Illegal Foreign Exchange Transactions in Violation of the Foreign Exchange Transactions Act: Key Strategies You Must Know to Avoid Punishment

  “I never thought sending some money overseas would become such a big problem.”   This is something often heard in real cases.   Most people investigated for illegal money transfers (unregistered foreign exchange remittance) say they never imagined it could fall under violations of the Foreign Exchange Transactions Act and lead to criminal punishment.   If the purpose of the transaction is unclear, or if foreign currency is exchanged or transferred without going through official procedures, the authorities may view it as illegal money transfer (hwanchigi). In particular, if the amount exceeds a certain threshold or if similar transactions are repeated, it becomes difficult to treat it as a simple mistake — and the case may even escalate to a prison sentence.   Once enforcement begins, punishment under the Foreign Exchange Transactions Act is hard to reverse. From the very first moment suspicions of illegal remittance arise, the way you respond can make a decisive difference in the outcome.   Because allegations of illegal money transfer are difficult to resolve alone, seeking help from a legal representative is often the most practical choice to minimize the risk of criminal penalties.    

Contents

 

1. Foreign Exchange Transactions Act Violations: When Do Penalties Apply?

 

2. Foreign Exchange Transactions Act Violations: How Severe Can the Punishment Be?

 

3. Police Investigations: Why Is It Risky to Face Them Alone?

 

4. Case Study – A Foreign National Accused of Violating the Foreign Exchange Transactions Act: Avoiding Prison and Receiving a Fine Instead

 

5. Even a single transaction can lead to imprisonment.

   

1. Foreign Exchange Transactions Act Violations: When Do Penalties Apply?

  The Foreign Exchange Transactions Act requires that all remittances of foreign currency—whether sending or receiving—must be reported in the prescribed manner. Even a simple transfer can become a violation if the reporting obligation is ignored, leading to penalties under the Act.   Common Types of Violations   Sending money abroad on behalf of someone else

• If you receive Korean won in another person’s name and then remit foreign currency overseas on their behalf, this may be deemed as conducting foreign exchange business without proper registration.

  Large overseas remittances without reporting

• Failing to report high-value transfers that qualify as capital transactions may be treated as an unreported act under the Act, leading to fines or administrative sanctions.

  Transactions with money laundering risks

• Remittance or receipt structures that could potentially be used for money laundering—or unreported large-scale movement of foreign currency—can constitute serious violations that result in criminal prosecution.

  Illegal “hwanchigi” (unregistered currency transfers)

• Sending or receiving foreign currency without going through official foreign exchange procedures is regarded as illegal hwanchigi, making it a key target for monitoring by financial authorities and investigative agencies.

  Particularly when the transaction amount is large or when repeated remittances are detected, the consequences can escalate beyond fines to criminal punishment — and even imprisonment.    

2. Foreign Exchange Transactions Act Violations: How Severe Can the Punishment Be?

  Violations of the Foreign Exchange Transactions Act, including illegal hwanchigi (unregistered money transfers), far more often result in criminal punishment than just fines. If the amount exceeds a certain threshold or if the same type of transaction is repeated, the case can directly lead to prosecution.   Legal Penalties under the Foreign Exchange Transactions Act   Failure to comply with reporting obligations (such as for capital transactions or payment methods):

• Up to 1 year of imprisonment or a fine of up to 100 million KRW

  Serious violations such as unauthorized foreign exchange transactions or illegal hwanchigi:

• Up to 3 years of imprisonment or a fine of up to 300 million KRW

  Violations can range from simple failures to report to repeated illegal transfers, and in some cases, have led to actual criminal convictions.   In the early stages of an investigation, it is crucial not only to organize the facts but also to analyze the entire structure and flow of the transactions. This comprehensive approach is the key to an effective defense.    

3. Police Investigations: Why Is It Risky to Face Them Alone?

  If you are about to be investigated on suspicion of violating the Foreign Exchange Transactions Act, it is more important to prepare how you will explain yourself than to simply insist that you are being treated unfairly.   Why You Need Legal Representation from the Police Stage   If it wasn’t intentional, you must prove it.

• Simply saying “I didn’t know” is not enough to establish lack of intent. You need to clearly demonstrate—through both documents and testimony—what the circumstances were, at whose request you made the transaction, and what the purpose of the transaction was.

  To reduce penalties, there is much you must show.

• Being a first-time offender does not automatically guarantee a fine instead of imprisonment. Preparing mitigating materials such as a written statement of remorse, family petitions, attempts at settlement, and explanations of how the funds were used can significantly reduce the risk of a prison sentence.

  For foreign nationals, the procedure itself can be overwhelming.

• Language barriers and unfamiliar legal standards often prevent foreign nationals from fully explaining their situation during the initial statement stage. However, what you say at this stage can shape how the case is interpreted and handled. If you respond without carefully organizing the facts, misunderstandings may accumulate and lead to unfavorable outcomes.

   

4. Case Study – A Foreign National Accused of Violating the Foreign Exchange Transactions Act: Avoiding Prison and Receiving a Fine Instead

  An American national residing in Korea and working as an English tutor processed an overseas remittance at the request of an acquaintance. However, because the transaction was carried out without prior reporting, it led to an investigation for violation of the Foreign Exchange Transactions Act. During the investigation, the case expanded, and authorities began to suspect possible involvement in illegal hwanchigi (unregistered currency transfers).   With the assistance of legal counsel, it was demonstrated that the transaction was a one-time occurrence and had no profit-making intent. Emphasis was also placed on the fact that the client had voluntarily paid the fine, closed the account, and had been residing in Korea for a long period without prior issues. Additionally, it was explained that losing residency status due to punishment would cause serious hardship to their livelihood.   The court, taking into account the submitted evidence and testimony, ruled that it was difficult to classify the transaction as a serious case of hwanchigi. As a result, the client received a fine instead of a prison sentence.   Ultimately, the client’s criminal liability was reduced, allowing them to maintain both their residency status and livelihood in Korea.    

5. Even a single transaction can lead to imprisonment.

  Penalties for violating the Foreign Exchange Transactions Act may not end as a simple mistake.   In particular, when there are repeated instances of sending or receiving foreign currency through unofficial channels—such as illegal hwanchigi—the conduct becomes subject to criminal punishment. In some real cases, this has even led to imprisonment rather than just fines.   If you receive a notice of investigation or a summons, the most critical factor is how you respond from the very beginning—from the direction of your statement to the preparation of supporting documents.   With the assistance of both a criminal defense attorney and a legal representative experienced in immigration matters, you can prepare to establish lack of intent, organize mitigating materials, and review residency status. This comprehensive approach can help reduce the severity of punishment and increase the chances of maintaining stable residency in Korea.   If you are already facing the start of such issues, it is vital to review your defense strategy immediately—before it’s too late.