South Korea’s Financial Intelligence Unit reportedly found 500,000 to 600,000 potential KYC violations on Upbit, the largest crypto exchange in the nation. KYC violations of this scale could lead to fines and possible license renewal issues.
According to a report by local news agency Maeil Business Newspaper, South Korea’s Financial Intelligence Unit of the Financial Services Commission found the potential Know-Your-Customer breaches when it was conducting on-site inspections for the platform’s business license renewal.
At the moment, Upbit’s license renewal is halted as the authorities require more time to review the hundreds of thousands of copies suspected of violating the country’s KYC standards.
South Korean crypto exchanges are obligated by law to establish strict KYC procedures for customers making accounts to prevent the accounts from being used for money laundering or other criminal activities.
Due to the potential violations, Upbit is reportedly facing a fine of 100 million Korean won or equal to $71,500 per case, which could potentially result to the company having to pay around $35.8 billion due to the large amount of cases.
Additionally, the report states that South Korean financial authorities still have not reached a conclusion regarding how this issue will affect Upbit’s business license renewal.
When asked about the FIU’s findings, an official from Upbit told Maeil Business that sharing information about matters being processed by the FIU is prohibited under the Special Financial Transaction Information Act.
“Information is not shared at all even within the company,” said the official.
The crypto exchange allegedly let customers open accounts despite their names and identification numbers being blurred. Accounts created without proper authentication run the risk of being used for money laundering or crimes. The local law requires all crypto exchanges to comply with KYC and Anti-Money Laundering protocols.
In early October, South Korea’s FSC planned to investigate Upbit regarding potential breaches of anti-monopoly due to the exchange’s market dominance and its close ties to K Bank. The FSC’s chairman also raised concerns about K Bank’s upcoming IPO, highlighting the risks tied to its heavy reliance on Upbit’s deposits, which amount to 20% of the bank’s total deposits.
