South Korean Regulator Fines Coinone and Imposes Partial Suspension for AML Violations
South Korea’s Financial Intelligence Unit (FIU) has reportedly levied a fine of 5.2 billion won (approximately $3.5 million) against cryptocurrency exchange Coinone. The sanctions stem from alleged failures in customer identity verification processes and facilitating transactions with unregistered overseas partners. In addition to the financial penalty, Coinone faces a three-month partial suspension of its business operations, restricting new customer access to crypto deposit and withdrawal services.
The FIU’s decision, announced on Monday according to reports, will impact Coinone from April 29 to July 28. During this period, the exchange is barred from onboarding new clients for deposit and withdrawal functionalities. Existing users, however, will be able to continue their trading activities without interruption.
Investigations by the FIU revealed approximately 70,000 instances where Coinone allegedly failed to verify user identities. Furthermore, the exchange is accused of processing around 10,000 transactions involving 16 overseas exchanges that are not registered within South Korea. The regulator also identified about 40,000 violations related to customer due diligence, including issues with verifying identity documents and approving users with incomplete or inconsistent address information. An additional 30,000 transaction restrictions were reportedly not enforced on accounts lacking complete verification.
Coinone’s chief executive officer is slated to receive an official reprimand. The exchange has been granted a ten-day period to submit its formal opinion before the penalty is finalized.
A Coinone spokesperson acknowledged the FIU’s decision, stating, “We are seriously aware of the FIU’s decision to impose sanctions. We are closely examining the shortcomings and taking remedial measures regarding the points pointed out.”
This enforcement action against Coinone follows a recent, similar regulatory measure taken against Bithumb, another prominent South Korean cryptocurrency exchange. In March, the FIU issued Bithumb with a notice for a six-month partial suspension due to violations of anti-money laundering obligations, including dealings with unregistered overseas virtual asset operators and inadequate customer due diligence. Bithumb’s CEO also faced disciplinary action in that instance.
Key Takeaways
- Coinone has been fined 5.2 billion won ($3.5 million) by South Korea’s Financial Intelligence Unit (FIU).
- A three-month partial business suspension has been imposed, preventing new customers from using deposit and withdrawal services.
- The sanctions are due to alleged failures in verifying customer identities (approx. 70,000 cases) and transacting with unregistered overseas exchanges (approx. 10,000 cases).
- Violations of customer due diligence procedures and transaction restriction failures were also cited.
- This action is part of a broader trend of increased regulatory scrutiny on South Korean crypto exchanges, following a similar case involving Bithumb.
Potential Regulatory Precedent and Global Compliance Landscape
The stringent enforcement actions by South Korea’s FIU against Coinone and previously Bithumb underscore a growing global trend toward stricter regulation of cryptocurrency exchanges. These actions highlight the critical importance of robust Anti-Money Laundering (AML) and Know Your Customer (KYC) protocols. The FIU’s focus on identity verification failures and dealings with unregistered entities sets a clear precedent for the level of diligence expected from virtual asset service providers operating within or serving the South Korean market.
Globally, regulatory frameworks such as the European Union’s Markets in Crypto-Assets (MiCA) regulation are also emphasizing compliance. MiCA mandates comprehensive requirements for crypto-asset issuers and service providers, including licensing, consumer protection, and market integrity. The FIU’s approach, particularly its emphasis on customer due diligence and restrictions on dealings with non-compliant overseas platforms, aligns with the principles underpinning these evolving international regulatory standards. Companies operating in multiple jurisdictions must demonstrate adherence to a patchwork of differing, yet increasingly harmonized, legal requirements. Failure to do so, as evidenced by the penalties against Coinone and Bithumb, carries significant financial and operational risks, including substantial fines and business disruptions.
Source: : www.theblock.co