South Korea finds systemic AML violations at Bithumb, penalty decision expected early 2026

South Korea’s Financial Intelligence Unit has concluded that Bithumb violated multiple anti-money laundering and know-your-customer regulations following a nine-month inspection that began in March 2025, potentially exposing the exchange to penalties rivaling or exceeding the $25 million fine imposed on rival Upbit last year.

Regulators described the violations as “structural and recurring” rather than isolated incidents, citing incomplete customer verification, weak monitoring of high-risk users, and failures to report suspicious transactions in a timely manner.

Final penalties are expected in early 2026 after Bithumb submits its formal response, with industry observers anticipating sanctions that could rank among South Korea’s largest crypto enforcement actions.

Regulators cite systemic AML failures at Bithumb

In its preliminary findings, the FIU said it identified repeated compliance breakdowns rather than isolated operational mistakes. These included insufficient customer verification, weak monitoring of high-risk users, and failures to report suspicious transactions in a timely manner.

“Where deficiencies are structural and recurring, the level of sanctions must reflect that seriousness,” an FIU official told local reporters, speaking on condition of anonymity due to the sensitivity of the process.

Among the most concerning issues tied to Bithumb AML penalties were incomplete user identity checks. Investigators flagged accounts with unclear identification photos, missing address verification, and a lack of enhanced due diligence for customers deemed high risk.

Regulators also found that some users were able to trade on the platform before completing mandatory KYC procedures, a direct breach of South Korea’s AML rules.

Comparisons to Upbit and Korbit raise penalty expectations

Market observers have drawn parallels between the Bithumb case and previous enforcement actions against rival exchanges.

In late 2024, Upbit was fined approximately 30 billion won (around $25 million) after regulators uncovered more than 5 million KYC-related violations. Korbit, which had a far smaller number of infractions, faced lighter sanctions.

Reports indicate that the scope of Bithumb AML penalties could be significant given the exchange’s large market share and the volume of affected transactions. One compliance consultant told Yonhap News that “penalties are often scaled not just to the number of violations, but to the systemic risk an exchange poses to the financial system.”

Order book scrutiny adds pressure to Bithumb AML penalties

Unlike some of its peers, Bithumb was also subjected to additional scrutiny over its order book management. Regulators reportedly examined whether the exchange maintained adequate oversight to detect abnormal trading patterns or potential manipulation.

The FIU has not accused Bithumb of deliberate market abuse, but officials noted that weak monitoring systems could worsen the impact of AML failures. This extra layer of investigation may further influence the final scale of Bithumb AML penalties once sanctions are formally announced.

A former Financial Services Commission adviser told KBS that order book oversight is increasingly linked to AML enforcement.

“Poor surveillance creates blind spots where illicit funds can move undetected,” the adviser said. “That’s why regulators are connecting these issues more closely.”

FIU signals tougher stance across the crypto sector

The Bithumb case forms part of a broader regulatory campaign targeting South Korea’s so-called “Big Five” exchanges: Upbit, Bithumb, Coinone, Korbit, and GOPAX. Over the past two years, the FIU has expanded on-site inspections and increased the use of financial penalties to deter non-compliance.

In a public briefing, the FIU said enforcement actions, including Bithumb AML penalties, are designed to stabilize the market and rebuild public trust. “Rapid growth in virtual asset markets must be matched by equally strong compliance systems,” the agency said in its statement.

The regulator added that it would continue follow-up inspections and impose sanctions where serious breaches of financial laws are confirmed, emphasizing that no exchange is too large to avoid scrutiny.

Bithumb response and timeline for final decision

Bithumb has acknowledged receiving the FIU’s findings and is expected to submit a formal response before penalties are finalized. The regulator said the process should conclude in early 2026, following a review of the exchange’s explanations and any remedial steps taken.

In a brief statement, Bithumb said it is “cooperating fully with authorities” and is committed to strengthening its AML and KYC frameworks. The company declined to comment on the potential size of the Bithumb AML penalties while the review remains ongoing.

Legal experts note that cooperation and corrective actions could influence the final outcome, but they caution that systemic issues typically carry heavier consequences.

The outcome of the Bithumb case is being closely watched across Asia’s crypto markets. South Korea is widely seen as a regulatory bellwether, and its enforcement actions often shape compliance expectations in neighboring jurisdictions.

According to Kim Yong-beom, a former vice chairman of the Financial Services Commission, strict AML enforcement is essential for long-term industry credibility.

“Virtual asset businesses can only gain institutional trust if they meet the same standards as traditional financial institutions,” Kim said in a recent policy forum.

As regulators push forward, Bithumb AML penalties are likely to serve as a reference point for future enforcement, not only domestically but across the region.

For now, the message from Seoul is clear: growth without compliance will no longer be tolerated, and even the country’s largest exchanges are expected to meet the highest AML standards.