Suspicion of 'Large Foreign Exchange Irregular Transactions'... Hana, Kookmin, and Nonghyup Likely to Be Investigated

Possible Additional Prosecution by Financial Supervisory Service
Interest in Role of Lee Bok-hyun, Head of Financial Supervisory Service
Central District Prosecutors' Office Reviewing Data
Woori and Shinhan Soon to be Raided and Summoned
Involvement with Virtual Asset Exchanges
Illegal Chinese Capital, etc.
Planned Investigation into Money Laundering and Fund Usage

Lee Bok-hyun, Governor of the Financial Supervisory Service. / Photo by Dongju Yoon doso7@

[Asia Economy Reporter Kim Hyung-min] Investigations by authorities into suspicious foreign exchange transactions at some commercial banks are showing signs of expanding to multiple banks.

According to the legal community on the 26th, the International Crime Investigation Division of the Seoul Central District Prosecutors' Office (Chief Prosecutor Na Uk-jin) recently received the case involving large-scale suspicious foreign exchange transactions at Woori Bank and Shinhan Bank from the Supreme Prosecutors' Office and is currently reviewing the materials. Once the review is complete, the investigation is expected to accelerate. It is anticipated that search and seizure operations and summons of related individuals will also take place at the banks involved. Since the Financial Supervisory Service (FSS) initially examined the case and then handed over the related materials, it is analyzed that the prosecution will not take long to initiate a compulsory investigation. After the 29th, Hana Bank, KB Kookmin Bank, and NH Nonghyup Bank may also come under investigation. These banks discovered suspicious signs of abnormal foreign exchange transactions during their internal inspections and plan to report the related details to the FSS on the 29th. The FSS may review the contents and additionally file complaints against these banks with the prosecution.

The suspicious foreign exchange transactions at the banks mostly involved amounts ranging from several hundred billion to over one trillion Korean won, raising suspicion due to the excessively large sums. According to the FSS, Woori Bank handled 800 billion won, and Shinhan Bank handled 1.3 trillion won in foreign exchange transactions. Hana, Kookmin, and Nonghyup Banks also dealt with amounts ranging from several hundred billion to over one trillion won. The fact that such large sums were transacted within a relatively short period of one year is also considered suspicious by the authorities.

For now, the FSS has identified that a significant portion of these amounts is linked to virtual asset exchanges. The banks hurried foreign exchange transactions before the counterparties were publicly disclosed under the virtual asset service provider registration system introduced in September last year, which caused the transaction amounts to increase. According to the 'Act on Reporting and Using Specified Financial Transaction Information (Special Act on Virtual Assets),' only virtual asset service providers registered with the government since September 24 last year are allowed to operate.

[Image source=Yonhap News]

The prosecution, having taken over the case, plans to investigate not only these details but also the fact that the foreign exchange transactions were mainly conducted with Chinese nationals, focusing on whether there is any involvement with illegal Chinese capital or money laundering purposes, as well as the specific use of the funds. They are also reviewing whether to take over related matters currently being investigated by the Daegu District Prosecutors' Office. The Daegu District Prosecutors' Office has been investigating related matters, paying attention to the fact that key executives of the remittance company involved in this case have addresses in Daegu. Depending on the scale and content of the case, the legal community predicts that "the prosecution may form a special investigation team or a joint investigation unit."

The prosecution is expected to actively cooperate with the FSS during the investigation. Naturally, attention is also focused on the role and actions of Lee Bok-hyun, the FSS Chairman and former prosecutor. As the suspicious foreign exchange transactions surfaced and the investigation began, political and legal circles have remarked, "The real reason for appointing Chairman Lee has now emerged." Chairman Lee was known as an expert in economic and financial investigations during his tenure as a prosecutor. He has a keen ability to detect financial crime possibilities. If unfair practices by commercial banks are confirmed through this investigation, Chairman Lee's stature could be elevated. He recently told bank presidents, "We will strictly punish market order disruption and illegal activities." Illegal foreign exchange transactions, which have recently become a significant issue due to rapid exchange rate fluctuations, are no exception.