Upbit Hit with $25M Hammer: FIU Suspends Trading in Major AML Crackdown

South Korea's crypto giant gets regulatory smackdown as financial watchdogs flex muscle

The Compliance Bill Comes Due

Upbit just learned the hard way that regulators don't play nice when anti-money laundering rules get ignored. The Financial Intelligence Unit dropped the hammer with a $25 million penalty and trading suspension that's sending shockwaves through the Asian crypto markets.

Zero Tolerance Era Begins

This isn't some gentle warning shot—it's a full-scale regulatory assault. The FIU's message couldn't be clearer: play by the rules or get benched. While traditional banks get away with wrist slaps for billion-dollar violations, crypto exchanges face immediate consequences. Funny how that works when you're the new kid on the financial block.

Market Domino Effect

Trading volumes are already feeling the pinch as one of Asia's largest exchanges goes dark. Investors are scrambling to reposition while competitors watch nervously—knowing they could be next in the compliance crosshairs.

Welcome to crypto's grown-up phase, where the regulators hold all the cards and the house always wins. At least until decentralization finally cuts out the middlemen.

TLDR

• Dunamu may appeal a 35.2 billion-won fine imposed on Upbit by the Financial Intelligence Unit of South Korea.
• The FIU also suspended new customer onboarding at Upbit for three months due to KYC and AML violations.
• Dunamu is conducting an internal review to assess the accuracy of the sanctions and previous FIU findings.
• The FIU uncovered over 5.3 million violations of customer verification obligations at Upbit.
• Upbit failed to report suspicious transactions in 15 cases, contributing to the imposed penalties.

Dunamu, operator of South Korea’s largest cryptocurrency exchange, Upbit, may challenge a 35.2 billion-won fine. The South Korean Financial Intelligence Unit (FIU) imposed the fine as part of its crackdown on anti-money laundering (AML) and know-your-customer (KYC) violations. The sanctions also include a three-month suspension of new customer onboarding.

FIU’s Action Against Upbit for AML and KYC Violations

The FIU’s investigation revealed around 5.3 million violations of customer verification rules at Upbit. In addition, the exchange failed to report suspicious transactions on 15 occasions. A spokesperson from Dunamu stated that the company is reviewing the accuracy of the FIU’s findings.

“The FIU has made errors in the past,” the spokesperson said. They referred to a case in which a Seoul court overturned a 2 billion-won fine against Hanbitco, a smaller crypto exchange. The court concluded that the violations did not contribute to money laundering.

Upbit has committed to strengthening its compliance efforts amid ongoing regulatory pressure. Dunamu’s spokesperson assured that the company WOULD work to avoid similar issues in the future.

FIU Expands Inspection Campaign to Other Exchanges

This action against Upbit is part of the FIU’s broader initiative to enforce stronger AML measures in South Korea’s digital asset sector. The campaign targets exchanges for KYC compliance and reporting of suspicious transactions. Other exchanges, including Bithumb, Coinone, and Korbit, are also under investigation for similar issues.

In total, the FIU has conducted inspections at five major South Korean exchanges, beginning with Upbit in August 2024. These inspections will continue until all exchanges have been reviewed. The FIU plans to inspect VIRTUAL asset operators on a “first-in, first-out” basis.

Despite the investigation, Upbit has reported no direct impact on its operations. The exchange continues to serve its customers while reinforcing its compliance systems. The company is focused on maintaining a secure environment for its users.

Further Regulatory Actions on Crypto Lending Products

Alongside the sanctions, the Financial Services Commission (FSC) has mandated that exchanges suspend new crypto lending products. This decision comes in response to increasing concerns over user risks. The suspension will remain in effect until formal guidelines on crypto lending are established.

Upbit, one of the major players in South Korea’s crypto market, will be affected by these broader regulatory changes. However, the company has stated that it remains committed to complying with all regulatory requirements. The ongoing inspections and sanctions reflect South Korea’s tightening regulatory stance on cryptocurrency exchanges.