TLDR
- South Korean regulators fined Bithumb 36.8 billion won, equal to about $24.5 million, for AML violations.
- The Financial Intelligence Unit identified about 6.65 million compliance breaches during its inspection.
- Authorities found that Bithumb processed 45,772 crypto transfers with 18 unregistered overseas providers.
- Regulators banned external crypto transfers for new customers from March 27 to September 26.
- Existing users can continue trading and using external transfers without restrictions.
- The Financial Supervisory Service is also probing Bithumb over an accidental 620,000 Bitcoin credit.
South Korean regulators imposed a 36.8 billion won fine on Bithumb for AML violations. The penalty equals about $24.5 million based on current exchange rates. Authorities also restricted certain services for new customers after a formal review.
Officials said the Financial Intelligence Unit conducted a detailed inspection of the exchange. The unit operates under the Financial Services Commission and oversees AML compliance. Investigators identified millions of compliance failures during the review process.
Bithumb Fined After AML Inspection Uncovers Millions of Breaches
The Financial Intelligence Unit found about 6.65 million violations during its AML inspection. Inspectors said Bithumb failed to complete proper customer identity verification checks. The review also found gaps in transaction monitoring and record keeping.
Regulators stated that Bithumb facilitated 45,772 crypto transfers involving 18 unregistered overseas virtual asset service providers. Authorities said those transfers breached South Korea’s AML framework. The sanctions deliberation committee reviewed the findings before confirming the penalty.
Officials based their decision on the Act on Reporting and Use of Specific Financial Transaction Information. The committee assessed whether the exchange met reporting and compliance duties. After discussions, regulators approved the 36.8 billion won fine.
The Financial Intelligence Unit had previously warned the exchange about dealings with unregistered overseas firms. Regulators urged the platform to suspend activity linked to those entities. However, authorities said Bithumb failed to implement the required blocking measures.
An FIU official said the exchange did not follow instructions despite repeated guidance. The official stated, “The platform continued transactions with unregistered providers after receiving corrective orders.” Regulators then finalized sanctions under existing AML rules.
Authorities also imposed a six-month restriction on external crypto transfers for new customers. The ban will run from March 27 to September 26. During that period, new users cannot process outbound or inbound crypto transfers.
However, existing customers can continue trading and use external transfer services. New customers can still buy or sell digital assets on the platform. They can also deposit or withdraw Korean won without restrictions.
Regulators described the fine as the largest ever imposed on a domestic crypto exchange. Authorities have sanctioned several platforms in recent years for AML breaches. However, this penalty exceeds earlier cases in monetary terms.
Last year, Upbit received a three-month restriction on crypto deposits and withdrawals for new users. Regulators also imposed a 35.2 billion won penalty on that exchange. Officials linked that action to dealings with unregistered virtual asset service providers.
Bithumb Faces a Separate Probe Over a Bitcoin Crediting Error
Bithumb also faces scrutiny from the Financial Supervisory Service over an operational mistake. On Feb. 6, the exchange accidentally credited users with 620,000 Bitcoin during a promotion. The error valued the distribution between $40 billion and $44 billion at that time.
An employee reportedly entered payout amounts in Bitcoin instead of Korean won. As a result, the system recorded and distributed large phantom balances within minutes. Regulators began reviewing the exchange’s internal control systems.
FSS Governor Lee Chan Jin addressed the issue during a public briefing. He said authorities would examine how the exchange recorded such balances with limited reserves. Lee stated regulators would review internal controls and electronic ledger systems.
The Financial Supervisory Service continues its probe into the February incident. Authorities have not announced penalties linked to that case. The investigation remains ongoing as regulators review internal records and procedures.
