Upbit license renewal on hold after authorities uncover 500k suspected KYC violations

South Korea’s Financial Intelligence Unit reportedly found between 500,000 and 600,000 potential KYC violations on the country’s largest crypto exchange, Upbit. KYC violations on this scale can lead to fines and possible license renewal issues.

South Korea’s Financial Intelligence Unit of the Financial Services Commission detected potential Know Your Customer violations while conducting on-site investigations for the renewal of the platform’s operating license, according to a report by local news agency Maeil Business Newspaper.

Currently, Upbit’s license renewal has been halted as authorities need more time to review hundreds of thousands of copies suspected of violating the country’s KYC standards.

South Korean crypto exchanges are required by law to establish strict KYC procedures for customers who open accounts to prevent accounts from being used for money laundering or other criminal activities.

For potential violations, Upbit reportedly faces a fine equal to 100 million Korean won, or $71,500 per incident; This could result in the company potentially having to pay out around $35.8 billion due to a massive amount of litigation.

Additionally, the report states that South Korean financial authorities are still unable to reach a conclusion on how this issue will affect Upbit’s business license renewal.

When asked about the Financial Intelligence Unit’s findings, an official from Upbit told Maeil Business that sharing information regarding matters handled by the Financial Intelligence Unit is prohibited under the Private Financial Transaction Information Act.

“Information is not shared in any way, even within the company,” the official said.

The crypto exchange allegedly allowed customers to open accounts even though their names and identification numbers were blurred. Accounts created without proper identity verification run the risk of being used for money laundering or criminal purposes. Local law requires all crypto exchanges to comply with KYC and Anti-Money Laundering protocols.

In early October, South Korea’s FSC planned to investigate Upbit for potential anti-monopoly violations due to the exchange’s market dominance and close ties to K Bank. The FSC chairman also expressed concern about K Bank’s upcoming IPO, highlighting the risks posed by the heavy reliance on Upbit deposits, which account for 20% of the bank’s total deposits.