South Korea Anti-Money Laundering Agency Flags 16 Crypto Companies for Operating Illegally

By: Henry Felix

August 19, 2022 11:19 PM

Among the foreign companies accused of engaging in "illegal commercial activities" without proper registration are the cryptocurrency exchanges KuCoin and Poloniex, which risk penalties or jail time.

According to a statement released on Thursday, South Korea's anti-money laundering agency is pursuing 16 foreign cryptocurrency companies that it claims have been operating there without the necessary regulatory clearance.

The organizations advertised cryptocurrency and provided services to Koreans without being properly registered, according to the Korea Financial Intelligence Unit (KoFIU), a division of the South Korean Financial Services Commission (FSC).

KuCoin, MEXC, Phemex, XT.com, Bitrue, ZB.com, Bitglobal, CoinW, CoinEX, AAX, ZoomEX, Poloniex, BTCEX, BTCC, DigiFinex, and Pionex are the companies it claimed were engaging in "illegal commercial activity."

The Financial Transaction Reports Act, which was passed in September, made registration for cryptocurrency businesses in the nation mandatory. Following the collapse of Do Kwon's Terraform Labs, a company he started in Korea, in May, efforts to regulate the sector have stepped up. Since Terra's collapse, prosecutors have raided seven exchanges. The FSC announced earlier this month that it will hasten the adoption of new regulations to control the cryptocurrency market.

The KoFIU has informed the appropriate authorities that it believes 16 businesses have broken their "registration obligations" and that it intends to notify the financial regulators in the nations where the businesses are headquartered. The maximum penalty for violating the registration requirements is five years in prison or a fine of up to 50 million South Korean won ($38,000). Additionally, for an undetermined amount of time, the companies will not be permitted to apply for registration as virtual asset service providers (VASP) in the nation.

"In order to prohibit the usage of virtual asset services offered by unregistered entities, the KoFIU has asked the Korea Communications Commission and the Korea Communications Standards Commission to block domestic access to the websites of unregistered VASPs."

Transfers using credit cards and transfers of digital currency to and from unregistered businesses would be prohibited "to prevent their usage in the local market."

Additionally, the agency advised cryptocurrency users to avoid using unregistered platforms because doing so could leave them "exposed to dangers of personal information breach and hacking."