Bank Branch Manager Takes Part in Illicit Foreign Exchange Transactions

An incumbent bank branch manager and others were arrested by the police for arbitrating illicit foreign exchange transactions worth 16.6 billion won for illegal Korean immigrants to Japan.

The number of Koreans who asked them to help illegal foreign exchange dealings for the last three years stands at 6,226.

Results from the Investigation-

The Seoul Metropolitan Police Agency’s foreign affairs division announced on June 26 that it would book without physical restraint six current and former bank employees, including 49-year-old Mr. Kim, the branch manager of a bank, on charges of arbitrating 16.6 billion won of illicit foreign exchange transactions using false name bank accounts in domestic banks (violation of the foreign exchange transaction law).

On the same charges, the police also booked 122 people, including illicit Korean immigrants to Japan, who requested them to make unlawful foreign exchange dealings.

These Koreans made illegal foreign exchange transactions from May 2002 to the end of last year using seven bank accounts under false names made by 34-year-old Mr. Park, an illicit foreign exchange broker and owner of a restaurant in Japan.

Kim and other current and former bank employees were asked by Park to manage the false name financial accounts. They sold the Japanese currency transferred from Japan by Park, and sent the money to Park’s other bank accounts in Korea.

Using an Internet banking service, Park remitted the money to bank accounts designated by his clients and got some commissions. The police speculate that the commission for illegal foreign exchange transactions would be somewhere between three and ten percent of the remitted money.

The major clients of Park were illicit Korean immigrants to Japan who could not make normal financial transactions easily. There were even some exporters who used Park’s bank accounts in an effort to evade taxation when receiving money for their exports from Japan.

The police issued an arrest warrant for Park, who is staying in Japan, and requested a concerted investigation into him by Japanese Interpol.

Moral Hazards Among Bank Employees-

The most distinctive feature of this case is that bank employees were systematically engaged in illicit foreign exchange dealings.

Park initially had another Kim, a 49-year-old branch manager of the same bank, manage the bank accounts under false names. When the manager was caught by the police for conducting loan irregularities, however, he asked the current Kim to care for the false bank accounts.

Kim made registered seals on which the names of the false depositors were written, and took charge of most foreign exchange transactions including the disposal, exchange, and remittance of foreign currencies.

The “Law on the Report and Utilization of Certain Financial Transaction Information” stipulates that those working for financial institutions should immediately report any money transactions that are suspected to be illegal to the Korea Financial Intelligence Unit (KFIU), an affiliated organization of the Ministry of Finance and Economy.

The bank employees did not made reports on the illicit foreign exchange dealings. Rather, they helped Park to get more exchange gains by applying prime interest rates when he exchanged money.

“We just made some illicit foreign exchange transactions in an effort to enhance our performance on foreign exchange purchases, but we did not exchange any money or other property,” Kim and others insisted during the police investigations.

“It cannot be seen as a mere effort to enhance their performance that the bank employees directly managed falsely named bank accounts and gave every accommodation, knowing that they were making illicit foreign exchange dealings,” said a police official, adding, “The number of people concerned will go up further when Park, the major culprit, is arrested.”

Jae-Myoung Lee egija@donga.com