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[Column] Stem political fund laundering first

Posted September. 08, 2000 12:56,   


At least two types of anti-money laundering bills are expected to be submitted at the current regular plenary session of the National Assembly.

Thirty-eight civic groups organized on September 6 a coalition for anti-corruption legislation and submitted a draft anti-corruption bill to the Assembly for legislation. Meanwhile, the administration and the ruling Millennium Democratic Party are said to be submitting their own joint bill soon.

The total amount of the laundered money in the country is estimated to reach 5.4 billion won to 16.9 billion won per year, according to an analysis by the Korea Criminal Policy Research Institute. Accordingly, the hidden money flow has become a serious problem.

The term money laundering encompasses the entire process of converting money accumulated through unlawful means into legitimate funds. The bulk of unlawful money is generally related to bribes and irregular political funds.

In the case of Korea, because there is no legal stipulations governing money laundering, it is possible for much money earned by illegal means to be hidden or used as if it is clean in disguise.

Under the present real-name financial transaction system, there are many ways to launder money. It is often done with the connivance or assistance from financial institutions. Among the methods: If checks are deposited with banks, they are treated as cash deposits; and in the case that money is transferred from Bank A to Bank B accounts, the money is treated as independent withdrawals and deposits, and their linkage is severed.

For the prevention of money laundering, not only legislation is needed but also ethical behavior must be demanded of employees of financial institutions.

The anti-laundering bill¡¯s approach is to provide a system to make financial transactions transparent. And the anti-corruption bill is expected to be enacted separately.

According to the civic coalition`s draft bill, when a financial institution transacts 20 million won or more in cash, the institution is required to report this to the National Tax Service within 30 days after the transaction. If the financial institution fails to report to the NTS, it is subject to punishments of penal servitude or fines.

The government draft bill would require financial institutions to report to the NTS about their money transaction of much higher amounts of money than the civic coalition provision of 20 million won. It is said that the National Assembly envisages a stipulation to waive the financial organizations` obligations for reports to the NTS and instead make it mandatory for them to keep their financial records for five years.

In the United States, financial institutions are obligated to report transaction of more than US$10,000 to the tax authorities, and all proceeds arising from money laundering are confiscated.

News reports of late have it that political funds will be exempt from the stipulations of the projected anti-laundering bill. The Finance-Economy Ministry underlined the need for an anti-laundering law in order to prevent the flow of the ill-gotten money ahead of the second-stage foreign exchange liberalization plan next year. But the ministry revealed a policy not to include political funds in the anti-laundering bill.

The ministry plan is drawing mixed reactions from lawmakers. They are openly debating the ministry plan. Proponents assert that political funds should be exempted from the legislation, while opponents point out that the inclusion of political funds is necessary to bring about a clean political landscape.

It is well known that in this country, the most corrupt sector is the political circle. From this standpoint, what`s the use for legislating an anti-laundering bill with the exclusion of political funds? If the proposed bill is to produce its desired effect, laundering of political funds must be given top priority. Unless political funds are included in the bill, the anti-laundering legislation is useless.

Advanced countries have a dual system for the prevention of corruption: an internal reporting system and a money laundering prevention system. With the parliamentary passage of the proposed money laundering prevention bill, it is hoped that Korea will be able to shed its humiliating title of international criminal money laundry, and provide a purifying system to stem corruption.

In order to prevent the laundering of hidden money, financial transactions by bank customers should be reported to the tax offices. What`s more, there should be no stipulations to exempt political funds from the proposed law.

LEE, Eun-Young / The Dean of the College of Law, Hankuk University of Foreign Studies