Core Briefing for Bank Practitioners
Inter-Bank Sector Meeting to be Held on the 21st Afternoon
On the 21st, the Financial Supervisory Service (FSS) announced that it has introduced measures to reduce violations related to foreign exchange transactions by financial consumers, targeting bank branch staff.
The FSS distributed a "Core Explanation Sheet for Customer Transactions in Foreign Exchange Business" to all banks and established a "3-step violation reduction plan" utilizing this sheet. The core explanation sheet contains reduction measures for common types of mistakes made by financial consumers. According to the FSS, last year, the types of foreign exchange transaction violations were mainly overseas direct investment (426 cases, 54.2%), monetary loans (93 cases, 11.8%), real estate (81 cases, 10.3%), and securities transactions (41 cases, 5.2%), accounting for 81.5% of the total.
The first step is for branch counters handling overseas remittance to verify the purpose of the remittance and whether it is subject to reporting under the Foreign Exchange Transactions Act. According to the core explanation sheet, prior reporting is required when acquiring 10% or more of the shares of a foreign corporation or additionally acquiring shares of a foreign corporation in which investment has already been made. Prior reporting is also required when a resident acquires or leases overseas real estate or a non-resident acquires domestic real estate. Additionally, prior reporting must be made when a resident borrows from or lends to a non-resident, or when securities are transferred between residents and non-residents.
The second step involves clearly guiding the procedures for change reporting (notification) and post-reporting compliance. Change reporting is required when establishing subsidiaries or sub-subsidiaries of a foreign corporation invested in through overseas direct investment, or when there are changes in company name, location, or investment amount. Remittances (investments), acquisition or liquidation of foreign currency securities (bonds) are subject to post-reporting. In the case of real estate, change reporting is required if the source of acquisition funds changes, and post-reporting is necessary when acquiring or disposing of overseas real estate. For monetary loans, change reporting is required if the loan period or interest rate changes, and for securities transactions, if the quantity or face value changes.
The final third step is to periodically check compliance with post-reporting and other requirements at both headquarters and branches.
To ensure the successful implementation of this 3-step violation reduction plan, the FSS will hold a bank sector meeting at 2 p.m. on the same day to explain the reduction plan using the core explanation sheet and encourage active compliance. The FSS will continue to monitor the implementation status of the reduction plan and trends in violations reported by each bank, and will strengthen guidance such as on-site inspections if necessary for banks with insufficient compliance.
An FSS official stated, "Although we have promoted public awareness activities such as foreign exchange transaction system briefings and press releases, the preventive effect has been low, so this time we changed the target of promotion to bank branches that have direct contact with financial consumers." He added, "We will continue to make greater efforts to protect financial consumers to minimize administrative sanctions such as fines and notifications to investigative agencies caused by a lack of understanding of the foreign exchange transaction system."
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