FIU investing Upbit for what could be the largest KYC scandals in crypto history

• South Korea’s FIU investigating Upbit for failing to verify 500,000–600,000 accounts properly.
• Upbit could face billions in fines for KYC violations under South Korea’s laws.
• The exchange’s license renewal is delayed as the FIU scrutinizes possible illegal activity.

South Korea’s Financial Intelligence Unit (FIU) is probing cryptocurrency exchange Upbit for what may become one of the largest Know Your Customer (KYC) scandals in the history of the industry.

The investigation centres on up to 600,000 accounts that allegedly failed to undergo proper verification procedures.

These breaches were uncovered during a routine review of Upbit’s business license renewal, which has now become anything but routine.

Accounts without proper identification documents

The FIU’s extensive review, which began in late August, uncovered serious flaws in the exchange’s account verification system. Authorities found that many accounts were opened with unclear or improperly submitted identification documents.

In some cases, critical details such as names and registration numbers were impossible to verify.

South Korea mandates strict KYC checks to prevent criminal activity, including money laundering, within the crypto market. Without proper identity verification, these accounts could have easily been exploited for illicit purposes.

Upbit risks penalties of up to billions of won

If the allegations are confirmed, Upbit, one of the 23 South Korean Exchanges that came together for self-regulation in 2023, could face massive penalties.

Under South Korea’s Special Financial Transaction Information Act, each violation could result in fines of up to 100 million won (approximately $75,000).

With potentially 500,000 to 600,000 affected accounts according to local sources familiar with the issue, the total fines could soar into the billions of won, marking a significant blow to the exchange and the broader crypto industry.

The fallout from these violations has already delayed Upbit’s license renewal process indefinitely. Typically a routine procedure for crypto exchanges every three years, the review is now mired in uncertainty as the FIU meticulously examines each flagged account for possible illegal activity.

In the meantime, Upbit has remained tight-lipped about the investigation, citing legal restrictions on sharing details. However, the company’s vague statements have only fueled concerns about the severity of the breaches and whether they could be linked to money laundering.

As the investigation continues, the crypto world watches closely, awaiting the potential consequences of what could become a landmark case in KYC and anti-money laundering enforcement.