South Korean regulators are investigating $3.1bn worth of “abnormal” foreign exchange transactions at two of the country’s biggest commercial banks for possible money laundering linked to crypto investments.
Unusual currency transactions worth Won4.1tn ($3.1bn) have taken place at two Korean banks — Woori Bank and Shinhan Bank — since February 2021, the Financial Supervisory Service said on Wednesday. Most of the transactions involved crypto exchanges and a local trading company, the FSS said.
After being informed of the irregular deals in June, the FSS has asked all Korean banks to conduct an internal review on all large currency transactions made between January 2021 and June 2022 for potential similar transactions and to submit the results by the end of this month.
The probe highlights how global authorities are more closely scrutinising ties between traditional financial companies and the crypto industry and also stepping up enforcement activity in the digital asset sector.
Information related to other abnormal transactions found from the review will be shared with the country’s tax office and prosecutors for further investigations.
“We’ll take stern measures against the banks that have not abided by forex rules or those who have violated regulations against money laundering,” the FSS said in a statement. Woori Bank said it would co-operate with the investigation. Shinhan Bank officials could not immediately be reached for comment.
The probe comes a week after prosecutors raided about 15 locations, including the country’s seven biggest crypto exchanges, in their investigation into the $40bn crash in May of stablecoin terra and its digital token counterpart luna.
Prosecutors are investigating accusations against Do Kwon and Daniel Shin, co-founders of Terraform Labs, which backed terra and luna. Shin denied the allegations at the time, saying “there was no intention of deception as we just wanted to innovate the payment settlement system with blockchain technology”. Kwon did not respond to a request for comment.
The investigation was sparked by two complaints filed earlier this year on behalf of 81 retail investors, who have accused the pair of fraud and breach of financial regulations.
Prosecutors are also investigating Chai Corp, the digital payment settlement company run by Shin, which had used terra as a payment tool, and some venture capital groups that have invested in the terra project, according to state-run Yonhap News. Shin could not be reached for comment on that report.
Authorities last month banned Terraform Labs’ employees from leaving the country. They have also summoned former and current employees to find out “if Kwon intentionally deceived investors with his flawed algorithmic coins”, according to prosecutors.
The investigation is widening as South Korea’s new government comes under fire for potentially creating perverse incentives with its Won125tn debt-relief plan for low-income people. The plan includes a scheme to forgive part of interest payments of financially vulnerable young people who have suffered huge losses from their stock and coin investments.
The Financial Services Commission estimates about 48,000 people will benefit from the temporary scheme, which will be implemented for a year from September as up to Won126.2bn will be settled with state funds. The plan has sparked complaints from local banks, which have been forced to roll over debts and cut interest rates for them.