Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Trading firm investigated for bogus deals with Iran
By Yi Whan-woo
The prosecution has launched an investigation into a trading company that allegedly withdrew 1.9 trillion won ($1.7 billion) from the Central Bank of Iran (CBI) after acting as if it had conducted deals with Iranian buyers.
The CBI is the only route for financial transactions between Korea and Iran following U.S-led sanctions imposed on the Middle Eastern country in October 2010. Concerns are rising that the fraud allegations could damage the commercial relationships with Washington.
The Seoul Central District Prosecutors’ Office said it raided the firm in Songpa on Sunday and seized documents that reportedly show the company made 50 fraudulent deals since 2011.
The company allegedly made the bogus deals through intermediary trading in which all the shipping and delivery processes of products occurred outside Korea. Such a process made it difficult for local authorities to track down whether the transactions were actually made, according to prosecutors.
The prosecution said the company claimed it purchased marble from Italy. It then directly shipped and sold it to Iranian buyers who planned to build a temple. Investigators, however, deem that the deals never were made and the firm forged the shipping documents to receive money from the CBI, responsible for payment on behalf of the Iranian buyers.
The CBI paid the amount in won through its account at the Industrial Bank of Korea (IBK) in Seoul. The Iranian bank runs won-currency accounts at IBK and Woori Bank following the U.S. sanctions that restrict the influx of its currency into Iran. The sanction, however, excludes deals in won and Korean and Iran have maintained a commercial relationship with the CBI the only route for transactions since then.
The prosecution has obtained relevant information from the Bank of Korea to track down the money the firm has smuggled out of the country.
“We found that the company wired the money to accounts in six different countries,” an investigator said.
Prosecutors are also looking into IBK to ferret out any possible accomplices. IBK originally does not allow payments on intermediary trade that involves Korea and Iran. The prosecution said concerns are rising as the government may push to restrict deals in won following the allegation.
“The fraud exposed the shortcomings of the current transaction system, as criminals could fake deals with Iran and withdraw money from the CBI,” an investigator said.