The government-wide task force on illegal foreign-exchange transactions launched in January has uncovered more than 600 billion won in illegal foreign-exchange transactions over roughly four months. Investigations found that those caught had evaded regulatory surveillance by using virtual assets or leveraging virtual accounts.

The Ministry of Economy and Finance said on the 3rd that it held a meeting of the government-wide ‘Illegal Foreign-Exchange Transaction Response Team’ on April 30 and reviewed the status of crackdowns on illegal outflows of foreign currency and hwanchigi.

The task force was launched jointly in January, when the won-dollar exchange rate was surging abnormally, together with the National Intelligence Service, the National Tax Service, the Bank of Korea, and the Financial Supervisory Service, to track increasingly sophisticated illegal foreign-exchange transactions.

The largest case by amount identified in this review involved a small remittance company that illegally remitted overseas foreign currency totaling 400 billion won by exploiting an expedient method of issuing a large number of virtual accounts. Although there is a cap on how much each person can send abroad, the operator opened 25,000 virtual accounts that allowed duplicate openings and deposits by third parties, and used them to illegally remit overseas foreign currency including proceeds from operating illegal online gambling sites. By making it appear on the surface as if more than 20,000 customers were making small remittances, they laundered gambling operating funds. The government referred this company to prosecutors on suspicion of engaging in an unregistered foreign-exchange business.

A 200 billion won case of ‘hwanchigi (sending and receiving foreign currency without going through formal financial institutions)’ by a used-car exporter was also uncovered. To circumvent regulations, the exporter mobilized a hwanchigi broker, received 200 billion won in payment from overseas traders in virtual assets, and converted it into won cash. Authorities said they have referred the hwanchigi broker to prosecutors and are also investigating the company that received the trade payment.

There was also a case in which, to avoid taxes, companies manipulated unit prices of export items such as scrap metal to undervalue them, and brought in the difference as foreign currency through borrowed-name accounts. The National Tax Service is investigating whether companies that underreported scrap-metal export proceeds committed tax evasion.

The task force is scheduled to operate until June. An official at the ministry said, “If necessary, the operating period can be extended.”