In a significant enforcement action, South Korea”s Financial Intelligence Unit (FIU) has sanctioned the cryptocurrency exchange Korbit due to numerous violations related to anti-money laundering (AML) regulations. Following an inspection conducted between October 16 and 29, 2024, the FIU identified approximately 22,000 breaches of AML protocols.
The investigation revealed that Korbit had serious shortcomings in its customer due diligence processes. Specifically, around 12,800 cases were flagged for incomplete or improper customer identification. This included instances of unclear identity documents, missing address information, and outdated verification records. Furthermore, the exchange allowed trades to proceed without completing the necessary verification steps, with about 9,100 transactions occurring despite incomplete checks.
Regulators also noted that Korbit facilitated transactions involving customers whose risk ratings had escalated, without conducting the required enhanced due diligence. These failures were directly linked to non-compliance with Articles 5-2 and 8 of the Specific Financial Information Act, which mandates strict verification protocols prior to transaction authorization.
In addition to customer verification lapses, the FIU found that Korbit engaged in transactions with unregistered overseas virtual asset service providers (VASPs). The investigation highlighted 19 transfers involving three foreign VASPs that lacked appropriate registration, thus violating regulations concerning unreported operators.
The FIU”s findings further extended to Korbit”s handling of non-fungible tokens (NFTs), where 655 cases were identified that lacked necessary money laundering risk assessments prior to processing transactions. These deficiencies underscored broader compliance gaps and highlighted the need for enhanced scrutiny of emerging digital asset categories.
As a result of these infractions, the FIU imposed a substantial fine of KRW 2.73 billion, approximately $1.88 million, along with an institutional warning to Korbit. Additionally, a caution was issued to the exchange”s CEO, alongside a reprimand directed at the reporting officer.
The FIU indicated that the severity of the sanctions considered the scale of the violations, the degree of responsibility, and any corrective measures taken by Korbit. Details of the sanctions will be disclosed on the FIU”s sanctions disclosure website following a public comment period. The FIU has committed to ongoing inspections and enforcement actions aimed at bolstering AML compliance throughout South Korea”s virtual asset sector.
