South Korean Regulators Penalize Coinone Over AML Failures

South Korea's third-largest cryptocurrency exchange, Coinone, has been hit with a 5.2 billion won ($3.5 million) fine and a three-month partial business suspension. The Financial Intelligence Unit (FIU), operating under the Financial Services Commission, cited significant lapses in anti-money laundering (AML) protocols as the primary cause for the enforcement. This action is part of a broader regulatory sweep across the South Korean crypto landscape. It follows a March penalty against Bithumb, the country's second-largest exchange, which was fined $24 million and faced a six-month suspension. The heightened scrutiny comes as the Bank of Korea advocates for more stringent controls to prevent operational errors and market instability, particularly following a high-profile error at Bithumb involving a massive Bitcoin transfer. The FIU's accusations against Coinone include failing to verify user identities in approximately 70,000 instances and facilitating over 10,000 transactions with 16 foreign exchanges that are not registered with local regulators. Additionally, the regulator found that Coinone marked customer verification as complete despite missing key information and failed to restrict transactions for unverified users. The three-month suspension specifically prohibits new customers from depositing or withdrawing funds. While the penalty is administrative rather than criminal, the exchange's CEO, Cha Myung-hoon, has received an official reprimand. Coinone has a 10-day window to dispute the findings before the penalties are finalized.