Authorities Issue 'Heavy Punishment' to Dunamu: Upbit Faces 3-Month Restriction on New Customer Deposits/Withdrawals [Comprehensive]

Partial Business Suspension for 3 Months

Hundreds of Thousands of Violations Including Transactions with Unregistered Operators and Customer Due Diligence Failures

Fines Excluded from Current Measures... "To Be Determined Through Future Sanctions Review"

Financial authorities have notified Dunamu, the operator of 'Upbit', of severe disciplinary actions for supporting transactions with unregistered overseas virtual asset service providers and violating customer due diligence obligations hundreds of thousands of times. The measures include a 3-month partial business suspension and a disciplinary warning for the CEO. Starting next month on the 7th, new customers joining Upbit, Korea's largest virtual asset exchange, will be restricted from depositing and withdrawing virtual assets.

On the 25th, the Financial Intelligence Unit (FIU) notified disciplinary actions including a 3-month partial business suspension, a disciplinary warning for CEO Seok-woo Lee, dismissal of the compliance officer, and personnel sanctions for 9 employees for violations of the Special Financial Transactions Information Act.

The partial business suspension, effective from March 7 to June 6, restricts virtual asset transfers for newly registered customers during the suspension period. Existing customers can trade without restrictions, and new customers can still conduct virtual asset trading/exchange and Korean won deposits/withdrawals without limitations, except for external virtual asset transfers.

A disciplinary warning is classified as a severe punishment for financial companies. The sanctioned executive is restricted from reappointment and from serving as an executive in financial institutions for 3 years. However, CEO Seok-woo Lee is expected to maintain his position as Dunamu is not legally classified as a financial company.

The FIU also notified personnel sanctions including the dismissal of the reporting officer and compliance officer.

According to the FIU's Virtual Asset Inspection Department's on-site anti-money laundering inspection of Dunamu from August to October last year, Dunamu was found to have supported 44,948 virtual asset transfer transactions with 19 unregistered overseas virtual asset service providers who had not fulfilled their registration obligations under the Special Financial Transactions Information Act.

Despite the FIU sending multiple business cooperation letters requesting prompt measures to prevent transactions with unregistered operators in August 2022 and July 2023, Dunamu failed to comply with these obligations.

Dunamu also violated customer due diligence and transaction restriction obligations hundreds of thousands of times. There were 34,477 cases where they accepted identification documents like resident registration cards that were unfocused, had light reflections making identity information unverifiable, or were prints, copies, or photo files rather than originals.

There were 5,785 cases where customer verification was completed despite blank or incorrect addresses, or irrelevant content entered in address fields.

There were 354 cases where transactions were allowed without conducting required customer verification within the re-verification period.

Additionally, there were 226,558 cases where transactions were allowed without customer due diligence measures despite money laundering concerns based on customer risk assessments. There were also 189,504 cases where customer verification through driver's licenses was inadequate, verifying only personal information without cryptographic serial numbers.

It was also confirmed that FIU reporting obligations were not fulfilled for 15 users with suspicious transactions related to investigative agencies' warrant requests.

Regarding fines for Dunamu not included in this measure, the FIU plans to make a final decision after March.

An FIU official stated, "We announced the partial business suspension and other sanctions first to promptly finalize measures affecting new users," adding "fines will be determined through future sanctions review discussions."

Regarding the FIU Sanctions Committee's results, Dunamu stated, "We understand the intent of the financial authorities' sanctions and are carefully discussing future measures," explaining "While virtual asset trading will proceed normally for both existing and new users on Upbit under the sanctions, new registrants will be restricted from transferring (depositing/withdrawing) virtual assets to other exchanges for a certain period."

Min-kyung Shin, Hankyung.com reporter radio@hankyung.com