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| Stacks of bundled dollar bills are photographed at Hana Bank in central Seoul / Newsis |
By Anna J. Park
The Korean government is expected to relax its long-held restrictions on foreign currency remittance as early as the second half of next year in a move to better suit global trends and standards, according to ministry officials, Monday.
The envisioned change is part of the government's plan to enact a new legal framework regarding foreign exchange transactions.
Currently, the Foreign Exchange Transactions Act ― which took effect in 1999 ― imposes various restrictions applied to foreign currency wire transfers exceeding $5,000 per transaction. For instance, an individual's dollar remittance exceeding $50,000 a year could only be wired through offline branches of a previously designated bank, after that person officially submits the reason for the remittance and the exact amount of money required.
Aiming to replace the overly intrusive and antiquated law, the finance ministry is now reviewing guidelines for the new foreign exchange transaction law. The new law is expected to improve autonomy in foreign currency transactions, compared to the current law.
A finance ministry official said the new guidelines will be announced soon.
"It is expected that Deputy Prime Minister Choo Kyung-ho will announce the direction of the new act either at the end of the month or early next month," the official explained to The Korea Times. "The ministry is still holding consultative discussions with other related government ministries regarding the matter, and nothing has been confirmed or decided as of now."
Once the direction of the new law is set through the guidelines, the government plans to push forward its enactment by the second half of next year.
Notwithstanding that nothing has been decided as of yet, it is expected that the new legal framework on foreign currency transactions would remove individuals' obligations of registering the purpose of foreign currency transactions ex ante, replacing them with ex post notifications, when it comes to personal matters like travel and overseas study.
Some transactions, however, will still require ex ante registration before remittance, including large-sum transactions that necessitate monitoring by financial authorities, and they will be clearly stipulated as exceptions to the ex post notification rule. As the possibility of money laundering or tax evasion could rise with the changed rules, the authorities' monitoring of transactions through individuals' obligations of ex post notifications will be maintained.
The current Foreign Exchange Transactions Act focuses largely on stemming the drainage of foreign currency reserves. It is estimated to be unfit for Korea's current economic size and transactional affairs.
The country's rather stable foreign currency reserves, among the world's top nine largest as of last November, has been one of the considerations behind the need for the current law's annulment. According to the Bank of Korea, the country's foreign currency reserves stand at $423.2 billion, which is 12.7 times more than in 1996.
