Mandatory notification of capital transfer starting next year

Starting Jan. 1 next year, the government will remove the limit on the amount of remitted fund abroad, while imposing a mandatory notification to the Korean Bank when a transfer of large sum of money is sought.

Along with the expansion of such freedom to transfer and/or maintain an offshore account, the government plans to expand the mandatory notification requirement to the National Tax Administration and the Customs Office for any large deposits made to an offshore account or information concerning trust accounts abroad. The Ministry of Finance and Economy, in a move to cut-off the possible massive outflow of foreign capital or money laundering schemes after the implement of the second phase liberalization of foreign currency next year, made an announcement of a supplemental measure on Thursday.

As a supplemental measure to the liberalization of transfer of funds for such purposes as the travel expense, the offshore donations and the immigration expense, the MOFE will impose a mandatory notification to the Korea Bank of any transfer abroad of large sums of fund made by a Korean national or a foreigner residing more than six months in Korea.

In addition, the non-residents (mostly foreigners or Koreans with residency abroad) who lack any clear source of income through legal employment will be required to notify the Korea Bank for any transfer of funds abroad.

A source in the MOFE stated that the criteria for the exact sum of money which would require prior notification would be made through discussions with various sectors, but has hinted that it would be kept quite low at least at the beginning. Should a person fail to give prior notification, a maximum fine of 5 million won may be imposed while a person found guilty of misappropriated fund transfer or transfer of national wealth could face a year in prison and a fine twice or 10 times the amount of the transferred capital. Also, in anticipation of various schemes to hide capital wealth through establishment of offshore accounts, the government will impose a mandatory annual notification of the offshore accounts and trust funds which are in excess of a certain amount. In addition, any offshore account or trust fund deposits and stock investments in foreign exchanges made without the service of an established foreign currency exchange agencies are required to be notified to the Korea Bank.

The MOFE will require the financial institutions to submit documentation for the large sum of capital transfer for travel expense purpose to both the National Tax Administration and Customs Office. Currently an individual may transfer abroad $10,000 for the purpose of travel expense and while the report of the amount is made to the National Tax Administration, the documentation for the transfer is given only to the Customs Office.

In a move to curtail the transfer abroad of illicit funds, the MOFE has announced its plan to establish the Financial Intelligence Unit to analyze the flow of capital abroad which may possibly be a money laundering scheme for illicit funds.