Japan's financial regulator has ordered two cryptocurrency exchanges in the country to halt their operations for two months due to insufficient know-your-customer (KYC) procedures.

Effective immediately, the suspension will last until June 5 and June 7, respectively, for Eternal Link and FSHO, according to two administrative penalty orders issued by the Financial Services Agency (FSA) on Friday.

Through its months-long inspection, the agency alleged the two operators had not properly required to customers to provide information such as purposes of trades. They had also not implemented procedures around reporting suspicious transactions to the FSA.

The failure to put such anti-money laundering efforts in place is not in compliance with the Act on Prevention of Transfer of Criminal Proceeds, the agency said.

Separately, the penalty order to Eternal Link also indicates that the firm had violated laws in Japan by using deposits from customers to pay for company expenses, even if temporarily.

In addition, Eternal Link, FSHO, as well as a third local exchange, Last Roots, were all found to have made insufficient improvements to their internal safety measures that guard user information against potential cyber threats, the FSA said.

The latest round of administrative penalties mark the continuing scrutiny by the Japanese regulator of the domestic cryptocurrency industry.

The new FSA suspension order sent to FSHO follows a one addressed to the firm on Mar. 8. At the time, another exchange, Bit Station, was also ordered to halt its operations, while five others were ordered to report back to the FSA regarding business improvement measures.

The FSA has been stepping up its efforts to inspect domestic cryptocurrency exchanges regarding their business operation loopholes after a heist that saw  $500 million-worth of NEM tokens stolen from the Coincheck exchange.

FSA image via Shutterstock