Key Points
- South Korea’s government agency reported significant amounts of KYC violations at Upbit.
- Multiple accounts with inappropriate ID verifications could be used for criminal activities.
According to the latest official reports, South Korea’s Financial Intelligence Unit (FIU), identified a large number of suspected violations of customer identification during the business license renewal review process for Upbit, the country’s biggest crypto exchange.
FIU, a government agency founded in 2016 to combat money laundering and financial terrorism, is currently reviewing each case to find potential illegalities.
Between 500,000-600,000 Cases of Suspected Inappropriate Identification
The South Korean economic publication Mk.co.kr reported that there are at least 500,000 to 600,000 cases of suspected inappropriate identification cases, meaning that the exchange’s customers used these accounts without proper KYC implementations.
Reports reveal that fines are usually imposed for violations of the customer verification system, but this case requires more attention to the fines’ sizes, given the fact that the number of suspected cases is so large.
The financial authorities’ decision is important as their conclusion may affect Upbit’s business license renewal.
On-Site Inspections of Upbit’s Renewal Applications
On November 14, the FIU conducted an on-site analysis of the renewal applications submitted by Upbit since late August and, during the process, it discovered at least 500,000 cases where KYC seems to have not been properly implemented.
KYC is a process that verifies customer identity and it’s implemented by crypto exchanges and other entities for anti-money laundering (AML) or counter-terrorist financing (CTF). Crypto exchanges require users to open real-name accounts and complete the necessary KYC verification steps before being able to deposit, trade, or withdraw funds.
During the KYC procedure, users have to submit their IDs and undergo thorough identity verification. Once the procedure is completed, the user can use the platform, and the exchange is considered compliant with AML and CFT regulations.
However, the governmental agency reported that there are many cases in which Upbit didn’t follow the procedures correctly.
Multiple Issues with User Accounts Reported
It seems that some accounts were opened by the exchange, despite the names and registration numbers on the users’ IDs being blurred and not properly readable for identification.
Such accounts that lack proper identification could be used for money laundering or other illegal activities.
An Upbit official reportedly released a statement, revealing that according to the Specific Financial Transaction Information Act (which provides information on financial transaction data), sharing of data processed by the FIU is prohibited. The official said that such data isn’t even shared within the company.
Upbit Verification for License Renewal Continues
According to the act mentioned above, crypto operators have to renew their licenses every three years.
While the financial sector shows interest in the reasons why Upbit’s verification for a renewal license is taking such a long time, this is due to the meticulous review of these hundreds of thousands of suspicious cases that were identified by the FIU agency.
The future focus is on how many actual violations are found among this large number of suspected cases that lack proper KYC verification.
The Special Financial Transaction Information Act reports that a fine of up to 100 million won/case could be imposed for violating proper KYC verification.
