Korbit Hit With $1.8M Fine as South Korea Flags Major AML Failures

South Korea’s crypto regulator has taken firm action against Korbit, one of the country’s longest-operating exchanges, closing the year with a clear warning to the industry.

On December 31, the Financial Intelligence Unit (FIU) announced a 2.73 billion won ($1.88 million) fine against Korbit after uncovering widespread failures in its anti-money laundering (AML) and customer verification systems.

The decision follows an on-site inspection that revealed nearly 22,000 compliance violations.

Major AML and KYC Failures at Korbit

The violations were identified during an FIU inspection carried out between October 16 and 29, 2024, with the findings later reviewed by the Sanctions Review Committee.

Along with the fine, the FIU issued an institutional warning to Korbit. Responsibility was also placed on senior leadership, with the exchange’s CEO receiving a caution and the reporting officer receiving a reprimand.

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Users Not Verified?

Most of the violations were tied to weaknesses in Korbit’s customer due diligence (CDD) process.

According to the FIU, around 12,800 cases involved improper identity verification. These included accepting unclear or unverifiable ID documents, incomplete address information, and failures to carry out required re-verification. In some cases, users were allowed to continue trading even after their risk levels increased, without additional checks.

Another 9,100 cases involved users being permitted to trade before verification was fully completed, violating rules that restrict transactions by unverified customers.

Other Key Red Flags

Regulators also flagged 19 virtual asset transfers involving three overseas virtual asset service providers (VASPs) that were not properly reported, breaching Korea’s rules on dealing with unregistered foreign entities.

In addition, the FIU identified 655 cases where Korbit failed to conduct mandatory money laundering risk assessments before introducing new transaction types, including NFT-related services.

The Timing Is Important

The enforcement action comes just days after reports that Mirae Asset is considering acquiring 92% of Korbit for up to 140 billion won ($97 million). Korbit is currently the fourth-largest exchange among South Korea’s six incorporated crypto platforms.

The FIU said full details of the sanctions will be disclosed after a minimum 10-day opinion submission period, signaling that tighter oversight is setting the tone for Korea’s crypto sector.

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