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ENFORCEMENT DECREE OF THE FOREIGN EXCHANGE TRANSACTIONS ACT

ENFORCEMENT DECREE OF THE FOREIGN EXCHANGE TRANSACTIONS ACT


INTRODUCTION

Details of Enactment and Amendment

- Enactment: This Decree was enacted by the Presidential Decree No. 16207 (Mar. 30, 1999) to prescribe the matters delegated by the Foreign Exchange Transactions Act such as requirements of registration of institutions conducting foreign exchange business, standards for soundness control, procedures for report and permission of capital transaction, standards for operation of foreign exchange information concentration institution, etc., and other matters necessary for the enforcement of the same Act following the enactment of the same Act in place of then abrogated Foreign Exchange Control Act, in order to improve the domestic investment environment for foreigners for smooth inducement of foreign capital necessary for our economy and to strengthen the international competitiveness by wholly liberalizing the domestic foreign exchange transaction of financial institutions and businesses step by step.
- Amendment: This Decree has arrived at its present form as a result of being amended 1 time after the enactment thereof, and the latest amendment was on December 27, 2000.


Main Contents

- This Decree prescribes that the financial institutions intending to be registered as an institution conducting foreign exchange business shall be a financial institution with sound financial structure that has a computer network and computer equipments, and 2 or more foreign exchange specialists in each business office.
- This Decree prescribes that the minimum limit of payment reserves, limit of overbought foreign exchange and oversold foreign exchange, etc. shall be set up or method of raising and operation of foreign currency fund shall be designated if necessary in order to secure stability of foreign exchange market and the soundness of foreign exchange dealing organization and foreign exchange brokerage company.
- This Decree prescribes the limits of capital transaction which needs permission of the Minister of Finance and Economy are the case where resident puts up collateral to non-resident, the case where resident concludes contract with less than one year expiration to loan money from non-resident, case where resident issues securities with less than one year expiration in a foreign country, case where resident issues securities in domestic currency with less than one year expiration.
- This Decree prescribes the authority of the Minister of Finance and Economy on the supervision, etc. of foreign exchange business dealing organization shall be entrusted to the Financial Supervisory Commission, the authority of the Minister of Finance and Economy on the registration of money exchange business, supervision of foreign exchange brokerage company, permission of capital transaction, etc. shall be entrusted to the president of the Bank of Korea.
- This Decree prescribes that the security measures be set up for foreign exchange information convergence organization where foreign exchange transaction data are interrupted, converged and exchanged to secure confidentiality of foreign exchange transaction.
- This Decree prescribes that the foreign exchange related restrictions pursuant to the former Foreign Exchange Control Act shall be alleviated such as abolishment, etc. of preliminary authorization in case where foreign exchange transaction contract is concluded between foreign exchange dealing institution and the financial institution of a country without diplomatic relationship following liberalization of foreign exchange transaction.




ENFORCEMENT DECREE OF THE FOREIGN EXCHANGE TRANSACTIONS ACT

Presidential Decree No. 16207, Mar. 30, 1999
Amended by Presidential Decree No. 17021, Dec. 27, 2000



CHAPTER I GENERAL PROVISIONS


Article 1 (Purpose)
The purpose of this Decree is to provide for matters delegated by the Foreign Exchange Transactions Act and matters necessary for its enforcement.

Article 2 (Coverage)
The term ¡°other acts related thereto¡± in Article 2 (2) of the Foreign Exchange Transactions Act (hereinafter referred to as the ¡°Act¡±) means the acquisition, holding, remittance, collection, export and import of means of payment, precious metals, and securities, which are done directly related to transaction, payment or receipt falling under Article 2 (1) 1 through 3 of the Act.

Article 3 (Means of Payment)
(1) The term ¡°bills of exchange, promissory notes and other payment orders as prescribed by the Presidential Decree¡± in Article 3 (1) 3 (b) of the Act means bills of exchange, promissory notes, payment orders by mail or telegraphic transfer or other representation entitled to an order, which do not fall under securities referred to in Article 3 (1) 7 of the Act and which are recognized by the Minister of Finance and Economy.
(2) The term ¡°those as prescribed by the Presidential Decree¡± in Article 3 (1) 3 (c) of the Act means prepaid cards issued upon receipt of a set amount beforehand or any similar one, which are recognized by the Minister of Finance and Economy.

Article 4 (Securities)
The term ¡°those as prescribed by the Presidential Decree¡± in Article 3 (1) 7 (e) of the Act means bearer certificates of deposit, asset-backed securities and other securities or deeds on which the title with property value is indicated, which can be negotiable as objects of investment.

Article 5 (Foreign Exchange Business)
The term ¡°business as prescribed by the Presidential Decree¡± in Article 3 (1) 14 (e) of the Act means: <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
1.Sales and purchase of securities or bonds denominated or paid in domestic currency with non-residents;
2.Trust, insurance and transactions of derivatives (limited to those related to foreign exchange) between residents, or trust, insurance and transactions of derivatives between residents and non-residents;
2-2.Facility loan denominated by foreign currency (referring to a facility loan under the Specialized Credit Financial Business Act; hereinafter the same shall apply); and
3.Other business incidental to the business listed in Article 3 (1) 14 (a) through (d) of the Act, and subparagraphs 1 through 2-2.

