The Korea Customs Service will begin year-round inspections of illegal foreign exchange transactions. The aim is to reduce volatility in the foreign exchange market by cracking down on acts that distort dollar inflows and outflows amid a high exchange-rate phase.
The Korea Customs Service said on the 13th that it held a "meeting of officials on nationwide customs foreign exchange investigations in response to the high exchange rate" at the Government Complex Daejeon and will operate an "illegal trade and foreign exchange transaction crackdown task force (TF)."
The TF is composed of a Korea Customs Service dedicated team and 24 foreign exchange investigation teams at customs offices nationwide. It will focus on three major illegal acts: failure to collect export proceeds, irregular trade settlements, and overseas flight of foreign-currency assets by abusing trade.
First, the Korea Customs Service will push for foreign exchange inspections of 1,138 corporations that show large discrepancies between trade payments made or received through banks and export and import amounts reported to customs. By company size, there are 62 large corporations, 424 mid-sized corporations, and 652 small corporations. It plans to distribute the target corporations to major customs offices including Seoul, Busan, and Incheon Customs, conduct additional data analysis, and promptly begin inspections starting with corporations deemed high risk.
The background to the Korea Customs Service launching such intensive inspections is the judgment that the circulation of foreign exchange for trade payments is not smooth. Trade payments account for 40% to 50% of Korea's total foreign-currency inflows, and illegal foreign exchange transactions undermine exchange-rate stability.
As of Nov. last year, the gap between bank foreign exchange transactions and amounts reported to customs widened to the highest level in the past five years (427 trillion won). In addition, in foreign exchange inspections conducted last year, illegal foreign exchange transactions were uncovered at 97% of those surveyed, with violations exceeding 2.2 trillion won.
During foreign exchange inspections, the Korea Customs Service plans to focus investigative resources and respond strictly to crimes that directly affect the national economy, such as offshore flight of assets and illegal overseas remittances that exploit exchange-rate instability. However, it emphasized that it will launch probes or investigations only when clear suspicions are confirmed, and will swiftly close cases where the illegality is unclear, so as not to discourage normal trade activities.
Lee Myung-gu, commissioner of the Korea Customs Service, said, "We have set support for exchange-rate stability as a key task this year," and added, "We will mobilize all our foreign exchange and customs investigation capabilities to respond to acts that undermine exchange-rate stability, such as illegal failures to collect export proceeds."