South Korea’s FIU is investigating Upbit for failing to properly verify 500,000 to 600,000 accounts. Upbit could be fined billions of dollars for KYC violations under South Korean law. The exchange’s license renewal has been delayed as the FIU scrutinizes possible illegal activities.
South Korea’s Financial Intelligence Unit (FIU) is investigating cryptocurrency exchange Upbit into what could be the largest know-your-customer (KYC) scandal in the industry’s history.
The investigation is focusing on up to 600,000 accounts that allegedly failed to undergo proper verification procedures.
These violations were discovered during a routine review of Upbit’s business license renewals, which is no longer routine.
Accounts without proper identification documents
A major FIU investigation that began in late August found serious flaws in the exchange’s account verification system. Authorities found that many accounts were opened with unclear or improperly submitted identification.
In some cases, important details such as name and registration number could not be verified.
South Korea has mandated strict identity verification checks to prevent criminal activities, including money laundering, within the virtual currency market. Without proper identity verification, these accounts can easily be misused for illegal purposes.
Upbit risks penalties of up to billions of won
If the allegations are confirmed, Upbit, one of 23 South Korean exchanges that came together to self-regulate in 2023, could face a huge fine.
Under South Korea’s Special Financial Transaction Information Act, each violation could result in a fine of up to 100 million won (approximately $75,000).
According to local sources familiar with the matter, the number of affected accounts could be between 500,000 and 600,000, and the total fine could soar to billions of won, with large financial implications for exchanges and the crypto industry as a whole. It could be a blow.
The fallout from these violations has already delayed Upbit’s license renewal process indefinitely. Normally a routine procedure carried out every three years at crypto exchanges, this review comes as the FIU meticulously investigates each flagged account for possible illegal activity. We are currently mired in uncertainty.
Meanwhile, Upbit remains tight-lipped about the investigation, citing legal restrictions on sharing details. However, the company’s vague statements only heightened concerns about the severity of the breach and its possible connection to money laundering.
As the investigation continues, the crypto industry is watching closely, awaiting the potential outcome of what could be a landmark case in KYC and anti-money laundering enforcement.
