South Korea’s Financial Intelligence Unit (FIU) under the Financial Services Commission (FSC) revealed serious lapses with the non-compliance of the Know Your Customer (KYC) policy in Upbit, the biggest Korean crypto exchange. This was found during the scrutiny of Upbit’s business license renewal documents, and it has sparked controversy due to regulatory and legal implications.
FIU Investigation Reveals KYC Lapses
The FIU started carrying out on-site inspections of Upbit operations in late August, in the process finding between 500,000 to 600,000 cases of suspicious KYC violations. These violations are related to customer identification failures, which are part of AML and CTF regulations by the Act of Special Financial Transaction Information.
Among the problems highlighted were cases of accounts opened with recognizable but blurred or incomplete Identification documents in terms of names and registration numbers. Deals of this nature could easily incorporate more operations, such as money laundering. The Upbit officials have not been keen to discuss this elaborate review, stating that it has legal implications that cannot be addressed to the public.
Potential Penalties and Impact on Business
Non-compliance with the provision on customer verification entails considerable penalties, which may total up to one hundred million won (approximately 75,000 dollars). Since numerous cases have been flagged, possible fines could reach record levels, possibly in hundreds of thousands.
Upbit’s Operational Challenges and Industry Influence
This is not the first time Upbit has faced scrutiny from regulators; its market dominance through trading volume was investigated over the manipulation of its market.
In July, it published its first disclosure in response to the new Virtual Asset User Protection Act, showing that it remains financially solvent and holds significant users’ assets. It also describes its measures to limit risks. In addition, Upbit acquired a Digital Payment Token Services License in January from the Monetary Authority of Singapore, establishing the company’s seriousness about compliance in regulated markets.
Broader Implications for the Crypto Sector
The conclusion of the FIU investigation basically holds the key to Upbit’s continued operation. It acts as a reference guide for the rest of the regulation across all cryptocurrencies in South Korea. Apart from possible penalties and loss of reputation, the results can lead to further debates on the level of compliance and identity verification among the other exchanges.
