Financial Supervisory Service "Be Careful of Legal Violations When Conducting Foreign Exchange Transactions"

[Asia Economy Reporter Song Seung-seop] It has been identified that violations of foreign exchange regulations are frequent in cases of foreign exchange transactions for purposes such as overseas direct investment. Depending on the case, investigations by law enforcement agencies or transaction suspension measures may be imposed, so special caution is required.

According to the Financial Supervisory Service on the 21st, the number of foreign exchange transaction law violations detected last year was 1,408. Among these, 1,325 cases received fines or warnings, and 83 cases were reported to investigative agencies. By transaction party, companies accounted for 54.8% (771 cases), and individuals accounted for 45.2% (637 cases).

By transaction type, overseas direct investment was the most common at 48.1% (678 cases). Residents in Korea must report even a single dollar to the head of a foreign exchange bank when making overseas direct investments in local overseas corporations. They must also comply with reporting obligations for changes such as establishing subsidiaries of local corporations or changing investment forms.

The next most common type was monetary loans, accounting for 15.3% (215 cases). When a resident borrows foreign currency funds from a non-resident, they must report to the head of a foreign exchange bank or the Governor of the Bank of Korea. If an individual, they must disclose specific details of the funds to be received to be guided through the reporting procedure to the Governor of the Bank of Korea. Reporting is also required when contract conditions change, such as contract maturity extension or interest rate changes.

In addition, reporting and change notification obligations arise when acquiring overseas real estate or securities.

A Financial Supervisory Service official stated, “We plan to strengthen public awareness activities through the distribution of press releases on precautions when conducting foreign exchange transactions and holding explanatory sessions on foreign exchange transaction systems.”