Corporate leaders probed for suspect FX transactions

Financial authorities on Monday said they have been investigating some 20 business leaders, including Lotte Group chairman Shin Kyuk-ho, on allegations of breaching the foreign exchange transaction act.

“We launched the investigation two months ago, and the estimated amount of transacted money is around 52.2 billion won ($50 million),” said a spokesman from the Financial Supervisory Service.

Other wealthy people on the list of the investigation include Lee Soo-young, chairman of OCI, a leading local solar power builder, and Hwang In-chan, chairman of shipping express giant Daea Group and a sibling of Lee Ho-youn, the former chairman of leading food company Binggrae.

“Our screenings uncovered suspicious transactions conducted between 2001 and 2004,” the FSS official said. 

Those businesspeople received a combined $50 million in their bank accounts, which they claimed were a return on investments, capital gains from asset sales overseas, and wage income.

The investigation is part of the watchdog’s tightened monitoring of foreign exchange transactions of wealthier Koreans in efforts to prevent tax evasion and capital outflow.

Under the current foreign exchange transaction act, the purpose of all currency transactions for amounts exceeding $50,000, aside from those involved in trade, must be reported to the related authorities.

Those subject to the recent FSS probe, however, allegedly failed to submit the documents required for verifying the legitimacy of the currency transactions.

“We have been looking into the flow of the money after it changed hands,’’ the FSS official said, raising the possibility that the suspected individuals were attempting to create slush funds or dodge taxes.

“If irregularities in cross-border transactions are found, we will impose a fine against those misconducts and take legal action.”

With $9 million, the chief of Lotte Group, the nation’s fifth-largest conglomerate by assets, topped the list in terms of the amount of funds that trickled in from overseas. Shin reported to the financial watchdog that the money was investment profit.

Lotte Group also claimed that the funds were used to pay taxes levied on the capital gains it incurred from selling a stake in Lotte Corp.

Last year, several high-profile local businessmen were found to have set up paper companies in popular tax havens in an apparent bid to stash away funds or evade taxes.

In response, the country‘s customs office and financial authorities have been stepping up measures to prevent offshore tax evasion and overseas concealment of wealth.

By Seo Jee-yeon and news reports
(jyseo@heraldcorp.com)