Emily Walker
Upbit, South Korea’s top cryptocurrency exchange, is currently under investigation by financial regulators for allegedly breaching Know-Your-Client (KYC) regulations. This scrutiny coincides with the exchange’s efforts to renew its operating license and an inquiry into possible “anti-monopoly violations.”
Investigation of Upbit for KYC Compliance Issues
Recent reports indicate that the Financial Intelligence Unit (FIU) of South Korea’s Financial Services Commission (FSC) is investigating Upbit concerning potential KYC compliance failures.
According to Maeil Business Newspaper, authorities discovered significant instances of non-compliance with customer verification protocols while scrutinizing Upbit’s license renewal. Under local law, virtual asset service providers (VASPs) must renew their licenses every three years.
The FIU uncovered between 500,000 and 600,000 instances where Upbit allegedly did not adhere to KYC protocols. It appears that numerous accounts were created without adequate user verification.
In South Korea, VASPs are mandated to follow anti-money laundering (AML) and Combating the Financing of Terrorism (CFT) rules, requiring users to complete KYC processes to create accounts on crypto platforms.
Customers are expected to submit identification documents which undergo verification by the exchange. However, the FIU reported that Upbit may have violated these AML and CFT requirements by improperly handling the KYC processes.
Investigators identified numerous accounts that were created using invalid identification photos. The financial body is now reviewing these cases individually to determine if there were any legal violations or potential links to money laundering or crypto-related offenses.
In a related incident, Indian authorities arrested an individual tied to a $235 million hack at the exchange WazirX, who reportedly sold an account registered under a false identity, enabling the cybercrime.
Possible Delays in Upbit’s License Renewal
Upbit’s license renewal, initiated in August, has been marred by delays, raising concerns in the financial sector. The ongoing investigation is significantly impacting the timeline of this process.
The FIU is tasked with confirming how many of the alleged 600,000 KYC violations are accurate. Each confirmed breach could result in fines of up to 100 million won (approximately $71,000), and an extended review could further postpone Upbit’s license renewal.
Additionally, Upbit may face further investigation in connection with its license renewal. Recently, a local news outlet reported that Financial Services Commissioner Kim Byung-hwan acknowledged concerns about the exchange’s possible market dominance and its relationship with K-Bank, assuring that a thorough investigation would be conducted.