South Korean banks could be targeted after the government, the media and regulators are stepping up scrutiny of the role banks play in allowing high-profile Korean traders to make money quickly as trading volumes increase.
As previously reported, regulators stepped in last month to warn banks about their inability to stop traders from buying tokens like bitcoin (BTC) overseas via wire transfers. banks – which traders then sought to dump on domestic cryptocurrency exchanges for a hefty profit.
As the price of BTC has increased in recent years, trading volumes by retail investors have skyrocketed – the former leading to a difference of up to 50% between prices on domestic platforms such as Upbit and global platforms. demand like Binance.
Some opportunistic traders have sought to capitalize on such a price gap by purchasing BTC from over-the-counter vendors – mainly individuals based in Mainland China, Hong Kong, and Japan. . South Korean authorities, which have already imposed strict regulations on foreign exchange transactions, have labeled such business as money laundering – and vowed to stamp it out.
Banks have since responded to limits on remittances abroad, but concerns have emerged that – historically – some $3.4 billion worth of illegal foreign exchange operations have been carried out. present in recent years. The Financial Supervisory Service (FSS) said last week that all of the money may have gone through domestic banks.
The FSS initially identified what it deemed “unusual” foreign exchange transactions in both Woori and Shinhan, with prosecutors also reviewing the evidence.
But according to Energy Kyungjae, citing unnamed sources in the banking industry, the FSS has been aware of the potential problems for more than a year – and has previously warned most banks in the country about possible breaches. may happen. The media added that the regulator repeated its warning “several times” in 2021.
In addition to the aforementioned Woori and Shinhan, the regulator has also issued separate warnings to Kookmin Bank, KEB Hana Bank and Nonghyup Bank. The FSS report told all five banks to “be careful about arbitrage trading aimed at the premium of kimchi” in 2021.
KEB Hana was fined for violating the terms of the Foreign Exchange Trading Act this year after an internal audit revealed historical irregularities – possibly related to cryptocurrency in some cases. case – as of 2018.
Meanwhile, Chosun reports that the FSS is “expanding the initial investigation to the entire financial sector,” and claims the regulator has been conducting an “on-site investigation.” The results of these polls were shared with the prosecution, as well as the National Intelligence Service (NIS) and the Korean Customs Service.
The latter company has previously had some success tracking high-end kimchi traders.
However, digging deeper into the matter seems to have uncovered a network of suspicious-looking companies that some say may have been used by overseas players to launder money.
The Financial Intelligence Unit (FIU) found details of “dozens of unusual transactions” involving an unnamed company based in Daegu, as well as similar cases involving other companies. The company may have a shell or “paper” based elsewhere in the country.
These companies appear to have been conducting crypto-related operations through domestic exchanges – then converting their funds into KRW fiat before remitting it overseas.
Some claim that individuals with ties to North Korea may join the network.
However, according to Yonhap, Kim Kyu-hyeon, director of the NIS, told the National Assembly Intelligence Committee that the investigation into the alleged illegal $3.4 billion worth of foreign exchange transactions “has yet to be opened up.” completed”.
Meanwhile, the Financial Services Commission (FSC) will hold a landmark meeting with the heads of the country’s five largest cryptocurrency exchanges later this month.
FSC President Kim Joo-hyun will personally attend the meeting, Seoul Kyungjae reported. Kim will listen to the exchanges’ proposals after the companies are asked to create a self-regulatory body. The meeting will be significant as no FSC director has previously held a face-to-face meeting with industry leaders.
An unnamed industry insider was quoted as welcoming the news, saying: “FSC seems to be more active in the crypto industry and market than it has been in the past.”