Woori’s Gaesong Transactions Illegal

Foreign exchange transactions made through the Woori Bank branch in the Gaesong Industrial Complex have violated the Foreign Exchange Transactions regulation for the last year and a half.

GNP lawmaker Lee Gae-kyung disclosed the violation on Wednesday in the report on revisions of foreign exchange management guidelines with regard to investment in the North.

“Current payments made through Woori Bank branch are a clear violation of the Foreign Exchange Transactions regulations,” reported the Ministry of Finance and Economy (MOFE) in April.

“Remittance from a South Korean company to a company in the complex through Woori Bank is a third party payment and should be reported to the Bank of Korea,” said the MOFE.

From December 2004, when Woori Bank opened a branch in the Gaesong Industrial Complex, until this June, when Foreign Exchange Guidelines were revised, remittances to the complex were made through Woori Bank.

Normally, foreign exchange transactions are made through a foreign exchange settlement bank, but in the case of the Gaesong Industrial Complex, the dealings were handled by Woori Bank.

The government belatedly recognized the illegality of such transactions and added an exemption clause in the guideline in late June.

The guideline mandates third party payments to be reported to the Governor of BOK because such transactions are highly likely to be abused.

“All remittances to the Gaesong Industrial Complex over the last year and a half are illegal. The U.S. is raising doubts about the business in the complex because of such obscurity,” said Lawmaker Lee.

“The lack of transparency in the transactions leaves a high possibility of misuse such as money laundering,” he added.

mhpark@donga.com