The Financial Intelligence Unit (FIU) of Seoul, the city in South Korea, said they have spotted between 500,000 and 600,000 potential Know-Your-Customer (KYC) violations uncovered in its examination of Upbit, the largest cryptocurrency exchange in the country. This was discovered during an on-site inspection regarding submission of Upbit’s business license renewal.
The FIU, Financial Services Commission (FSC) affiliate, revealed in a review of Upbit’s operations that they flagged suspected KYC breaches, according to a Maeil Business Newspaper report. Violations may cost the exchange hefty fines, as well as a delay or state the acquisition of the exchange’s license renewal.
Upbit Faces Scrutiny Amid KYC Violations Investigation
Upbit, which will have to bar customers with failed KYC checks from the platform to fight money laundering, is also holding up its renewal license process as authorities dig deeper. The violations are thought to span times when customers’ names and identification numbers were blurred or improperly checked during account setup, creating worries concerning the platform’s anti money laundering (AML) procedures.
These fines are severe. If the scale of the violations is taken into account, Upbit could be fined up to 100 million Korean won (approximately $71,500) per case, totaling 35.8 billion Korean won or, roughly, $25 million.
Upbit’s license renewal is still pending with South Korea’s financial authorities, who have not yet determined how the violations will affect the FIU’s continuing investigation. Upbit declined to comment on specifics of the findings of the FIU, given the fact that this is covered with the Special Financial Transaction Information Act, according to an official from Upbit speaking with Maeil Business.
The official said: ‘It’s prohibited to share information about a case being processed by the FIU.’ ‘Even within the company information is not being shared.’
The suspected breaches of KYC come at a time when the Upbit exchange and the cryptocurrency sector in South Korea are being scrutinised more widely. Earlier this year, the FSC opened an investigation into Upbit for possible anti-monopoly law violations, partly based on Upbit’s dominant position in the market and its net affiliation with the K Bank. K Bank relies on Upbit’s deposits, which account for around 20 percent of the total deposit base, and the FSC has warned about that. There are also worries that any regulatory issues surrounding K Bank’s initial public offering (IPO), already due in just a few weeks, could hurt it as well.
The results of the current investigation could have drastic implications for regard to Upbit’s operations and, in general, towards the cryptocurrency landscape in South Korea, where regulators are intensifying their attempts towards improving compliance and also oversight of the rapidly growing market.
