The Financial Supervisory Service (FSS), South Korea’s financial sector watchdog, has announced that it has uncovered more than KRW 4.1 trillion ($3.1 billion) in suspicious international money transfers linked to digital assets when investigating two local banks.
According to a Financial Times reportLee Joon-soo, the deputy governor of the FSS, identified the banks involved as Woori Bank and Shinhan Banks, which the regulator has been investigating for a month after receiving a whistleblower.
The FSS claims to have uncovered a total of KRW 1.6 trillion ($1.2 billion) in abnormal foreign exchange (forex) transactions between May 2021 and June 2022 at the five branches operated by Woori Bank. An additional KRW 2.5 trillion ($1.9 billion) of questionable foreign exchange transactions were also carried out at 11 branches of Shinhan Bank between February 2021 and early July this year.
The investigation revealed that the transactions were part of an elaborate money laundering scheme. The banks were acting on behalf of 22 trading companies that received money from local digital asset exchanges.
“It has been confirmed that most of the anomalous remittances were sent from commercial company bank accounts after the accounts received money from local cryptocurrency exchanges,” the Deputy Governor said.
Some of the trading companies were registered to operate jewelry or tourism-related businesses. The FSS has discovered that the flow of opaque money to trading companies comes from digital asset exchanges. Funds are transferred to foreign companies whose management personnel have close ties – sometimes through the same employee or family members – to the companies based in South Korea.
However, where digital asset exchanges draw funds in the first place remains a mystery. The FSS said it asked all other banks in the country to submit internal investigations into their international money transfer transaction by the end of the month, as they suspected the scheme had spread to them.
South Korea leaves no room for digital asset crimes
The FSS will report all guilty companies to the country’s prosecutors as well as the Korean Customs Service. Fines and sanctions will follow after the investigation. The National Intelligence Service is also conducting a separate investigation into the matter, according to the report.
South Korea has sent a strong message to malicious players in the digital asset market that there will be no place for them in the country. Earlier this month, prosecutors investigating the Terra UST and LUNA crash raided 15 sites, including seven local exchanges and the homes and offices of their management staff.
The government also hounded Do Kwon and Shin Hyun-seong, the co-founders of leading Terra developers, Terraform Labs (TFL). Additionally, the country has introduced new departments and regulations that will limit the risks posed by digital assets to consumers.
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