Crypto Exchange Upbit Faces South Korean Probe Over 600,000 KYC Violations

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As a seasoned researcher with a keen interest in the intersection of finance and technology, I find myself closely monitoring the ongoing investigation into Upbit, South Korea’s leading crypto exchange. Having spent years studying regulatory compliance and its impact on digital assets, this case presents an interesting challenge.

In South Korea, the top cryptocurrency trading platform Upbit is under scrutiny by financial regulators due to accusations of disregarding Know-Your-Customer (KYC) regulations. This examination occurs during the renewal of their license and also hints at a potential probe into possible anti-competitive practices.

Crypto Exchange Faces Probe For Potential KYC Violations

Based on community news sources, it appears that South Korea’s Financial Intelligence Unit (FIU), under the Financial Services Commission (FSC), has initiated an investigation into cryptocurrency exchange Upbit, suspecting them of not complying with Know Your Customer (KYC) regulations.

According to a report from Maeil Business Newspaper, financial regulators have uncovered several significant instances of potential rule-breaking in customer identification procedures during their review of a crypto exchange’s license renewal process. Every three years, providers of virtual asset services (VASPs) are required by the Special Money Act to apply for license renewal.

It appears that the Financial Intelligence Unit (FIU) discovered approximately 500,000 to 600,000 instances where the Know Your Customer (KYC) process was not adequately adhered to. This suggests that the cryptocurrency exchange created a substantial number of accounts for users without undergoing the necessary verification procedures.

In South Korea, Virtual Asset Service Providers (VASPs) need to adhere to regulations aimed at preventing money laundering (AML) and financing of terrorism (CFT). To ensure this compliance, users are asked to undergo the Know Your Customer (KYC) verification process when opening an account on cryptocurrency platforms.

As an analyst, I’ve observed that users are required to provide identification for validation purposes, which goes through a verification process by the cryptocurrency exchange I work with. Unfortunately, it appears there could be a breach in compliance with Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) regulations, as Upbit may not have adequately implemented Know Your Customer (KYC) procedures, according to the Korean authorities.

In simple terms, the Financial Investigation Unit found numerous instances where accounts were established without proper identification, as the submitted ID photos did not meet requirements. The financial authorities are now individually reviewing these cases to determine if any rules were broken, whether they may have been used for money laundering or illegal crypto transactions.

As a researcher, I’ve recently found myself delving into an intriguing development: A suspect connected to the massive $235 million hack of the Indian cryptocurrency exchange WazirX has been apprehended by the Delhi police. Remarkably, this individual is believed to have peddled an account fabricated under a false identity, which later fell into the hands of the perpetrator who orchestrated the crypto heist.

Upbit’s License Renewal Could Be Delayed

It’s important to point out that the renewal of Upbit’s license, initiated in August, has sparked curiosity within the financial sector due to its extended duration. According to the report, this delay is attributed to a thorough investigation.

As an analyst, I find myself tasked with verifying the accuracy of approximately 600,000 potential Know Your Customer (KYC) infractions within our system. It’s crucial to ensure we get this right, as each instance could potentially lead to fines totaling up to 100 million won per case – equivalent to roughly $71,000 in U.S. dollars. If the review process takes too long, it may also delay our license renewal, further complicating matters for our crypto exchange.

Additionally, it’s possible that the cryptocurrency exchange could undergo another examination during its renewal period. Previously, a regional news source disclosed that the Financial Services Commissioner, Kim Byung-hwan, hinted at a potential inquiry into the exchange’s “dominant market structure.

In response to lawmaker Lee Kang-il’s queries during a South Korean parliamentary audit, Kim asserted that the financial regulatory body had recognized Upbit’s potential for market dominance and promised to scrutinize this matter as well as their collaboration with K-Bank, ensuring appropriate action would be taken.

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2024-11-16 22:12