million KRW (approximately $74,000 USD) per case.
Upbit Accused of Accepting Blurry IDs for KYC
In South Korea, cryptocurrency exchanges like Upbit are required to comply with strict KYC regulations. Upbit is accused of violating KYC by allowing users to open accounts with IDs that have blurred personal data.
This could result in a fine of 100 million won ($71,500) per case and difficulty in renewing their business licenses.
The FSC previously initiated an exclusive investigation into Upbit
Upbit, a major cryptocurrency exchange in South Korea with a daily trading volume of $2.2 billion, was investigated for KYC violations following the FSC’s October plan.
The case involves Upbit’s relationship with K-Bank, where 70% of deposits are crypto-related. K-Bank also canceled its $732 million IPO in October 2023 due to concerns about valuation and reliance on cryptocurrencies.
