Woori Bank was brought to trial over an anomalous foreign remittance case linked to virtual assets but was acquitted at the first trial. The court found it hard to view Woori Bank as the substantive operator of the disputed foreign exchange transactions and said prosecutors had applied the law with an overly broad reading of the penal provisions.
The Criminal Division 19 single-judge panel of the Seoul Central District Court (presiding judge Director General Im Hye-won) on the 14th acquitted Woori Bank Co., Ltd., which was indicted on charges including violating the Foreign Exchange Transactions Act. Woori Bank did not agree to a public notice of the acquittal, so there will be no separate disclosure. KIM&CHANG handled Woori Bank's defense.
The case concerns foreign currency remittances processed at some Woori Bank branches from September 2021 to August 2022. Foreign currency was remitted from several branches in the Seoul metropolitan area under the heading of paying import transaction proceeds, and the disputed scale was found to be 40 transactions totaling $9.09 million (about 12.5 billion won).
Prosecutors viewed some remittances as not actual import transactions but as funds from virtual asset transactions converted into foreign currency and sent overseas. They argued that Woori Bank branches failed to comply with the reporting and verification duties under the Foreign Exchange Transactions Act and that the bank as a corporation did not fulfill its internal control responsibilities.
The key issue was whether the remittances were simple payments of import proceeds or capital transactions requiring reporting under the Foreign Exchange Transactions Act. Capital transactions refer to transactions in which loans, investments, or changes in credit and debt relationships occur between residents in Korea and residents overseas. Capital transactions above a certain size must be reported to the Bank of Korea, and violations can be subject to criminal punishment.
Woori Bank denied the charges. It said the disputed transactions were not reportable foreign exchange transactions but were closer to a consignment trading structure under the Commercial Act, and bank employees merely processed remittances of import proceeds based on documents submitted by customers. It argued that employees could not readily discern false transactions or virtual asset-related fund flows from documents alone, and the bank had no legal duty to substantively review every actual transaction relationship and the source of funds.
The court found that Woori Bank could not be deemed the substantive operator of unregistered foreign exchange business or unreported capital transactions. The court said, "The substantive operators were those who remitted foreign currency through virtual asset trading," adding, "Woori Bank is hard to view as an operator subject to the joint penal provisions."
The joint penal provisions allow punishing a company along with an employee or agent who violates the law in connection with their work. However, for a company to be punished, the violator must be a person who performed the company's business. The court said the parties who sought to remit foreign currency after obtaining won through virtual asset transactions were not Woori Bank employees or agents, so Woori Bank could not be punished for their actions.
The court said, "Under the Foreign Exchange Transactions Act, the joint penal provisions are designed to punish operators who performed foreign exchange business without registration," and added, "The mere fact that bank employees were partly involved in the remittance process does not justify punishing the bank itself."
A violation of the bank's verification duty was not recognized either. Prosecutors argued that Woori Bank employees, while processing foreign currency remittances labeled as payments of import proceeds, failed to check whether the transactions required reporting or approval. The court viewed that, at the time, payments of import proceeds were, in principle, excluded from reporting under the Foreign Exchange Transactions Regulations.
The court said, "Once bank employees recognized requests to pay import proceeds as transactions that did not require reporting or approval under the Foreign Exchange Transactions Act, it is hard to say they also had a duty to verify whether reporting was required." It added, "The mere fact that they did not verify whether invoices were false does not establish a violation of the verification duty under the Foreign Exchange Transactions Act," and said, "Interpreting the law as prosecutors argue would excessively expand penal provisions and run counter to the principle of legality."
The principle of legality holds that to punish an act as a crime, the subject and elements of punishment must be clearly defined by law. The court found that although the bank's document checks may have been insufficient, recognizing a violation of the verification duty under the Foreign Exchange Transactions Act on that basis alone would make the scope of punishment overly broad.