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Upbit. (Photo = Dunamu) |
[Alpha Biz= Kim Sangjin] Upbit, the cryptocurrency exchange, has been notified by financial authorities of a business suspension order due to violations of the customer identification system (KYC) and lax anti-money laundering obligations.
Along with the business suspension, Upbit is also facing a fine worth hundreds of millions of won. If financial authorities assess a high risk of money laundering with virtual assets, disciplinary action against the CEO could also be possible.
According to financial industry sources last Friday, Upbit recently received a pre-notification from the Financial Intelligence Unit (FIU) of the Financial Services Commission regarding violations of the Act on Reporting and Use of Specific Financial Transaction Information. If the decision is confirmed, Upbit will face restrictions on new customer transactions.
The violation identified by the FIU concerns the customer identification system (KYC). KYC is a process to verify customer identity to prevent money laundering and terrorist financing. The FIU conducted an on-site inspection starting in late August last year regarding Upbit's application for business license renewal. During the process, 700,000 cases where KYC had not been properly implemented were discovered.
The FIU's sanction procedure for violations of the Specific Financial Transaction Information Act follows the steps: pre-notification of sanctions, the FIU's sanction deliberation committee, defense procedure, decision on the sanction level, and final sanctions. The FIU, rather than the Financial Services Commission or the Securities and Futures Commission, will make the final decision through its own deliberation committee.
According to Article 7 of the Specific Financial Transaction Information Act, the FIU can order a complete or partial business suspension for virtual asset operators who fail to implement anti-money laundering measures within a period of up to six months. The industry is paying close attention not only to the business suspension but also to the potential fine imposed on Upbit. The FIU can impose a fine of up to 10 million won per violation, which means the total fine could reach up to 7 billion won if all 700,000 violations are confirmed.
The FIU is also believed to have judged that Upbit's dealings with unregistered foreign operators violated the Specific Financial Transaction Information Act. Given the emphasis on anti-money laundering measures for virtual asset operators, there is also the possibility of sanctions against Upbit's CEO.
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
