38 firms inspected through May; 415.4 billion won ($274 million) in illegal transactions uncovered; task force to operate permanently as authorities target leads-and-lags, hawala-style transfers and virtual asset schemes

The South Korean government said it will make its pan-government task force on illegal foreign exchange transactions a permanent body and expand the scope of related investigations, as authorities move to protect exchange-rate stability amid a period of elevated won weakness.

The Ministry of Finance and Economy said Wednesday it convened a meeting of the pan-government "Illegal Foreign Exchange Transaction Response Team," attended by representatives from the National Intelligence Service, the National Tax Service, the Korea Customs Service, the Financial Supervisory Service and the Bank of Korea.

Employees work at the dealing room of Hana Bank's headquarters in Jung-gu, Seoul, on Wednesday. The won-dollar exchange rate opened up 12.9 won at 1,525.0 won per dollar. [Yonhap]
Employees work at the dealing room of Hana Bank's headquarters in Jung-gu, Seoul, on Wednesday. The won-dollar exchange rate opened up 12.9 won at 1,525.0 won per dollar. [Yonhap]

The meeting was convened as a follow-up to an emergency market stability review held June 7, with discussions focused on the current state of illegal foreign exchange investigations and plans going forward.

When the task force launched in January, the government had planned to operate it only through the first half of the year. It has now decided to make the body permanent.

Authorities also agreed to expand the scope of investigations into illegal foreign exchange transactions that disrupt the currency market through inter-agency cooperation, and to take strict action under relevant laws when violations are detected.

The primary targets of investigation are illegal early payment of import funds and delayed collection of export proceeds — known as leads and lags — irregular trade settlement, and the illicit transfer of assets abroad.

More specifically, authorities are targeting firms that make excessive advance payments for imports without proper declaration or evade the repatriation of export proceeds; businesses that settle trade payments outside the banking system using hawala-style transfers or virtual assets; and entities that manipulate import and export prices to retain or move foreign currency overseas.

The Korea Customs Service has been conducting foreign exchange inspections targeting illegal transactions that exploit the high exchange rate since January. It selected as priority targets companies with large trade and foreign exchange volumes over the past five years that showed significant gaps between their declared import and export figures and the trade payments actually made or received. As of May, the agency had completed inspections of 38 companies and uncovered approximately 415.4 billion won ($274 million) in illegal foreign exchange transactions.

The National Intelligence Service said it had identified a firm that disguised client funds as trade payments, moved foreign currency abroad, purchased virtual assets overseas and then brought them back into South Korea to be converted into won. The task force said it plans to investigate whether the company concealed assets abroad and whether trade invoices were forged.

The Ministry of Finance and Economy said it will continue to build on these measures to block illegal foreign exchange transactions that undermine exchange-rate stability and deliver concrete results.


y2k@heraldcorp.com