According to an Asia Times report, an investigation into South Korean banks was made by the Financial Supervisory Service (FSS) following suspicions of making remittances abroad at the end of June.
The investigation found that between January and June 2022, a total of $6.5 billion was sent abroad through crypto exchange platform accounts before being sent abroad, including that some Korean companies had exploited "Kimchi premium (kimp)".
Kimchi premium is the price gap of cryptocurrency on the South Korean exchange compared to foreign exchange. Investors will buy cryptocurrencies from foreign exchanges and sell them on local Korean exchanges for a profit.
Additionally, regulators are concerned about the Kimchi premium trade because it encourages capital flight from the country. Now, Kimchi's premium is at a moderate level of +3.37% but above +20%.
Reports from Shinhan Bank and Woori Bank say that most of the money sent will be transferred out of domestic crypto exchanges to various corporate accounts of Korean companies.
Accordingly, large remittances boosted investors using large sums of money to exploit Kimchi's premium, local news channel Asia Times reported.
There are also suspicions that the funds were sent to be used for money laundering, including the arrest of several employees from an unnamed company for sending money.
The total amount sent was more than double the FSS's expectations. In the meantime, the FSS is also expected to conduct additional investigations on domestic bank sites to reveal more that have been sent.
