South Korea fines Coinone $3.5M, suspends services over AML lapses

South Korean regulators have moved to penalise Coinone over anti-money laundering failures, adding to a string of enforcement actions against local crypto exchanges.

According to local media reports on Monday, the Financial Intelligence Unit (FIU) under the Financial Services Commission found that Coinone failed to meet key anti-money laundering obligations, including verifying user identities in around 70,000 cases.

Authorities also said the exchange processed more than 10,000 transactions involving 16 overseas platforms that were not registered with domestic regulators, despite prior warnings.

Regulators further pointed to lapses in customer due diligence, noting that some accounts were marked as fully verified even when essential information was missing.

In other cases, transactions were not restricted for users whose verification process had not been completed, raising concerns over internal compliance controls.

The FIU has reportedly imposed a fine of 5.2 billion won, about $3.5 million, along with a three-month partial suspension.

During this period, new customers will not be allowed to deposit or withdraw funds.

Coinone’s chief executive, Cha Myung-hoon, has also received an official reprimand, although the action remains administrative rather than criminal.

The exchange has been given 10 days to challenge the decision before it is finalised.

Tighter scrutiny follows earlier exchange failures

Pressure on Coinone comes soon after action taken against Bithumb, which was fined $24 million and handed a six-month partial suspension in March over similar anti-money laundering issues.

Bithumb drew a lot of attention after the exchange mistakenly sent 620,000 Bitcoin, valued at about $42 billion at the time, instead of 620,000 Korean won during a promotional event.

Regulators said the incident exposed serious gaps in internal controls, prompting calls for stricter safeguards across the sector.

The Bank of Korea has since urged lawmakers to consider rules that would allow exchanges to halt trading during abnormal activity or sudden price swings.

Exchanges are now required to reconcile internal ledgers with actual asset holdings every five minutes, a major change from the earlier practice where some platforms checked balances only once every 24 hours.

Officials have warned that such delays made it harder to detect discrepancies in time and respond before issues escalated.

Under the updated framework, firms must set clear thresholds that can automatically trigger transaction halts if mismatches cross defined limits.

Oversight now extends to internal processes as well, with high-risk activities such as promotional payouts requiring multi-level approvals and third-party checks.

Audit cycles are also being shortened, moving from quarterly to monthly reviews, while disclosure rules will require more detailed reporting of wallet balances and internal records.

“The financial authorities and the DAXA plan to complete the rule changes needed to implement the improvement measures within April this year,” the FSC said.

Data from the FSC shows that capital has continued to move off local platforms, with crypto outflows reaching 90 trillion won, about $60 billion, in the second half of 2025, up from 78.9 trillion won in the first half.

The trend has added urgency to regulatory efforts as officials try to restore confidence in exchange operations.