Foreign Exchange Transaction Inspection Response Procedure

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Select your current step and the content for that step will appear below.

1. 1Selection of inspection targets and approval of the inspection plan
2. 2Notice of inspection plan and sending of self-check list
3. 3Application to postpone the inspection
4. 4On-site inspection and document inspection
5. 5Custody and return of materials and items
6. 6Closure of inspection and reporting of results
7. 7Notice of intended administrative disposition and hearing (warning, suspension or restriction of transactions)
8. 8Notice of intended administrative fine and submission of opinions
9. 9Objection to the administrative fine and administrative fine trial

• Basic step
• Additional action / option
• Rejection / objection
• End of procedure

Time required

Within 120 days from the inspection notice to the end of the inspection, combining on-site and document inspections; subsequent disposition and administrative fine procedures vary by case

Cost

The Foreign Exchange Transactions Act has no provision for inspection fees; attorney and customs broker fees are separate; costs of an administrative fine trial or administrative lawsuit are separate

Procedure guide

Read from start to finish in order. Red text marks deadlines set by law.

1. 1

   The authority to inspect foreign exchange transactions lies with the Minister of Economy and Finance; parties to import and export transactions and related services and capital transactions are handled by the Korea Customs Service, parties to services and capital transactions unrelated to import and export, etc. by the Financial Supervisory Service, and foreign financial institutions, etc. by the Bank of Korea (Foreign Exchange Transactions Act §20, Enforcement Decree §35(4)). Rules differ by authority, so first check the inspecting authority. Administrative dispositions against parties to foreign exchange transactions inspected by the Financial Supervisory Service apply mutatis mutandis the sanction procedures of the Regulations on Inspection and Sanctions of Financial Institutions under the Regulations on Sanctions against Parties to Foreign Exchange Transactions (Financial Services Commission) (§8(1) of the same Regulations), and the period for stating opinions on an administrative fine is 15 days (§5(1)).

2. 2

   Customs notifies the inspection plan in writing by 15 days before the inspection starts and sends a self-check list (Korea Customs Service Directive §10). If there is a ground such as a disaster, illness, a long business trip or seizure of the books, apply for a postponement before the inspection start date, and the head of the customs office decides within 7 days (§11). If you were notified on the day of the inspection because of a risk of destruction of evidence, you cannot apply for a postponement.

3. 3

   The total inspection period is within 120 days combining on-site and document inspections, and the on-site inspection is within 20 working days (Directive §14, §15). You may receive the assistance of an attorney or customs broker (§3). If a violation of reporting obligations is clear, the inspection may be converted to a criminal investigation with prior approval from the Commissioner of the Korea Customs Service (§23), so review the transaction evidence together before answering questions.

4. 4

   If you consent to custody of materials or items, they are kept until the result reporting date and returned within 14 days of the date the results are reported (Directive §19). If you request their return, you can get them back immediately unless it seriously hinders the purpose of the inspection. Customs reports the results to the Commissioner of the Korea Customs Service within 1 month of the end of the inspection (§22), and if there is no violation, notifies the results by official letter within 10 days of the date the inspection closure is registered (§24(2)).

5. 5

   If the violation amount is at or below the threshold, a warning is given (USD 10,000 for violations of §15-§17, USD 50,000 for violations of §18, Enforcement Decree §33(1)); for 2 or more violations within 5 years, suspension or restriction of transactions for up to 1 year per violation, or revocation of a permit, is possible after a hearing (Act §19). The hearing is notified by 15 days in advance (Directive §34(3)). You can file an administrative appeal or administrative lawsuit against the disposition within 90 days.

6. 6

   Before an administrative fine is imposed, a 20-day period for submitting opinions is given (Directive §38(2)). When you receive the imposition notice, you can file a written objection within 60 days; if you object, the imposition loses its effect and the case moves to an administrative fine trial in court (Directive §42, Act on the Regulation of Violations of Public Order §20).

Frequently asked questions

Practical questions that come up right away in this procedure.

QHow do I know which authority is inspecting us?

Check the authority that sent the inspection notice. Services and capital transactions related to import and export transactions are inspected by the Korea Customs Service.Services and capital transactions unrelated to import and export are handled by the Financial Supervisory Service, and foreign financial institutions, etc. by the Bank of Korea. The applicable rules and periods differ by authority.So this guide should be read as based on a Korea Customs Service inspection. In some cases the Financial Supervisory Service and the Korea Customs Service inspect jointly.

QCan I postpone the inspection date?

Yes, you can apply for a postponement before the day the inspection starts, and the head of the customs office decides within 7 days of receiving the request and notifies you in writing.However, if you were notified on the inspection start date because of a risk of destruction of evidence, you cannot apply for a postponement. Submit materials supporting the reason for postponement along with the application.

QHow long does the inspection take?

The total inspection period, combining the on-site inspection and the document inspection, is within 120 days. Of this, the on-site inspection, in which officials come to the company to check, is within 20 working days and can be extended by up to 20 days. Extending 2 or more times requires approval from the Commissioner of the Korea Customs Service, so if it drags on without reason, you can ask for the basis of the extension.

QIf we missed reporting a transaction, will we face criminal punishment right away?

If the violation amount is at or below the threshold, it may end with a warning. The threshold is USD 10,000 for violations related to payment and receipt, and USD 50,000 for capital transaction reporting violations.However, if a violation is clearly found, it may turn into a criminal investigation with prior approval from the Commissioner of the Korea Customs Service. If the amount violating the reporting of payment or receipt methods exceeds KRW 5 billion, or the amount violating capital transaction reporting exceeds KRW 2 billion, it is subject to criminal punishment.It is subject to imprisonment of up to 1 year or a fine of up to KRW 100 million. So it is important to accurately organize and explain the violation amount and circumstances.

QIf an administrative fine is imposed, how do I dispute it?

Before the fine is imposed, submit the circumstances of the violation and grounds for reduction during the 20-day period for submitting opinions, counted from the notice date. After receiving the imposition notice, you can file a written objection within 60 days of receipt. If you object, the imposition loses its effect, and the head of the customs office notifies the court within 14 days, moving the case to an administrative fine trial.