Massive Uncovering of Economic Crimes Including Money Laundering and Illicit Succession of Management Rights

Funds Embezzled Overseas Laundered Back into Korea via Nominee Accounts
4.6 Trillion Won in Economic Crimes Including Illicit Succession of Management through Export Favoritism Uncovered
Customs Service Warns of Increasingly Sophisticated and Complex Trade-Based Economic Crimes
Ongoing Crackdowns Based on Interagency Cooperation... Caution Advised to Protect Individual Investors

Provided by Korea Customs Service

[Asia Economy (Daejeon) Reporter Jeong Il-woong] #A Corporation was caught by customs authorities on charges of money laundering by manipulating export prices to create slush funds in secret overseas accounts, then remitting the money back through paper company accounts established in the United States, buying and selling local real estate, hiding funds in accounts of acquaintances residing in the U.S., or purchasing precious metals and smuggling them into Korea.

#Cases of illicit succession of management rights based on trade activities were also uncovered. Company B funneled export volumes held by group affiliates to a company where the second-generation owner was the largest shareholder, for the purpose of raising funds for the succession of management rights by the second-generation owner. It was revealed that the second-generation owner used the profits gained through this method to acquire shares in the group holding company.

The Korea Customs Service announced on the 27th that from March to December last year, it deployed 83 foreign exchange investigation specialists divided into 18 teams across the Customs Service and nationwide customs offices to crack down on foreign exchange transactions, uncovering trade-based economic crimes worth approximately 460 billion KRW.

The suspects caught in the crackdown include about 40 corporations and 80 individuals. They are mainly accused of manipulating import and export prices or creating slush funds overseas through false or fabricated trade and foreign exchange transactions, then laundering the funds as legitimate money or embezzling public finances such as subsidies.

The types of violations and the scale of illegal foreign exchange transactions detected are classified as follows: ▲546 billion KRW for embezzlement of public finances such as health insurance funds and trade finance fraud loans through manipulation of import and export prices ▲36.2 billion KRW for overseas asset flight using paper companies ▲30.2 billion KRW for money laundering using secret (nominee) accounts ▲341 billion KRW for unfair trading such as financial procurement and stock price manipulation through inflated false overseas sales.

The Korea Customs Service analyzes that such trade-based economic crimes are increasing by riding on the experiences of domestic companies expanding overseas, the rise in foreign direct investment, liberalization of foreign exchange transactions, and the simplification of import and export customs procedures.

In particular, the Customs Service explains that the methods of trade-based economic crimes are becoming increasingly sophisticated and complex by exploiting the difficulties authorities face in monitoring foreign exchange transactions conducted overseas.

Accordingly, the Korea Customs Service is focusing on blocking trade-based economic crimes through collaboration with related agencies. For example, the crackdown on trade-based economic crimes was also conducted through cooperation among related agencies. At that time, the crackdown involved government agencies such as the National Tax Service (Council for Response to National Wealth Outflow and Offshore Tax Evasion), the Korea Federation of Banks, and commercial banks (Council for Prevention of Trade Finance Fraud), sharing information and working together.

Additionally, in February last year, the Customs Service signed a memorandum of understanding with the Health Insurance Review & Assessment Service to strengthen the soundness of health insurance finances and uncovered multinational corporations illegally embezzling health insurance funds borne by the public through planned investigations.

A Korea Customs Service official said, “There are quite a few cases where companies significantly manipulate their scale by inflating overseas sales (export amounts) and then attempt to attract investment, prepare for listing, and manipulate stock prices,” adding, “Individual investors should carefully examine whether companies are engaging in such illegal activities to avoid financial losses.”