South Korean banks could finish up in the firing line following the government, media outlets, and regulators walked in the scrutiny from the banks’ role in enabling kimchi premium traders to create quick money when buying and selling volumes rise.
As formerly reported, regulators walked in recently to warn banks regarding their failure to prevent traders from buying tokens like bitcoin (BTC) overseas via wire transfers – which traders then searched for to dump on domestic crypto exchanges for any hefty profit.
When BTC prices have risen recently, retail investors’ buying and selling volumes have soared – in the past resulting in discrepancies as high as 50% between prices on domestic platforms like Upbit and global platforms like Binance.
Some opportunistic traders have searched for to benefit from such cost gaps by purchasing BTC from over-the-counter vendors – mainly individuals located in Landmass China, Hong Kong, and Japan. South Korean government bodies, which already impose strict rules on foreign currency buying and selling, have equated such buying and selling with money washing – and also have vowed to stamp it.
Banks have since responded with overseas remittance caps, but concern has since come to light that – in the past – some USD 3.4 billion price of illegal foreign exchanges happen to be transported out recently. And also the Financial Supervisory Service (FSS) a week ago stated that all this money might have undergone domestic banks.
The FSS initially identified what it really thinks were “abnormal” foreign currency transactions at both Woori and Shinhan, with prosecutors also searching in the evidence.
But per Energy Kyungjae, which quoted unnamed banking industry sources, the FSS has known potential issues for more than a year – and it has formerly cautioned most domestic banks about possible violations. The press outlet added the regulator had repeated its warnings “several times” in 2021.
Additionally towards the aforementioned Woori and Shinhan, the regulator apparently also issued private warnings to Kookmin Bank, KEB Hana Bank, and Nonghyup Bank. The FSS apparently told all five banks “to be cautious about arbitrage buying and selling targeted at the kimchi premium” in 2021.
KEB Hana was fined for violating the the Foreign Currency Transactions Act this season after an interior audit revealed historic irregularities – possibly related in some instances to crypto – dating back 2018.
Chosun, meanwhile, reported the FSS was “expanding its initial analysis towards the entire financial sector,” and claimed the regulator had conducted “on-site investigations.” The findings of those probes happen to be distributed to the prosecution service, along with the National Intelligence Service (NIS), and also the Korea Customs Service.
The second has formerly enjoyed some success in tracking lower kimchi premium traders.
However, digging much deeper in to the matter seems to possess unearthed a network of suspicious-searching firms that some have recommended might have been utilized by overseas players to launder funds.
The Financial Intelligence Unit (FIU) finds information regarding “dozens of abnormal transactions” associated with an unnamed company located in Daegu, in addition to similar instances involving possible covering or “paper” companies based elsewhere in the united states.
These businesses have the symptoms of conducted activities involving crypto via domestic exchanges – then converting their coins for fiat KRW before remitting money overseas.
Some have claimed that North Korea-linked individuals may engage in the network.
But, per Yonhap, Kim Kyu-hyeon, the Director from the NIS, told the National Set up Intelligence Committee the analysis in to the alleged illegal USD 3.4 billion price of foreign currency transactions “has not completed.”
Meanwhile, the Financial Services Commission (FSC) holds a landmark ending up in the heads from the country’s five greatest crypto exchanges later this month.
The FSC’s Chairman Kim Joo-hyun will personally attend the meeting, Seoul Kyungjae reported. Kim will pay attention to the exchanges’ proposals following the companies were requested to produce a self-controlling body. The meeting is going to be crucial as no FSC chief has formerly held an immediate ending up in industry leaders.
An unnamed industry insider was quoted as welcoming this news and stating: “The FSC appears to become more mixed up in cryptocurrency industry and market than it was once.”