Financial authority puts 5-month suspension on NH Futures' foreign exchange operations

The headquarters of the Financial Services Commission (FSC) in Seoul / Yonhap

The Financial Services Commission (FSC), the country's top financial regulator, has confirmed a suspension of business for NH Futures' foreign exchange operations for just over five months, starting this week.

The business suspension is one of the severest disciplinary actions that a financial authority can impose against a financial company that commits major violations.

NH Futures issued a statement earlier this week, apologizing to its customers: "As a result of the sanction by the FSC, foreign exchange operations of non-resident customers, including opening accounts, depositing funds as well as exchanging and trading derivatives, will be suspended during the period starting from Monday until May 9 of next year. The company sincerely apologizes for any inconvenience and concern it caused."

The sanction was confirmed at the FSC's regular meeting on Nov. 29, which came about a month after five employees of NH Futures were found guilty of aiding illegal foreign exchange transactions in return for receiving kickbacks and were sentenced to jail terms in late October.

The five employees of NH Futures were accused of colluding with Chinese nationals from August 2019 to August 2022, illicitly transferring foreign currency remittances overseas totaling 5.78 trillion won ($4.4 billion), in over 420 instances by fabricating bank statements to make it appear as if the funds were proper derivative transactions. They also facilitated another 1.2 trillion won worth of foreign exchange transactions without proper reporting in 411 instances for other foreign investors.

Another legal proceeding against NH Futures is also underway, as prosecutors indicted the firm as a corporate entity that neglected its obligations of monitoring and adequate supervision.

While NH Futures was found to have funneled the largest amount of abnormal overseas remittances, some 6 trillion won, the highest amount for a domestic financial company, five major banks were also imposed with penalties totaling 87 million won due to their respective violations of foreign exchange laws in connection with abnormal foreign currency remittances.

Earlier in the year, the Financial Supervisory Service (FSS) said it confirmed violations of foreign exchange laws relating to suspicious foreign currency remittances totaling over $12.26 billion at 12 domestic banks as well as NH Futures.