Borrowed-name account holders face tougher penalties

By Chung Ah-young

People who hold bank accounts under borrowed names that have been used for tax evasion and money laundering will face stiffer legal penalties from Nov. 29.

However, despite giving the appearance of a government crackdown on such activities, revisions to the Real Name Financial Transaction Law, will still allow the use of borrowed-name accounts for “well-intentioned” purposes including management of membership fees for social gatherings and the financial assets of religious groups and family members.

The revisions are said to be intended to eradicate financial malpractices perpetrated through borrowed-name accounts held by conglomerate owners and their relatives. A number of such people have already been convicted for evading taxes and creating slush funds.

But the revisions to the law will also still allow people to open accounts in the names of relatives. Accounts opened under the names of spouses that hold up to 600 million won over a 10 year period and accounts of children holding less than 50 million won will also be permitted.

Moreover, all assets will become the property of those who lend their names for such accounts to be opened. Anyone who opens an account under a borrowed name cannot claim such assets under the new revisions.

Currently the law, which became effective in 1993, stipulates that fines can be imposed on anyone who opens an account under a borrowed name without the consent of the person whose name is used. But there is no regulation to punish the holders of borrowed-name accounts opened on the basis of mutual consent.

Under the new revisions, even people who hold an account under a borrowed name and who obtain consent from a person who lends their name will be subject to five years in prison or up to 50 million won in fines if the account is used for illegal purposes.

Financial institutions will also face tougher punishments if they are found to have helped create such accounts. They will be subject to fines of up to 30 million won per case.

Financial institutions have also been blamed for being complicit in the illegal practices. Recently, the financial watchdog probed Woori Bank for helping to create hundreds of borrowed-name accounts for CJ Group to allegedly create slush funds.