South Korea’s largest crypto exchange, Upbit, is being scrutinized for significant Know-Your-Customer (KYC) violations during its local license renewal.
KYC is a crucial regulatory requirement designed to prevent illegal activities like money laundering and fraud by ensuring that users are correctly identified. Violations of these standards can lead to severe penalties for companies in the crypto industry.
Over 500,000 KYC Violations
A local report confirmed that South Korea’s Financial Intelligence Unit (FIU), part of the Financial Services Commission (FSC), has uncovered potential violations of KYC regulations on Upbit’s platform, involving between 500,000 and 600,000 cases.
The authorities noted that they discovered the customer verification breaches while evaluating Upbit’s business license renewal. These alleged breaches could seriously affect the exchange’s ability to continue operating in the country, especially as regulatory scrutiny intensifies.
In South Korea, crypto exchanges or virtual asset service providers (VASPs) must establish strict KYC procedures.
Failed KYC Implementation
Investigations into Upbit’s operations also revealed that the exchange failed to implement its KYC procedures properly. Reports highlighted instances where user-submitted identification documents were unclear, with blurred names or registration numbers.
The exchange approved and opened accounts despite these issues without addressing these verification discrepancies. Accounts created with such questionable documents could potentially facilitate criminal activities.
The FIU will continue its thorough investigation into each suspicious case. However, representatives from Upbit have stated that they cannot share details regarding the ongoing investigation due to legal restrictions.
Under South Korea’s Special Financial Information Act, crypto exchanges are required to renew their licenses every three years.
Failure to comply with KYC regulations could threaten this renewal. Additionally, each violation of the law could result in a fine of up to 1 billion Korean won (over $716,000).
Over $2B Daily Trading Volume
Launched in 2017, Upbit is recognized as one of South Korea’s leading crypto exchanges and ranks among the largest globally. The exchange has a daily trading volume of $2.2 billion, according to data from CoinGecko.
The report concerning Upbit’s KYC violations came after the FCS revealed plans to investigate the exchange for possible anti-monopoly violations.
Upbit’s investigation into monopoly practices was linked to its strong ties with K-Bank, which local authorities have long scrutinized due to its high exposure to crypto exchanges. Reports show up to 70% of K-Bank’s deposits are associated with crypto transactions.
