Currency Exchange Booths to Be Immediately Expelled if "Coin Hawala" Is Detected...Proposed Amendment to Foreign Exchange Transactions Act Enforcement Decree Pre-announced

Establishment of Integrated Monitoring System for Virtual Asset Remittances

"One-Strike-Out" for Detection of Coin Hawala

An integrated monitoring system for cross-border virtual asset remittances will be established, and a new foreign exchange surveillance network will immediately expel unreliable currency exchange booths from the market if illegal currency exchange or underground money transfer operations are detected. Meanwhile, innovative fintech-based foreign exchange services will be encouraged and developed by opening up the sector.

A currency exchange booth displaying exchange rates in Myeongdong, Jung-gu, Seoul. Photo by Yonhap News Agency.

The Ministry of Economy and Finance announced on October 7 that it will pre-announce a proposed partial amendment to the Enforcement Decree of the Foreign Exchange Transactions Act. This is a follow-up measure to the amendment of the Foreign Exchange Transactions Act, which passed on June 2 and included provisions such as monitoring cross-border virtual asset transfers. The goal is to minimize blind spots in illegal foreign exchange transactions by concretizing subordinate regulations in line with the purpose of the amended upper-level law.

According to the amendment, a new “virtual asset transfer service” will be introduced, bringing cross-border coin remittances into the official regulatory framework. Going forward, any domestic business transferring virtual assets to overseas virtual asset service providers or individual wallets will be required to have dedicated computerized systems, employ at least two individuals with two years' experience in foreign exchange operations or those who have completed the required training, and formally register with the authorities. All remittance details handled by these businesses must be reported through the Bank of Korea’s foreign exchange information network, and the data will be shared in real time with the National Tax Service, Korea Customs Service, Financial Supervisory Service, and Korea Financial Intelligence Unit.

The government will also raise barriers to entry for currency exchange businesses by, through the Enforcement Decree, thoroughly screening disqualifications of executives and mandating minimum capital (KRW 10 million or more, as determined by the finance minister). Serious violations, such as voice phishing, illegal trade settlement, and so-called “coin hawala” (illegal foreign exchange transactions that transfer foreign currency between Korea and abroad without going through authorized foreign exchange banks), will be subject to a “one-strike-out” rule—registration will be immediately revoked upon a single infraction. The maximum penalty will be raised so that fines can now reach up to 100% of the ill-gotten gains. This comes in response to criticism that unreliable currency exchange booths have proliferated, as 581 out of 1,346 registered exchange businesses (about 43%) reported no foreign exchange purchases in the first half of this year.

In contrast, fintech-based foreign exchange services that enhance consumer convenience will be reorganized into a new overseas payment business category consisting of six different business types. In reflection of successful initiatives like Travel Wallet, the transfer of foreign currency prepaid means of payment to third parties will be formally permitted up to a specified limit. To respond quickly to increasingly sophisticated fraudulent transactions, the Korea Customs Service will have its enforcement authority expanded, allowing it to directly inspect service and capital transaction violations identified during its inspections of import and export transactions.

The primary reason behind the authorities’ move to update the regulatory system is the severity of foreign exchange crime. According to data obtained by Assemblyman Park Sooyoung's office from the Korea Customs Service, the total amount uncovered in underground money transfer cases from 2018 to July this year reached 18.0297 trillion won. Of this, “coin hawala” accounted for about 67% (12.1407 trillion won) by amount. The amendment to the Enforcement Decree is scheduled to undergo public notice to collect public opinions through October 26 and will take effect on December 3, coinciding with the implementation date of the revised Foreign Exchange Transactions Act.

This content was produced with the assistance of AI translation services.