Foreign Couple Who Bought Ultra-High-End Apartment for '5.3 Billion' Suspected of Illegal Activities Detected

Suspicious Activities in 282 Transactions with 433 Suspected Violations
Illegal Inflow of Overseas Funds Tops at 77 Cases
Followed by 60 Cases of False Reporting of Transaction Amounts

View of houses and apartment complexes in Seoul city. Photo by Yonhap News

#. Foreigner Mr. A purchased the pre-sale rights of an officetel in Busan for 470 million KRW. Mr. A claimed to have paid the deposit and interim payments in cash, but there is no supporting evidence such as cash withdrawal records. The Korea Customs Service launched an investigation suspecting illegal inflow of overseas funds in Mr. A’s transaction.

#. Foreigners Mr. B and Mrs. C, a married couple, jointly purchased a super-luxury apartment in a speculative overheated district for 5.3 billion KRW. They borrowed 60% of the transaction amount from a corporation represented by Mr. B. Additionally, Mrs. C is suspected of receiving an illicit gift from her parents and is under investigation by the National Tax Service.

The Ministry of Land, Infrastructure and Transport (MOLIT) is cracking down on such abnormal real estate transactions by foreigners and taking measures such as tax collection through the Ministry of Justice, Financial Services Commission, National Tax Service, and Korea Customs Service. Previously, investigations were conducted only on housing transactions, but recently, with the increase in transaction volume, land and officetel transactions have also been included in the investigation targets.

MOLIT announced on the 22nd that among 557 abnormal transactions involving foreigner-owned houses, land, and officetels from last year to June this year, 433 suspicious illegal activities were found in 282 cases.

First, cases suspected of illegal inflow of overseas funds like Mr. A’s amounted to 77, the highest number. This involves bringing in more than 10,000 USD in cash from abroad without reporting or secretly bringing funds through 'hawala' without going through foreign exchange banks.

There were 60 cases of false reporting of transaction amounts or contract dates. This means reporting a transaction amount different from the actual amount or registering a transaction date different from the actual contract date.

Other cases include 15 instances where rental business was conducted under qualifications such as visit employment visa (H2) that do not permit leasing, 15 cases where related parties illicitly gifted transaction funds to their children, and 7 cases where individual business owners misused corporate loans to purchase houses beyond the loan’s intended purpose.

Among the 433 suspicious illegal activities, Chinese nationals accounted for the largest share with 192 cases (44.3%). This was followed by Americans with 100 cases (14.9%) and Australians with 24 cases (5.4%).

By region, such activities were most frequent in Gyeonggi Province with 128 cases (29.6%), followed by Seoul with 64 cases (14.8%), Chungbuk with 59 cases (13.6%), and Incheon with 40 cases (9.2%).

Meanwhile, since November 2022, MOLIT has established a permanent cooperation system with the Korea Customs Service to prevent speculation by foreigners who obtain loans in their home countries where regulations are more lenient than for domestic residents, and conducts annual planned investigations of speculative real estate transactions by foreigners.

In October last year, MOLIT enabled metropolitan and provincial governors to designate land transaction permission zones with specified target uses including land with houses for foreigners in areas where foreigner real estate speculation is a concern.

It also made it mandatory for foreigners to designate and report a 'domestic entrusted manager' when reporting transactions. This is to prevent situations where investigations become difficult after foreigners leave the country following real estate purchases.

Additionally, in August last year, MOLIT amended subordinate regulations of the Real Estate Transaction Reporting Act to allow access to foreign household composition data held by the National Health Insurance Service. This is a measure to investigate illicit gifting among relatives and related parties.

Kim Gyu-cheol, Director of the Housing and Land Office at MOLIT, said, "We will take strict action against illegal real estate transactions by foreigners through this investigation," adding, "We will also investigate abnormal transactions in new land development candidate sites and planned real estate projects currently underway to respond to illegal and unfair activities."