Korea Customs Targets Illegal Money Flows

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Enhanced Measures to Combat Transnational Financial Crimes

The Korea Customs Service is set to implement a comprehensive crackdown on the illegal transfer and laundering of funds obtained through transnational crimes, including voice phishing, illegal gambling, and drug trafficking. This initiative comes in response to a significant increase in cases where criminal organizations based overseas, particularly in Southeast Asia, have been siphoning illicit funds from domestic victims using methods such as unauthorized remittances and cash smuggling.

On the 17th, the Customs Service announced that starting next month, it will conduct a special operation targeting violations of the Foreign Exchange Transactions Act. This includes monitoring the illegal movement of funds across borders and money laundering schemes that disguise illicit funds as legitimate through the abuse of trade and financial systems.

Key Focus Areas of the Crackdown

The crackdown will concentrate on three main areas:
Illegal remittances
 Smuggling of foreign currency
* Money laundering via trade abuse

Illegal foreign exchange transactions, commonly referred to as hwacha-gi, are a prevalent method for circulating illicit funds. Hwacha-gi involves unauthorized foreign exchange transactions that mimic the effect of sending foreign currency abroad without using registered institutions like banks, as required by the Foreign Exchange Transactions Act. Over the past five years, the Customs Service has detected approximately 11 trillion won in such crimes. Notably, 83% of these cases involved virtual assets, highlighting frequent attempts to evade detection by exploiting anonymity.

In October, five members of a hwacha-gi ring were arrested for acting as intermediaries in 78,489 transactions worth 92 billion won between South Korea and Vietnam using stablecoins like Tether. The Customs Service plans to investigate suspects involved in hwacha-gi using virtual assets by leveraging risk transaction data from the Korea Financial Intelligence Unit (FIU). It will also actively target currency exchange businesses and small-scale remittance operators exceeding legal limits.

Increasing Scale of Currency Smuggling

The scale of foreign currency smuggling through airports and ports has been steadily increasing. Over the past five years, 238.6 billion won was detected, with 141.1 billion won seized through September of this year. In July, eight members of a criminal organization were caught smuggling approximately 115 billion won in overseas gambling funds across 519 trips by carrying cash in luggage. The group was found to have financed gambling and tourism activities between South Korea and the Philippines.

The Customs Service will strengthen inspections of travelers arriving from high-risk countries at all airports and ports for concealed currency. It will also focus on detecting counterfeit currency and securities that could be used in domestic fraud schemes. Price manipulation-based money laundering through trade or abuse of overseas ATMs will also be targeted. Over the past five years, 862.2 billion won was detected in price manipulation cases, while 399.6 billion won was uncovered in money laundering and asset flight schemes.

Collaborative Efforts to Combat Financial Crimes

For this crackdown, the Customs Service has formed a 126-member “Crime Fund Tracking Team” led by the head of its Foreign Exchange Investigation Division. It will collaborate with the FIU, Financial Supervisory Service, Credit Finance Association, Airport Corporation, and other agencies to swiftly report illegal activities such as virtual asset trading and misuse of mule accounts.

Commissioner Lee Myung-gu of the Customs Service stated, “Transnational crimes are severe social harms that inflict extreme damage on our citizens. We will strengthen our crackdown on illegal fund circulation and concealment to completely block the movement of funds by international criminal organizations threatening our citizens’ assets and contribute to establishing a transparent international financial environment.”

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