The Ministry of Strategy and Finance said Sunday that it planned to propose amendments to legislation on foreign exchange transactions to allow increased monitoring and punishment by state regulators of those who hide assets offshore.
The revised bill to be reviewed by the National Assembly over the next month would give local regulatory agencies such as the Korea Customs Service and the Financial Supervisory Service more power to conduct joint investigations into suspicions of illegal foreign exchange transactions overseas.
This would allow the removal of a firewall between the two organizations and share information through close collaboration and increase efficiency, enabling them to fine-tune their investigative procedures that were bound to overlap later.
The KCS was previously responsible for mainly scrutinizing companies that allegedly stashed away excessive funds overseas gained through foreign exchange transactions via trade, while the FSS looked into those funds deposited in unreported tax haven accounts.
The Finance Ministry said that the revision aimed to further prevent companies or wealthy individuals from hiding their assets in offshore accounts and evading tax through stricter oversight of capital flight.
Financial authorities have been expanding their supervision and collaboration to seek the so-called “tax justification” among those channeling their funds or wealth to offshore accounts without filing reports amid increased revelations of individuals connected to conglomerates and former political leaders operating paper companies.
The government of President Park Geun-hye is looking to clamp down on tax evasion and black market activity to secure 50.7 trillion won ($45.0 billion) of the 134.8 trillion won it pledged to spend over the next five years on welfare and the revitalization of the economy. The rest of its spending will be allocated through state expenditure cuts.
The amendments will also encourage the National Tax Service and the Bank of Korea to further collaborate with the KCS and the FSS to share and gather information on domestic companies that remitted funds overseas for transactions such as real estate purchases and bond investments.
Regulators will impose higher fines and tougher sanctions against companies that failed to properly report their foreign direct investments under the proposed revision.
A growing number of companies were found to have manipulated their reports and used their investment funds for purchases of overseas real estate via accounts under borrowed names instead of the establishment of offshore subsidiaries.
Last year, regulators discovered over 500 cases of such illicit transactions, up from 219 in 2011 and 100 in 2010, the Finance Ministry noted.
By Park Hyong-ki (
hkp@heraldcorp.com)
