FSS finds evidence of suspicious crypto-related currency exchanges at Shinhan, Woori

The headquarters of Shinhan Bank and Woori Bank in Seoul / Yonhap

By Lee Min-hyung

Shinhan Bank and Woori Bank are in the hot seat after it turned out that some of their suspicious foreign exchange trading has been linked with local cryptocurrency exchanges.

Last month, the Financial Supervisory Service (FSS) launched an investigation into certain cases in which Woori's trade volume totaled 800 billion won ($69.5 million) and Shinhan's topped an estimated 1 trillion won, respectively.

But the watchdog has recently found evidence that some of the capital flowed into domestic crypto exchanges, which raises the possibility of money laundering or illegal foreign exchange transactions.

The FSS is still looking into the cases and investigating whether officials from the two lenders have violated any laws to prevent money laundering and illegal foreign currency transactions.

The authority also does not dismiss the likelihood that those who conducted the transactions made ill use of foreign exchange transactions due to the so-called “kimchi premium.” The term refers to a gap between the price of cryptocurrencies at Korean exchanges and overseas ones.

But as the investigation is still underway, it remains to be seen whether the suspicious transactions were aimed at reaping profits via crypto trading.

Last month, Woori Bank reported its case to the FSS for further investigation after the lender found evidence of suspicious trading at one of its sales offices in Seoul. The transactions were conducted via multiple corporate accounts.

The lender soon reported the case to the watchdog, as the transaction volume was suspiciously large. Officials from the FSS have since launched an on-site inspection into the lender and inspected the incident focusing on whether Woori violated any rules of the Foreign Exchange Transactions Act.

A similar incident took place at Shinhan about a week after Woori reported the case to the FSS. The specific transaction volume from Shinhan has not been confirmed, but it is known to exceed 1 trillion won.

These incidents are feared to dampen the corporate image of the two lenders at a time when local banks have in recent years been mired in a series of scandals surrounding the misselling of risky fund products.

In May, Hana Bank was slapped with a fine of 50 million won from the FSS due to its violation of the act, after its sales office in Seoul failed to monitor suspicious foreign exchange trading of 200 billion won. According to the FSS, the office was also ordered to suspend operations for four months.

Officials from the two lenders declined to give details on the ongoing investigation, only saying that they would sincerely cooperate with any request from the authority.

“We have to wait until the authority finishes its investigation and shares the results,” an official from Woori said.