Overseas Money Transfers Becoming More Difficult

Currently, measures are being reviewed to require submission of documents to banks that state the purpose of money transfers to families and relatives abroad (as gift or donation money transfer), and for tuition fees abroad. They are aimed at curbing expedient money transfers abroad in the names of donation money transfers or tuition-related fee transfers, which in fact are used for overseas real-estate investments, purchasing golf membership cards and other unstated purposes.

The Ministry of Finance and Economy said on March 1 that it is reviewing measures to immediately implement amended transaction bylaws on foreign currencies in the first half of the year in order to stop reckless capital outflow. The ministry is currently considering ways not to allow money transfers if their amount exceeds a cap without related documents stating the purpose of the money being submitted.

At the moment, no legal document needs to be issued for donation money transfers. And yet, for transfers of more than 10,000 dollars a year, the transaction bank has to notify the National Tax Service. The Ministry of Finance and Economy is also examining measures to require submission of documents verifying the purpose of money when sent as tuition-related fees. Under the current laws, an admission notice has to be prepared when opening an account for the first time, and an enrollment notice is to be shown when tuition fees are transferred on a yearly basis. Besides this, money transfers are flexible up to 100,000 dollars.

Another measure to be possibly implemented is to require accumulatively transferred amounts to be reported on a yearly basis, which is different from the current one: only on money transfers of more than 50,000 dollars is reporting to the Bank of Korea mandatory for those wanting to transfer money abroad to deposit in a bank. This is because it is becoming more common to divide up a large amount of money into amounts less than 50,000 dollars to be transferred abroad, thus avoiding the mandatory reporting regulation. Kim Keun-soo, director of the Foreign Exchange Regulations & External Debt Division of the Ministry of Finance and Economy said, “We are reviewing these measures to systemically resolve the massive overseas capital transfers which are being carried out in an expedient way.”

Chi-Young Shin higgledy@donga.com