Clear suspicions on murky remittance

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Clear suspicions on murky remittance

The prosecution has launched an investigation into suspicious foreign exchange remittance to other countries. The dubious transfer of more than 3 trillion won ($2.3 billion) in total took place in Woori Bank, Shinhan Bank and Hana Bank from 2021 to the first half of this year. The data submitted by the Financial Supervisory Service (FSS) to the top law enforcement angecy shows that 850 billion won was taken out from a branch of Woori Bank and 1.3 trillion won from a branch of Shinhan Bank to be remitted to China, Japan and other countries.

Prosecutors suspect that it could be an illegitimate foreign exchange transaction disguised as payments for imports, as the huge amount of money was remitted overseas by new corporations or small and mid-sized companies, contrary to conventional wisdom. Woori Bank says that 90 percent of the remittance was made in return for gold bars or semiconductor chips its customers bought in foreign countries. But the bank cannot affirm whether they really brought in such items. It turned out that a number of companies involved in the remittance split the money into small amount and remitted it over and over.

The truth behind the strange remittance is yet to be revealed. The prosecution links it to the possibility of some greedy people trying to take advantage of the “Kimchi premium” — reaping gains from relatively higher prices of cryptocurrencies in Korea after purchasing them from overseas cryptocurrency exchanges at lower prices. In the process of siphoning the money to foreign countries, the parties involved may have fabricated documents needed for the remittance.

This could be just a tip of the iceberg. Hana Bank also discovered a similar stream of strange remittance of about 1 trillion won to foreign countries. In May last year, the FSS levied 50 million won in fines on the bank for violating the Foreign Exchange Transaction Act and suspended the operation of some of its branches. At that time too, the problem was an abnormal remittance largely disguised as payments for imports from foreign countries. The financial watchdog has ordered all domestic banks to check any suspicious money remittance and report the results to the FSS by Friday.

Even if employees of the banks were not involved in the cases, the case shows a serious loophole in their internal control system. The Foreign Exchange Transaction Act strictly bans banks from remitting a large amount of money without specifying the source of the money. Otherwise, it’s clear violations of an international covenant forbidding money laundering and our domestic financial law.

A simultaneous remittance of such suspicious money to foreign countries exposes vulnerabilities of our banking institutions. The prosecution and FSS must find the truth behind the case and hold related officials of the banks accountable if there are any. CEOs of those banks must find ways to prevent such murky flows of money.
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