South Korea Suspends Upbit Over Compliance Issues and KYC Violations

Highlights:

• Upbit cannot process crypto deposits and withdrawals for new users for three months due to violations.
• Authorities found that Upbit failed to verify customer identities and processed transactions with unregistered service providers.
• Upbit is making changes and is working with regulators to address the suspension.

South Korea’s Financial Intelligence Unit (FIU) has given Upbit has been given a three-month partial suspension of its business. The decision will restrict new customer transactions, including crypto deposits and withdrawals. The suspension comes after an investigation into alleged financial regulations violations. The FIU determined that the exchange had conducted transactions with unregistered virtual asset service providers.

🚨 Breaking News: South Korea’s Financial Intelligence Unit (FIU) has imposed a 3-month restriction on crypto deposits and withdrawals for new institutional customers of Upbit.

The FIU cited violations of transaction prohibition duties, customer verification obligations, and… pic.twitter.com/HuUGrxvmbN

— BLOCKMEDIA(블록미디어) (@with_blockmedia) February 25, 2025

Upbit has acknowledged the action and also apologized to its customers for any inconvenience caused. According to the regulator, the suspension will run from March 7 to June 6. New users will not be able to transfer crypto assets during this period, but existing customers will continue trading as normal.

The probe was launched after it was reported that Upbit infringed anti-money laundering laws. In 2024, authorities conducted on-site inspections, which showed various compliance failures. The FIU added that the exchange had not met the regulatory customer verification standards.

KYC Breaches and Unverified Transactions

According to the inspection performed by the FIU, several violations of Know Your Customer (KYC) policies were found. According to reports, Upbit failed to verify more than 600,000 customer identities. Identification document verification was difficult since the exchange used out-of-focus identification documents. In other cases, addresses were recorded incorrectly or remained incomplete.

Authorities also noted issues with transactional restrictions. FIU discovered that Upbit allowed 354 transactions without verifying customers in the required re-verification period. Additionally, 226558 transactions were processed without proper customer verification. These lapses increased the risk of financial crimes such as money laundering.

The exchange also facilitated nearly 45000 transactions with 19 unregistered virtual asset service providers. These transactions violated South Korea’s financial regulations, which require exchanges to work only with registered providers. The FIU had previously warned Upbit about these activities. However, the exchange continued to engage in transactions with unregistered firms.

The investigation into Upbit’s operations began in August 2024 and lasted until October. The FIU reviewed transaction records and customer verification procedures during this period.

Upbit has yet to receive any financial penalty from the FIU. Officials said further discussions will decide whether more fines are necessary. The regulator also took disciplinary action against several Upbit executives. The company’s compliance officers and reporting staff received warnings and dismissal notices. The regulator gave CEO Lee Sirgoo a reprimand warning.

Upbit Responds and Awaits Further Decisions

Upbit has stated that it will cooperate with the authorities during the restriction period. In addition, it stated that it has taken necessary actions to rectify the compliance issues within the company. The exchange, however, said that some regulatory decisions could change.

The company stated that trading services remain fully operational for existing customers. After the period for suspension, new users will have access to their deposit and withdrawal functions. Upbit also promised to update the community if discussions with regulators result in changed sanctions.