[Song Seungseop's Financial Light] How Did $2.6 Billion in Coins Flow to the Chinese-speaking Region?

Banks, Suspicious Foreign Exchange Transactions of 4.1 Trillion Won
New Companies Made Over a Thousand Transfers in a Short Period
Checking Corporate Accounts Revealed Same CEO
2.5 Billion USD of Related Funds Sent to Hong Kong

Finance is difficult. Confusing terms and complex backstories are intertwined. Sometimes, you need to learn dozens of concepts just to understand a single word. Yet, finance is important. To understand the philosophy of fund management and consistently follow the flow of money, a foundation of financial knowledge is essential. Accordingly, Asia Economy selects one financial term each week and explains it in very simple language. Even those who know nothing about finance can immediately understand these ‘light’ stories that illuminate the ‘light’ of finance.

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Song Seung-seop] Suspicion over suspicious foreign exchange transactions recently surfaced in the financial sector is gradually growing. This is because trillions of won originating from domestic virtual asset exchanges flowed out to overseas corporations through multiple companies. Who, why, and through what process did the funds move overseas? We explain the complex foreign remittance process in detail.

According to the Financial Supervisory Service’s announcement, the suspicious foreign exchange transactions amount to $3.37 billion. This is a large sum equivalent to about 4.1 trillion won. This amount was confirmed only at Shinhan Bank and Woori Bank, and it has increased from the initially reported 2.5 trillion won. The Financial Supervisory Service is currently reviewing foreign currency remittance details across all domestic banks. The total is estimated at $5.37 billion, and suspicious transactions may increase depending on future inspection results.

But what makes these transactions suspicious? Anyone can send money abroad from Korea. The first reason the financial sector views these foreign remittances as suspicious is the repetitive number of transactions. Excluding duplicates, 22 companies were involved in suspicious foreign exchange transactions at Shinhan Bank and Woori Bank. These 22 companies processed 1,238 foreign remittances over 17 months at Shinhan Bank and 931 remittances over 13 months at Woori Bank. This is an abnormally high number of transactions to be considered routine business.

The second suspicious point is the identity of the companies exchanging money. Looking into the companies involved in the foreign exchange remittances, there were precious metals companies, cosmetics, travel-related firms, and various wholesale and retail businesses. Most of these companies were newly established. Some had very low sales or capital. It is very rare for small startups to send trillions of won overseas.

Companies exchanging money... it turns out the representatives are the 'same person'

There is another suspicious aspect: the relationships between the companies exchanging money. To understand this, one must understand how the funds flowed. Most of the money originated from virtual asset exchanges. Korean won was transferred from virtual asset exchanges to numerous individuals and corporations. This money then gathered at a specific trading company. This trading company converted the Korean won into foreign currency through banks and remitted it to overseas corporations.

However, when examining the accounts of each company, cases with the same account holder name were found. The representatives of multiple companies exchanging money were the same person. Some companies sent money to firms whose representatives were cousins. One person also held executive positions in multiple corporations. So-called ‘related parties’ exchanged money over different periods before the funds flowed overseas.

Then, ultimately, who benefited? So far, only the countries where the funds flowed have been officially confirmed. The largest portion, $2.5 billion, was transferred to Hong Kong. Japan received about $400 million, the United States $200 million, and China approximately $160 million. The overseas corporations receiving the money were not virtual asset exchanges but general corporations.

Who converted the virtual currency into Korean won remains unclear. This is because the Financial Supervisory Service currently lacks the authority to inspect or investigate virtual asset exchanges. The Financial Supervisory Service has not disclosed which virtual asset exchanges are involved but explained that “multiple exchanges are related.”

This content was produced with the assistance of AI translation services.