South Korea Uncovers $5.2 Billion in Illegal FX Transactions in First Half

South Korean authorities uncovered more than $5.2 billion in illegal foreign-exchange transactions in the first half, including cases in which dollars that should have been brought back into the country were siphoned off overseas.

The Korea Customs Service said on July 27 that it detected 792 cases of illegal foreign-exchange activity amounting to 7.2 trillion won, or about $5.2 billion, in the January-June period.

The probe covered not only direct illegal outflows of foreign currency, but also illicit trade settlement using hawala-style transfers and virtual assets that weakened foreign-currency inflows and hindered authorities' monitoring.

Under the Foreign Exchange Transactions Act, such transactions must go through designated banks, and the proceeds must be repatriated to South Korea without delay.

The review also uncovered cases of capital flight in which money borrowed from domestic financial institutions was invested in overseas real estate, while profits were concealed abroad instead of being brought back to South Korea in line with the rules in force at the time.

Authorities also found illegal remittances using a "split transaction" method, in which multiple virtual accounts under third-party names were issued to make each account appear to remain within transfer limits. The investigation found the funds included criminal proceeds tied to voice phishing and gambling.

The agency also identified cases in which exporters accepted payment in virtual assets rather than legal tender and failed to bring home about $65.2 million in export proceeds. It also found cases in which overseas trade receivables were not repatriated and were instead invested abroad without reporting, resulting in foreign-currency outflows.

Commissioner Lee Jong-wook said the agency would mobilize all of its foreign-exchange enforcement capabilities to crack down on illegal outflows, adding that a high exchange-rate environment remains a key risk exacerbating strains on the economy.

Jeon Min-jung, Korea Economic TV reporter jmj@hankyungtv.com