South Korea Plans to Sanction Crypto Exchanges Over AML Shortcomings

The financial regulatory body in South Korea is gearing up to impose new penalties on local virtual asset exchanges. This step is part of an intensified initiative to address failures in anti-money laundering (AML) practices that officials believe could jeopardize the integrity of the country’s rapidly expanding cryptocurrency marketplace.

Key Takeaways

South Korea's financial regulatory body will impose new penalties on crypto exchanges for anti-money laundering (AML) failures.
The Korea Financial Intelligence Unit (FIU) is using a first-in, first-out approach for enforcement actions.
Major exchanges such as Dunamu and Bithumb have faced inspections and consequent sanctions.
Industry experts anticipate that penalties for remaining exchanges will mirror those imposed on Dunamu.
Regulatory pressures are expected to remain high as the FIU continues its enforcement actions into next year.

South Korea

Authorities are anticipated to levy both institutional and individual sanctions, along with financial penalties, against prominent trading platforms that have failed to meet AML requirements, according to a report released locally on Monday.

The Korea Financial Intelligence Unit (FIU) is systematically progressing through cases based on the order of its on-site inspections, effectively utilizing a first-in, first-out (FIFO) strategy.

FIU Readies Sanctions Following Major Exchange Inspections

The FIU is expected to impose sanctions on the remaining major exchanges, having already taken action against Dunamu, which operates Upbit. Since last year, the FIU has conducted inspections of Upbit, Bithumb, Coinone, Korbit, and GOPAX to assess compliance with regulations, including Know Your Customer (KYC) protocols and the reporting of suspicious transactions.

Most of the site inspections have been completed, and legal evaluations along with discussions over sanctions are currently in progress.

As the FIU is following the order of its inspections, the marketplace anticipates that announcements of penalties will follow the same sequence as the inspections occurred. Dunamu was reviewed in August last year, succeeded by Korbit in October, GOPAX in December, Bithumb in March this year, and Coinone in April.

Bithumb may face delays in this process due to additional on-site reviews of its order book operations.

Anticipated Sanctions to Align with Dunamu’s Example

The forthcoming process is likely to resemble the actions taken against Dunamu, where officials first determined personal and institutional sanctions, followed by finalizing the penalties. In February, the FIU issued a disciplinary warning to Dunamu’s CEO and enforced a three-month suspension on new customer deposits and withdrawals due to violations of the Special Financial Transactions Act.

On November 6, a fine amounting to 35.2 billion won was also imposed.

Industry insiders predict that similar outcomes are probable for the remaining exchanges, as inspectors generally assessed the same AML controls.

Regulators are expected to announce additional sanctions for both institutions and personnel, along with considerable monetary fines. Officials and market watchers have hinted that total penalties across this group could reach hundreds of billions of won, depending on the number and severity of infractions at each platform.

Crypto Market Faces Tougher Regulation Amid Ongoing Sanction Process in Korea

As four exchanges await the outcomes of their inspections, the FIU is not likely to conclude its sanctions schedule this year. Most remaining actions are expected to be resolved by the first half of next year, maintaining regulatory pressure during a time when global crypto markets are already adapting to tighter oversight.

This enforcement initiative coincides with a renewed uncertainty surrounding South Korea’s long-pending crypto tax framework. Officials have warned that the nation is still unprepared to initiate taxation on virtual assets by the anticipated January 2027 timeline, citing deficiencies in infrastructure and comprehensive guidelines.

After years of political discussions, technical planning, and repeated delays, discussions about a fourth postponement have resurfaced.

In the meantime, policymakers are striving to demonstrate their commitment to innovation. The ruling Democratic Party has recently established a new task force focused on crypto policy, which it claims aims to "foster growth" in digital assets and blockchain technology.