Crypto Exchange Upbit Faces Probe Over 600K KYC Violations

Upbit, the leading crypto exchange in South Korea, is being investigated by the country’s financial authorities over an alleged violation of Know-Your-Client (KYC) procedures. The probe comes amid the exchange’s license renewal process and a potential investigation for “anti-monopoly breaches.”

Crypto Exchange Faces Probe For Potential KYC Violations

According to local reports, South Korea’s Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC) has started investigating crypto exchange Upbit for potential violations of KYC requirements.

Maeil Business Newspaper revealed that the financial authorities identified large-scale cases suspected of violating customer identification procedures while reviewing the crypto exchange’s license renewal process. Under the Special Money Act, virtual asset service providers (VASPs) must renew their licenses every three years.

The FIU found between 500,000 and 600,000 cases where the KYC process was not properly followed. Seemingly, the crypto exchange opened thousands of accounts for users without the proper verification.

In South Korea, VASPs must comply with anti-money laundering (AML) and Combating the Financing of Terrorism (CFT) requirements. To achieve this, users are required to complete the KYC identification process when creating an account on crypto platforms.

Customers must use submit IDs to validate their identity, which undergoes a verification process by the crypto exchange. However, the Korean authority found that Upbit potentially broke AML and CFT requirements by failing to conduct the KYC process properly.

The FIU located thousands of cases where accounts were opened without the proper verification, as the ID picture submitted was ineligible. The financial authority is re-examining the potential violations on a case-to-case basis to assess whether they break the law or have been used for money laundering or crypto-related crimes.

Recently, the Delhi police arrested a suspect linked to the $235 million hack of Indian exchange WazirX. The suspect allegedly sold an account created with a fake name to the individual who eventually conducted the crypto heist.

Upbit’s License Renewal Could Be Delayed

It’s worth noting that Upbit’s license renewal process, which started in August, has raised questions among the financial community for its prolonged timeline. The report highlights that the process has been affected by the extensive investigation.

The FIU has to determine how many of the 600,000 potential KYC violations are correct. However, the crypto exchange could face fines of up to 100 million won per case, worth around $71,000, and Upbit’s license renewal could be further delayed if the reviewing process extends.

Moreover, the crypto exchange might face another probe amid its renewal process. Last month, a local news media outlet reported that the Financial Services Commissioner Kim Byung-hwan announced a potential investigation into the exchange’s “monopoly structure.”

Kim responded to lawmaker Lee Kang-il’s concerns during an audit by the South Korean parliament, stating that the financial regulator was aware of Upbit’s potential market monopoly and assuring it would investigate the issue and its partnership with K-Bank.

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