South Korea’s Financial Intelligence Unit (FIU) uncovered between 500,000 and 600,000 potential violations of customer verification rules during a license review for Upbit. Questions also arise about possible ties to money laundering.
Details of the FIU Investigation
Since starting the investigation in August, inspectors have found accounts registered with blurry or improperly submitted documents. Critical information, such as names and registration numbers, was often too unclear for verification. This violation could point to potential money laundering risks.
Potential Consequences for Upbit
If violations are confirmed, Upbit faces significant fines. Under South Korea’s Special Financial Transaction Information Act, KYC rule violations can carry penalties of up to 100 million won per case, potentially resulting in total fines reaching tens of billions of won.
KYC Compliance Requirements and Money Laundering Risks
South Korean laws require cryptocurrency users to undergo strict KYC checks before trading. The requirements include submitting valid identification documents. However, the discovered violations question the effectiveness of Upbit's verification system, with regulators now faced with determining how many of these accounts might be used for illegal purposes.
The FIU investigation casts a shadow over Upbit's license renewal process, placing the exchange at the center of a scandal with potential criminal implications. Clarity in this situation will be necessary for regulators and customers alike.
