South Korean authorities are reportedly investigating crypto exchange Upbit for numerous KYC (Know Your Customer) violations.
Due to these reported compliance failures at the Korean exchange, Upbit might have to pay fines as high as $71,500 for each case along with potential issues with its license renewal process.
The crypto exchange platform has been suspected of major breaches in vital KYC procedures amid its business license renewal process. It’s becoming critical for exchange operators to adhere to strict regulatory guidelines because of the rise in financial crime globally.
Service providers that fail to ensure compliance may become the target of serious enforcement actions that can even result in the business being shut down permanently. Despite these serious consequences, companies across the world continue to face challenges when trying to follow regulatory guidelines.
The Asian nation’s Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC) has said that there were around 500,000 to 600,000 possible KYC incidents of non-compliance by Upbit. This, according, to the Maeil Business Newspaper.
The agency claims it identified user verification violations during its review of the renewal of Upbit’s operational license, which might impact the virtual currency exchange’s ongoing business operations.
It’s worthwhile to note that digital currency exchanges or virtual asset service providers (VASPs) operating in South Korea are required to maintain stringent KYC practices.
Back in January of 2018, which was the start of the extended crypto bear market, the Korean government aimed to regulate virtual currency trading by permitting these activities strictly via real-name banking accounts. This measure was taken to ensure that authorities and concerned parties were able to accurately identify who was actually conducting such transactions. With this approach, it’s possible to reduce the risk of fraud or prevent illicit activities linked to illegal transactions.
Once it had strengthened its regulatory approach, the FSC launched a compulsory registration procedure for local exchange platforms, thus helping with ensuring they adhere to the KYC as well as AML procedures.
As reported by local sources, the FIU flagged numerous incidents where Upbit apparently had not adhered to applicable KYC guidelines.
It’s also being reported that Upbit had permitted clients to open up accounts using IDs with “blurred” sensitive information like their legal names as well as registration numbers. Due to this, regulators were not able to identify them in a reliable manner.
Because of these compliance shortcomings, Upbit now potentially faces regulatory penalties of 100 million Korean won for each such case. This would be applied along with potential challenges with Upbit not being able to renew its license.
Established during the historic crypto bull market of 2017, Upbit has emerged as a major virtual currency exchange operating in South Korea as well as in other jurisdictions,
The update regarding Upbit’s compliance challenges has been revealed shortly after the FCS unveiled its intentions last month to investigate the digital assets firm for “anti-monopoly” issues.
Upbit’s probe was apparently linked to an alleged relationship with K-Bank, which local authorities have criticized for its significant exposure to digital assets exchange platforms.
