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[March 03, 2006]

LEAD: FSA punishes Korea Exchange Bank for illicit remittances+

(Japan Economic Newswire Via Thomson Dialog NewsEdge)TOKYO, March 3_(Kyodo) _ (EDS: UPDATING WITH FSA ANNOUNCEMENT)

The Financial Services Agency took disciplinary action on Friday against the Japanese branches of the Seoul-based Korea Exchange Bank for its alleged involvement in illegal remittances.

The FSA ordered the two Japanese branches in Tokyo and Osaka to suspend operations involving overseas money transfers with new corporate customers for three months between March 10 and June 9, FSA officials said.

The agency also ordered the branches of South Korea's fifth-largest lender to enhance compliance to prevent any involvement with illicit money transactions and submit a business improvement plan by April 3, they said.

According to the FSA, the bank's Japanese branches undertook remittances worth more than 10 billion yen on behalf of so-called underground banks or unlicensed financial organizations from May 2001 to March 2005.

People involved in the unlicensed financial entity were arrested by Japanese police last year and the one who masterminded the scheme was arrested by the South Korean law enforcement authorities, the officials said.

Due to lax procedures for confirming the identity of a money sender, the bank's Japanese branches have failed to comply with the requirement of reporting frequent remittances and those involving large sums, which might constitute criminal activities, to the authorities, the officials said.


The bank admitted to negligence but denied intentional violation of law, the officials said.

The allegations are based on findings from the FSA's raids on the bank's Tokyo and Osaka branch offices from last August to October, they added.

Banco do Brasil was punished for similar misconduct in 2004.

Unlicensed money handlers often work for illegal aliens sending money to their home countries, or for drug traffickers or other criminals stashing illegally made funds abroad.

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