Major Penalty Imposed on Upbit Operator
South Korea’s financial authorities have imposed a record-breaking fine of 35.2 billion Korean won on Dunamu Co., Ltd., the operator of Upbit, the country’s largest cryptocurrency exchange. The penalty was issued for multiple violations of obligations related to customer verification and transaction restrictions, specifically under the Specific Financial Information Act.
The fine marks the largest ever imposed by financial regulators in this context. The Korea Financial Intelligence Unit (FIU), which is responsible for monitoring offshore tax evasion and money laundering, announced this decision on the 6th. According to the FIU, during an on-site anti-money laundering inspection conducted between August and October of last year, over 8.6 million violations of the Specific Financial Information Act were identified at Dunamu.
Key Violations Identified
Based on these findings, the FIU decided to impose a total penalty of 35.2 billion Korean won. The violations included:
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Customer Verification Failures:Dunamu is accused of violating customer verification obligations in 5.3 million cases. This includes approving registrations even when customers uploaded identification documents that were out of focus, making names or resident registration numbers unidentifiable, or accepting scanned copies or printed versions of identification documents instead of originals.
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Unrestricted Transactions:Approximately 3.3 million cases were found where transactions were permitted for customers whose verification processes had not been completed.
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Failure to Report Suspicious Activities:There were 15 cases where Dunamu failed to fulfill its obligation to report when there was reasonable grounds to suspect money laundering. This includes instances where prosecutors requested search and seizure warrants for transaction records of Upbit users suspected of criminal activity, and Dunamu, despite being aware of this, did not submit the required reports.
Next Steps and Company Response
The FIU will notify Dunamu of the details of the violations and grant it a period of over ten days to submit its opinion. The final penalty amount will be determined after considering the feedback from Dunamu.
Earlier, in February, Dunamu had already faced disciplinary actions, including a three-month partial business suspension and measures against its employees for violating the obligation to prohibit transactions with unregistered virtual asset businesses.
In response to the FIU’s decision, Dunamu stated, “We have strengthened investor protection measures and will strive further to prevent recurrence.”
Ongoing Regulatory Scrutiny
This latest penalty highlights the increasing regulatory scrutiny on cryptocurrency exchanges in South Korea. As the industry continues to grow, authorities are stepping up efforts to ensure compliance with anti-money laundering and know-your-customer regulations. The case of Dunamu serves as a significant warning to other platforms about the consequences of failing to meet these obligations.
The FIU’s actions reflect a broader trend of tightening oversight in the digital asset space, aiming to protect investors and maintain the integrity of the financial system. With more enforcement actions expected, the future of cryptocurrency exchanges in South Korea may depend heavily on their ability to comply with evolving regulatory standards.