[Exclusive] Fintech Also Expands 'No-Document Overseas Remittance' Up to 100,000 Dollars

$100,000 Overseas Remittance Without Documentation Only Possible at Banks
Expansion to All Industries Expected as Early as Second Half of Next Year
Unified Limit Replacing Previously Separate Controls
Strict International Anti-Money Laundering Regulations Pose Challenges

Starting as early as the second half of next year, the limit for undocumented overseas remittances across all financial sectors will be increased from $50,000 to $100,000. Currently, only commercial banks allow undocumented overseas remittances up to $100,000 without requiring documents or declarations. The limit management system, which is currently divided by sector, will also be integrated into a single system. However, there are voices calling for safeguards to be put in place first, as concerns remain about potential side effects such as splitting foreign exchange remittances.

Pursuing '100,000 Dollar Limit' Expansion Within a Year

According to a comprehensive report by Asia Economy on the 13th, the Ministry of Economy and Finance recently met with financial sector officials to discuss raising the undocumented overseas remittance limit from $50,000 to $100,000 across all financial sectors. Under the Foreign Exchange Transactions Act, overseas remittances exceeding $5,000 require documentation each time. However, if a foreign exchange bank is designated, remittances up to $50,000 can be made without documentation, and if it is a commercial bank, up to $100,000 can be sent easily without documents. The main point of this plan is to raise the undocumented limit to $100,000 for other financial sectors besides commercial banks. The limit increase is expected to be implemented as early as the second half of next year.

The discussion on raising the undocumented overseas remittance limit comes about a year after late June last year. At that time, the Ministry of Economy and Finance announced plans to increase the $50,000 limit, established when the Foreign Exchange Transactions Act was enacted in 1999, to $100,000 to match the scale of the economy. The intention was to make everyday foreign exchange transactions more convenient for the public. However, securities firms and fintech (financial technology) companies, excluding commercial banks, were excluded from the limit increase due to the lack of an established system.

An integrated limit management system will also be established. Currently, the undocumented foreign exchange remittance limit is managed separately by sector. For example, if a customer uses undocumented foreign exchange remittance services at a commercial bank, it is difficult to enjoy the undocumented benefits at fintech companies or securities firms. The Ministry of Economy and Finance plans to create a system where all financial companies share undocumented foreign exchange remittance records and manage them within the $100,000 limit. Once the system is implemented, customers using foreign exchange remittances will be free to choose any financial company they want.

A government official said, "We are in the process of internal consultations," adding, "We are planning work for integrated management."

The government expects the convenience for citizens using foreign exchange remittances to improve significantly. A Ministry of Economy and Finance official explained, "Once the system is completed, citizens will be able to send foreign exchange up to $100,000 without documentation regardless of which branch they visit or which application (app) they use," adding, "This will greatly improve the inconvenience for frequent remitters such as international students and foreign workers."

The industry expects the uneven playing field to be corrected. A fintech industry official said, "From the customer's perspective, they naturally prefer banks with double the undocumented overseas remittance limit," lamenting, "Other countries are fostering global remittance companies, but Korea's fintech competitiveness is declining due to regulations." He added, "Since the fees saved by using fintech overseas remittances instead of banks amount to 520 billion won annually, customer benefits will also increase."

Can Strict Anti-Money Laundering Regulations Be Complied With?

The issue is whether small remittance companies can comply with stringent international foreign exchange regulations. The Financial Action Task Force (FATF) enforces about 40 anti-money laundering (AML) and counter-terrorism financing (CFT) regulations when conducting foreign exchange remittance operations. Violating these regulations not only harms financial companies but can also damage Korea's global credibility. Compliance with domestic foreign exchange laws is also crucial. Unlike commercial banks, which have many foreign exchange law experts and well-established IT systems, some fintech companies have a lower understanding of foreign exchange laws.

The fact that illegal foreign exchange remittance transactions have actually been detected is also a burden. There are widespread suspicions in the industry that some companies have used prepaid electronic payment methods to conduct overseas remittances, utilizing anonymous virtual accounts, or that many excessive remittances exceeding limits have occurred at certain companies. During police investigations into drug trafficking charges, allegations were raised that criminal proceeds were sent abroad through remittance companies. This is why there are concerns that prematurely easing regulations could lead to an increase in illegal foreign exchange remittance transactions.

The government’s position is that if a compliance system is not firmly established, the limit increase and integrated management may be difficult even by the second half of next year. Another government official pointed out, "It is true that some poorly managed companies exist that even consider the $50,000 limit excessive," adding, "There were cases where the provisions of the Foreign Exchange Transactions Act were not properly understood." He emphasized, "If they receive the same benefits as banks, they must have the same regulatory compliance capabilities."

The fintech industry argues that these concerns are excessive. A fintech official said, "International regulations must be complied with by any overseas remittance company," and added, "Fintech overseas remittance companies that operate properly would be following these regulations."