The government is strengthening inter-agency cooperation to combat illegal foreign exchange transactions that have exploited the high exchange rate environment. The Korea Customs Service referred 84 cases involving 2.4 trillion won ($1.59 billion) in illegal foreign exchange crimes to prosecutors between January and the end of May, while the National Tax Service said it would use overseas financial account reporting data to tighten the foreign exchange management framework.

The Ministry of Economy and Finance said Tuesday it held the sixth meeting of the pan-government "Illegal Foreign Exchange Transaction Response Team," reviewing the current state of investigations into import- and export-related illegal foreign exchange activity and discussing ways to strengthen inter-agency cooperation on the overseas financial account reporting system and broader foreign exchange oversight.

Foreign visitors exchange currency at a money changer in the Myeong-dong area of Jung-gu, Seoul. [Yonhap]
Foreign visitors exchange currency at a money changer in the Myeong-dong area of Jung-gu, Seoul. [Yonhap]

The National Intelligence Service, the National Tax Service, the Korea Customs Service, the Financial Supervisory Service and the Bank of Korea all attended the meeting.

The Korea Customs Service said it conducted a focused crackdown on crimes that constrain foreign exchange liquidity — including capital flight abroad and trade settlements using virtual asset hawala transfers — referring 84 cases worth 2.4 trillion won to prosecutors between January and the end of May. The agency plans to continue expanding investigations into illegal foreign exchange transactions, including procedural violations, import and export price manipulation, and money laundering.

The National Tax Service said that with this year's overseas financial account reporting period having concluded at the end of June, it would support foreign exchange management from a tax-administration standpoint through strict measures, including the recovery of hidden overseas accounts and criminal penalties.

Residents and domestic corporations whose combined balances in overseas financial accounts — including deposits, savings, shares, bonds, insurance and virtual assets — exceed 500 million won must report those holdings by June of the following year. Failure to report carries a fine, and those with unreported amounts exceeding 5 billion won may face public disclosure of their names and criminal prosecution.

The response team agreed to further strengthen inter-agency cooperation to eradicate illegal foreign exchange transactions that distort the foreign exchange market. The Korea Customs Service will share information obtained during enforcement operations with the National Tax Service to link cases to offshore tax evasion investigations, while the National Tax Service will share overseas financial account reporting data within the team to track and recover illicit foreign currency funds, including those tied to tax evasion.

Lee Hyeong-ryeol, director general of the international finance bureau at the Ministry of Economy and Finance, said large volumes of forward exchange sales from major semiconductor and heavy industry companies had begun to come to market, improving the supply-demand balance and easing one-sided flows. He added that a structural shift in foreign exchange supply and demand in the second half was expected, underpinned by solid fundamentals including a record trade surplus of $138.3 billion in the first half.


y2k@heraldcorp.com