Upbit faces investigation for suspected KYC violations, potentially affecting its business license renewal and resulting in significant fines.
Key Notes
- Upbit is investigated for 500,000+ suspected KYC violations, risking fines and license renewal delays.
- Inspections found compliance issues like unclear user details under South Korea’s financial laws.
- The outcome could impact Upbit’s operations amid separate anti-monopoly investigations.
Top South Korean cryptocurrency exchange Upbit is under investigation for a suspected violation of the customer verification requirement during its license renewal process. This violation has raised concern about whether Upbit has been complying with the Know Your Customer (KYC) obligations.
The KYC requirement helps track malicious and criminal activities, such as anti-money laundering (AML) and terrorist financing. Hence, crypto exchanges are always required to verify users properly before allowing them to execute transactions on their platforms.
Alleged KYC Breaches Could Impact Upbit’s Business License
South Korea’s Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC), recently said it found between 500,000 and 600,000 cases where Upbit might not have followed KYC (Know Your Customer) rules. Local news agency Maeil Business Newspaper (MK) revealed the potential fines Upbit could face due to the high volume of cases. There are also growing concerns about the financial watchdog’s final decision, as this issue may impact Upbit’s business license renewal.
The South Korean Special Financial Transaction Information Act requires virtual exchanges to renew their licenses every three years. However, MK reported growing concern within the financial sector over the lengthy renewal process for Upbit. The delay is largely due to the time required to thoroughly investigate the various cases identified by the FIU.
South Korean Financial Authorities Intensify Scrutiny of Cryptocurrency Exchange
The financial authority was reported to have been conducting onsite inspections of renewal applications submitted by the exchange since late August. During this process, they identified many cases where Upbit had failed to implement KYC properly. Some of the instances include Upbit allegedly opening accounts despite blurred names and registration numbers, making them difficult to identify.
An official from the Upbit team reportedly declined to provide further details about the exchange’s ongoing issue with the FIU, citing the Specific Financial Transaction Information Act. According to this law, sharing information still under investigation by the FIU is not permitted, and such details are not even disclosed internally within the company.
Concerns Grow Over Potential Fines and Delays in License Renewal
The alleged KYC breaches came a month after the FSC was reported to have announced plans to investigate Upbit for possible anti-monopoly violations. The investigation is linked to its strong ties with K-Bank, which local authorities have been closely monitoring due to its high involvement with cryptocurrency exchanges.
According to the regulatory act, if any exchange is found to violate the customer verification requirement, the firm will receive a fine of up to 100 million Korean won per case. Thus, the concern is how many real violations will be identified among the hundreds of thousands of suspected cases. The outcome could also affect the exchange’s business license renewal, as it could be put on hold.
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Temitope is a writer with more than four years of experience writing across various niches. He has a special interest in the fintech and blockchain spaces and enjoy writing articles in those areas. He holds bachelor’s and master’s degrees in linguistics. When not writing, he trades forex and plays video games.
