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&#91FORUM&#93Money has an instinct to hide

Published: 17 Apr. 2003, 23:48

We all know the nature of money; it doesn’t like to show its face. But money is also of no use hidden in your closet. Money flows incessantly from person to person in search of higher profits and less risk. During the 1997 financial crisis, banks accepted any bundle of money coming in, no questions asked about the hidden face. Desperate for foreign currency, the government also asked very few questions about large amounts of foreign cash coming from nowhere to be exchanged. At the time, prying into the identity of mysterious account-holders cashing in over $100,000 or questioning the sources of money were considered to be very unhelpful acts that would only aggravate the chaos of the market.
Think back to the times of President Chun Doo Hwan. Major bill fraud scandals with big names like Lee Chul-hee and Jang Young-ja popped up in the 1980s like mushrooms after the rain. The government tried to regulate financial transactions by introducing a real- name financial transaction sytem outlawing bank accounts or transactions made under a different person’s name. Suddenly, cash stopped flowing and the government was impelled to give up its policy for the sake of normal money distribution. The discredited bank accounts went underground and threatened the foundations of the government. The “real- name” financial system was finally implemented in 1993, after the economy had grown and the financial order had settled into some kind of stability.
Eight years later, in 2001, the financial markets again shook. The brakes were applied to the money flow with indiscriminate tracing of bank accounts by government agencies. Every time an inquiry into illegal political funds was launched, illegal or questionable tracking of bank accounts was a part of it. These probes would inevitably lead to the disclosure of the financial transactions and private information of third parties who were unrelated to the original purpose of the inquiry. The government and the opposition parties realized the seriousness of this hazard and revised the law to tighten the requirements for government agencies to search financial accounts.
We are witnessing some remarkable moves recently. The National Tax Service wants, as a part of its reform drive, to revise the law again so that it can conduct a comprehensive inquiry into the financial transactions of an individual or corporation.
The Fair Trade Commission insists that the authority to track a bank account at any time is necessary to investigate unfair insider dealings and is asking for a revision of the Fair Trade Act.
And there is more. The Board of Audit and Inspection, the prosecutors’ office and the Financial Supervisory Service all want more authority to track bank accounts for their own purposes. Their logic is that the right to demand information about financial transactions or to track bank accounts is necessary for a swift and smooth investigation. Individually, their explanations seem quite reasonable. But money has an inexplicable tendency to hide from the light and will see all this as an overwhelming threat. It will burrow further into the ground in a hiding place where its secrets are safe. Yet government agencies are determined and competing at the same time to get the right to trace funds. They want to skip over the process of requesting and issuing warrants and to expand the boundaries of their investigation rights.
Despite all the requirements in the present law to prevent the misuse and abuse of tracing bank accounts, information about the financial transactions of unrelated persons always leaks during investigations. This is a cause for serious concern among bank-account holders.
It is too early to say whether the new government deserves criticism on this issue. It is too early for any government agency to ask for a system that gives it comprehensive rights to track accounts. Is there no way to pursue policies of reform while maintaining the privacy of the account holders?
The purpose of the National Tax Service’s proposed system to control large cash flows is noble, indeed. But it doesn’t erase the apprehension of having one’s accounts tracked not for fraud but for political reasons and the fear of having one’s privacy eroded. The essence of social capital is in the trust among people and trust in the government.
The government should strictly protect the secrecy of financial transactions unrelated to fraud. That is how social capital thrives.

* The writer is an editorial writer of the JoongAng Ilbo.

by Choi Chul-joo