80 Illegal Foreign Currency Outflow Cases Unearthed

Corporations and individuals who take foreign currency out of the country to speculate in real estate have been exposed en masse.

The Financial Supervisory Service (FSS) made clear on April 24 that it inflicted punishment, including a ban on foreign exchange trade, upon 34 corporations and 46 individuals who unlawfully remitted foreign currency abroad without a report of foreign exchange trade.

The FSS reported one corporation and one individual, who broke the law more seriously, to prosecutors, and nine corporations and 34 individuals to the National Tax Service.

The FSS will make a report of the result of measures on five banks, which breached their duty of monitoring clients’ foreign exchange trades, after the inspection.

According to the FSS, Mr. A, CEO of a medium-to-small-sized enterprise, gave 500 million won (approximately $400,000) to an exchange speculation broker, and then changed it into yuan in China to invest in Chinese real estate. Foreign exchange through brokers is regarded as unlawful exchange speculation, and investment in overseas real estate without any report to the government is illegal.

It was made public that Mr. B, CEO of another medium-to-small-sized enterprise, sent a total of $600,000 to two of his children who were studying in China, as expenses for studying abroad, three times in March and April of 2004, and then paid $330,000 of the money and $870,000 lent from banks in China for a house there.

However, it is known that there are many cases in which some people violated the law without knowing they are required to report the acquisition of overseas real estate to their government.

Cho Seong-rae, the foreign exchange investigation department manager of the FSS, said, “A good many offenses were caused by unawareness of related law and regulations and trade process,” adding, “Banks are planning to inform clients of the trade process, and are planning to compile the process and the instructions of foreign exchange trade into a book to distribute to clients.”

Wan-Bae Lee roryrery@donga.com