Mandatory Reporting of Withdrawals and Deposits Over 50 Million Won

Starting from January of next year, if a single person withdraws or deposits over 50 million from a financial institution in a day, then the transaction is reported to the government.

Additionally, when a customer makes a new account or deposits over 20 million won without a passbook, the financial company must confirm the customer’s identity.

On May 26, the Ministry of Finance and Economy (MFE) announced that it is planning to prepare an Enforcement Amendment Bill for the Specific Financial Transaction Reporting Act outlining the above, to prevent illegal capital transactions and money laundry. After announcing the legislation before the month’s end, the ministry intends to introduce the ordinance by next January 18.

According to the revised bill, financial companies are obligated to report to the Korea Financial Intelligence Unit (FIU), an affiliate of the MFE, if a single person or corporate body makes a cash transaction of over 50 million won in a day.

Currently, financial companies report to the FIU transactions that are suspected of being instances of money laundry among transactions exceeding 20 million won.

The limit will be gradually lowered from 50 million won next year to 30 million won in 2008, and 20 million won in 2010.

Organizations with a low risk of committing capital laundry, such as government investment institutions, government affiliates, government-funded research institutions and local public enterprises, are exempted from reporting.

Financial companies need to confirm information related to customers who open new accounts or make one-time transactions, such as deposits without a passbook of over 20 million won or $10,000. In the case of corporations and organizations, the name, business registry number, trade, object of establishment, address, name of representative, and, if foreign, nationality and residence in Korea must be verified.

FIU President Kim Seok-dong said, “If financial institutions suspect that a customer is evading being reported on large cash transactions by dividing financial transactions into sums under 50 million won, they must also report such transactions.”

legman@donga.com