Investigations have started over South Korean banks due to their potential involvement in facilitating suspicious oversees remittances worth $6.5 billion which have been tied to companies arbitraging cryptocurrency, according to Cointelegraph.
As stated by Cointelegraph, on the basis of a report by Asia Times, the Financial Supervisory Service (FSS) ordered an investigation regarding South Korean banks after it identified a considerable amount of oversees remittance transactions at the end of June. Through the investigation, it was found that majority of the $6.5 billion remitted oversees between January, 2021, and June, 2022, was done by cryptocurrency exchange accounts before being sent oversees, which suggested that some Korean companies are making illegal use of the Kimchi premium (kimp). Kimchi premium is considered the gap between cryptocurrency prices in South Korean exchanges compared to foreign exchanges. Cryptocurrency bought by investors from foreign exchanges sell them for a profit at local exchanges.
Information from Cointelegraph mentioned that regulators have expressed concerns about Kimchi premium trading due to its encouragement of capital flight from the country. Currently, the Kimchi premium stands at a positive 3.37% but was above by a positive 20% in last April, according to market tracker CryptoQuant. Shinhan Bank and Woori Bank has reported majority of the remitted money was first transferred out of domestic cryptocurrency exchange to various accounts of Korean companies. Suspicions of money laundering have also been raised, as declared by KBS news outlet, with employed from undisclosed companies being arrested.
Moreover, Cointelegraph’s data noted that the total amount sent oversees was more than double of what the FSS had anticipated, when it ordered banks to investigate the matter. The FSS is now expected to issue sanctions towards Shinhan and Woori for permitting the amount of remittances. Reportedly, on-site investigations at Shinhan and Woori are expected to be completed soon.
(With insights from Cointelegraph)
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