Transition to Negative System
It becomes possible to transfer foreign currencies of up to US$20,000 via mobile applications such as Kakao Talk. The Ministry of Strategy and Finance announced on March 15 that the cabinet meeting passed revisions of an enforcement ordinance of the Foreign Currency Trade Act and the Foreign Currency Trade Regulations, which will allow non-banking financial companies such as securities, insurance and asset management firms to expand their foreign currency business.
One of the revision highlights is the introduction of the business to transfer small amount of foreign currency. Therefore, not only insurance and securities companies but fintech companies and foreign invested companies will be able to engage in foreign currency transfer services. Up to the present, such services have been provided only by banks.
One person will be able to transfer up to US$3,000 at a time and up to US$20,000 in total in a year. This limitation is placed to prevent transferences of too much foreign currency from being misused for illegal foreign currency use such as foreign exchange embezzlement or money laundering abroad. Those who want to begin foreign currency transfer service have to sign business agreements with banks after meeting requirements such as capital and IT facilities.
The government lowered the required capital for being small fintech companies to 300 million won from more than 1 billion won in order to enable them to offer foreign currency transfer services. But the government has made it obligatory for transfer service providers to secure implementation deposits which should be double the maximum foreign currency to be transferred or buy guaranty insurance policies to protect customers. .
The government expects that an increase in the number of such foreign currency transfer service companies will drive competition, finally pruning transfer commissions. “At the moment, a transfer commission is 30,000 to 40,000 won for a transfer of one million won,” said an official at the ministry. “Transfer commissions will sink and illegal foreign currency transfers will be replaced with lawful ones.” On the other hand, regulations of the foreign currency sector will switch to a negative system from a positive one.
Up to now, non-banking financial companies have been able to do only the businesses listed in foreign currency trade regulations. But in the future, they will be able to freely engage in all businesses except for those banned specifically in the regulations. Moreover, the government also allowed Korea Securities Finance Corp. and Korean Federation of Community Credit Cooperatives to offer the foreign currency services directly related with businesses set by the Capital Market Act and the Act on Community Credit Cooperatives, which has come out from the consideration of the fairness between the two organizations and other financial firms.
“The significant expansion of handling foreign exchange services by non-banking financial institutions will contribute to Korea’s financial globalization by accelerating local banking and non-banking companies’ advancement into overseas markets,” said a spokesperson at the Ministry of Strategy and Finance.
Besides, the Office of Customs Administration will exclusively take charge of registering, managing and supervising moneychangers, which has been shared with the Bank of Korea. Further, five billion won charge has been the standard for fining those who do not report capital trade to the government. But the charge will be lowered to one billion won to secure more through reports.