South Korea’s regulatory landscape for cryptocurrency has just become more stringent, as the Financial Intelligence Unit (FIU) has imposed a significant fine on Korbit, one of the nation’s oldest exchanges. This action underscores the increasing scrutiny and growing expectations surrounding compliance within the South Korean crypto sector.
Regulatory Action Against Korbit
On December 31, South Korea’s FIU concluded an on-site investigation into Korbit, resulting in a hefty financial penalty and executive-level sanctions. This enforcement action, which followed a comprehensive inspection in October, highlights critical issues relating to user verification, risk management practices, and service expansions.
Specifically, the FIU announced a fine of 2.73 billion won (approximately $1.88 million) after uncovering around 22,000 compliance violations tied to anti-money laundering regulations and customer verification obligations. These breaches were detected during inspections conducted between October 16 and 29, 2024, and subsequently analyzed by the sanctions review committee.
Along with the financial penalty, the regulator issued an institutional warning and enforced immediate accountability measures for Korbit’s senior executives.
Inspection Findings
A significant portion of the violations stemmed from failures in customer due diligence. The FIU identified approximately 12,800 instances where identity checks were improperly executed, including the acceptance of ambiguous or unverifiable identification documents, incomplete address information, and lapses in mandatory re-verification processes.
In several cases, traders continued to operate despite an elevated risk profile, with no additional verification performed—a clear violation of the requirement for enhanced scrutiny of high-risk customers. The review also found around 9,100 instances where clients were allowed to trade before their identity verification was fully completed, directly contravening South Korean regulations that prohibit transactions by unverified users.
Accountability at the Executive Level
Beyond operational shortcomings, the regulatory action broadened accountability to include senior management. The FIU not only issued an institutional warning to Korbit but also reprimanded the exchange’s CEO and issued a warning to its compliance head.
This approach signifies a broader regulatory stance prioritizing governance and internal control mechanisms, demonstrating that responsibility extends beyond automated systems and compliance teams to the leadership’s role in ensuring adherence to regulations in day-to-day operations and decision-making processes.
International Transfers and Service Expansion
Regulators also flagged weaknesses related to customer integration. Inspectors reported 19 virtual asset transfers involving three foreign virtual asset service providers that were not properly disclosed. South Korean regulations mandate exchanges to report transactions with foreign entities and prohibit dealings with unregistered providers.
Additionally, the FIU identified 655 instances where Korbit failed to carry out mandatory anti-money laundering risk assessments before launching new types of transactions, including those associated with non-fungible tokens (NFTs). This area continues to be subject to the same compliance obligations as other digital asset products.
Wider Implications for the Sector
This enforcement action coincides with reports that Mirae Asset is considering acquiring a 92% stake in Korbit for up to 140 billion won ($97 million). With Korbit currently ranked fourth among South Korea’s six integrated crypto exchanges, it remains a focal point for regulatory oversight.
The FIU stated that all details regarding the sanctions would be released after a minimum 10-day period for public feedback.
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