Gov’t will probe ‘Panama Papers’ claim about Roh

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Gov’t will probe ‘Panama Papers’ claim about Roh

The government said it will investigate allegations that the son of former president Roh Tae-woo used shell companies as tax havens, the biggest bombshell in Korea from the so-called Panama Papers revelations.

The Financial Supervisory Service announced Tuesday that it will start an investigation of 195 individuals including Roh Jae-heon, the eldest son of the former president, who are accused of opening companies in tax havens. On Monday, the National Tax Service said it will do its own investigation.

The Korean financial watchdog said Roh was among 195 Koreans mentioned in documents leaked from Panama’s largest law firm, Mossack Fonseca, which were the basis of articles published by the International Consortium of Investigative Journalists (ICIJ). The 11.5 million leaked documents reportedly describe the law firm helping wealthy clients commit various illegal acts including money laundering and tax evasion through the setting up of more than 200,000 shell companies.

According to the documents, Roh created three shell companies - One Asia International, GCI Asia and Luxes International - in the Virgin Islands on May 18, 2012.

The non-profit Korean news organization Newstapa raised the possibility that the junior Roh created the companies to hide his father’s illicit wealth, which he would inherit. It said the companies were created when the existence of a slush fund surfaced in the process of Roh Jae-heon’s divorce. The ownership of each company is complicated, Newstapa said, in an efforts to conceal its true owner.

“We are currently at the monitoring stage of fact checking and we plan on starting an investigation once we secure the list of 195 individuals,” said an FSS official.

Under current foreign exchange laws, any Korean who opens a company overseas has to report it to the Bank of Korea.

Anyone who fails to do so is liable to a minimum penalty of a fine and a maximum penalty of jail time. If the amount of funds sent overseas is under 5 billion won ($4.3 million), the transgressor can be slapped with a fine equivalent to 2 percent of the amount with a ceiling of 50 million won. When the amount exceeds 5 billion won, the person faces jail time of less than a year or a fine of less than 100 million won.

On Monday, the National Tax Service said it will start its own investigation of allegations, including the one that Roh evaded taxes.

“As allegations of possible tax evasion have been raised, the tax agency will definitely look into the matter,” said a tax agency official.

The agency conducted an investigation into tax dodgers with shell companies in tax havens after ICJI and Newstapa accused 182 Koreans in May 2013 of having such companies, including former president Chun Doo Hwan’s son Chun Jae-kook, OCI Chairman Lee Soo-young and former Hanjin Shipping Chairwoman Choi Eun-young.

The agency collected documents from other tax agencies including in the U.S. and UK that mentioned 405 Koreans, including the 182 cited by ICJI and Newstapa and analyzed them. They did more thorough investigation into 48 individuals the following year that resulted in collecting 132.4 billion won in fines. Three people including the former president’s son and OCI chairman were reported to the prosecutors’ office.

Roh denied this week’s allegations, claiming the companies in question have nothing to do with slush funds and were created to start a business in China that failed.

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