South Korea to Investigate Dubious transfers from Crypto Exchanges

Paigambar Mohan Raj
Source: Business Insider India

According to a local South Korean news outlet, Asia Time,  the Financial Supervisory Service (FSS) has ordered a probe into banks that facilitated $6.5 billion in questionable foreign wire transfers. According to the report, most of the funds between January 2021 and June 2022 came from crypto exchange accounts before being sent out of the country.

The report suggests that Korean companies are exploiting the “Kimchi premium.” The Kimchi premium refers to the gap in crypto prices in South Korean exchanges compared to foreign counterparts. Investors purchase crypto from foreign exchanges and sell them for a profit on local South Korean platforms. The premium has been called into question as it promotes capital flow from the country. The premium presently sits at 3.37% but was north of 20% last April.

According to Shinhan Bank and Woori Bank reports, most money sent overseas was initially moved from local crypto exchanges. The funds were then transferred to various corporate accounts held by Korean businesses.

Kimchi premium on crypto used for money laundering?

When the FSS asked banks to investigate, the total amount moved abroad was more than twice what they anticipated to discover. The FSS is now expected to carry out more on-site checks of local banks. According to Asia Times, the authorities may find more funds that may have been remitted.

According to another South Korean news outlet, KBS, there is suspicion that the funds are being used for money laundering. The report states that some employees of the yet unnamed companies have been arrested.

The South Korean Authorities seem to be swamped with multiple cases. The country is also investigating the fallen crypto project, Terra. In a recent interview with Coinage, Terra founder Do Kwon said that the founders had not been charged with anything, and he also said he had not gotten in touch with the investigators. Nonetheless, Kwon plans to cooperate with the authorities when the time comes.