Article 6 (Financial Institutions)
The term ¡°those as prescribed by the Presidential Decree¡± in Article 3 (1) 15 of the Act means:
1.The Korea Development Bank under the Korea Development Bank Act;
2.The Export-Import Bank of Korea under the Export-Import Bank of Korea Act;
3.The Industrial Bank of Korea under the Industrial Bank of Korea Act;
4.Asset management companies under the Mutual Fund Act; and
5.Postal government offices as designated by the Minister of Information and Communication.

Article 7 (Foreign Direct Investment)
(1) The term ¡°those as prescribed by the Presidential Decree¡± in Article 3 (1) 16 (a) of the Act means:
1.An investment in which stocks or investment equities acquired in order to take part in the management of a corporation established under any foreign Act or subordinate statutes (including a corporation under organization; hereinafter referred to as ¡°foreign corporation¡±) account for not less than 10/100 of the total number of stocks issued or the total amount invested by the foreign corporation (refers to the total ratio of stocks or investment equities where stock or investment equities are jointly acquired; hereinafter in this paragraph referred to as ¡°investment ratio¡±);
2.Establishment of relations hereunder with the foreign corporation by a corporation whose investment ratio is less than 10/100:
(a) Dispatch of officers;
(b) Conclusion of a sales contract for raw materials or products for a term of not less than one year;
(c) Conclusion of a contract for technical assistance and license or joint research and development; and
(d) Conclusion of a contract obtaining overseas construction and plant export contracts;
3.Additional acquisition of a foreign corporation¡¯s stocks or investment equities already invested pursuant to subparagraph 1 or 2; and
4.Loans of money with a maturity of not less than one year to a foreign corporation by a resident who has invested in the foreign corporation pursuant to subparagraphs 1 through 3.
(2) The term ¡°those as prescribed by the Presidential Decree¡± in Article 3 (1) 16 (b) of the Act means the payment of: <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
1.Cost of establishing a branch or an office and operating fund;
1-2.Funds for the residents to establish and operate a business other than a corporate form in a foreign country; and
2.Funds for any overseas resources development business under Article 2 of the Overseas Resources Development Business Act, or social overhead capital development project: Provided, That the survey funds for the development of overseas resources and the purchase funds of the overseas resources shall be excluded.

Article 8 (Transactions of Derivatives)
The term ¡°other similar transactions as prescribed by the Presidential Decree the financial futures market, enumerated hereunder;
1.Transactions in which the parties agree to deliver and receive means of payment, securities, bonds or other commodities to be traded (hereinafter in this Article ¡°commodities¡±) at a predetermined price at a certain time in the future, or where they are long or short coverings, transactions which can be cleared by delivering and receiving the difference between the predetermined price and the price at the time of long or short covering;
2.Transactions in which parties agree to deliver and receive money calculated by the difference between agreed figures based on the prices of commodities, interest rates or an index calculated thereon (hereinafter referred to as ¡°index¡±) and figures calculated using the index in a certain time in the future; and
3.Transactions in which the parties agree to exchange commodities at predetermined prices or prices calculated by the index during a certain period in the future;
4. Transactions in which the parties agree to grant either of the parties the right to make the following transactions by either of the parties making a declaration of unilateral intention, and the party who has been granted such right agrees to pay the other party for the right:
(a) Transactions listed in subparagraphs 1 through 3;
(b) Selling and buying transactions of commodities; and
(c) Transactions of delivering and receiving money calculated upon the difference in figures agreed based on the index; and
5.Transactions in connection with the parties or any third party¡¯s credit risk, which are similar to transactions listed in subparagraphs 1 through 4.

Article 9 (Capital Transactions)
(1) The term ¡°giving and receiving funds related to expenses necessary for maintaining offices or ordinary transactions as prescribed by the Presidential Decree¡± in Article 3 (1) 18 (h) means:
1.Payment or receipt of expenses directly necessary for maintaining offices;
2.Payment or receipt of money for export or import of goods and freight, insurance premiums or other expenses directly incidental thereto; and
3.Payment or receipt of money for service transactions and expenses directly incidental thereto.
(2)The term ¡°other transactions or acts which are similar to those under items (a) through (h) and which are prescribed by the Presidential Decree¡± in Article 3 (1) 18 (i) of the Act means: <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
1.Transactions not falling under Article 3 (1) 18 (a) and (b), on the accrual, modification, or extinction of claims pursuant to leasehold, sureties-giving, insurance, association or other similar contract between residents and non-residents or residents: Provided, That for any transactions between residents, it shall be limited to transactions on the accrual, modification, or extinction of claims which can be denominated or paid in foreign currency;
2.Transactions on the accrual, modification or extinction of claims pursuant to any inheritance, bequest, or donation between residents and non-residents or residents (for any transactions between residents, it shall be limited to transactions on the accrual, modification or extinction of claims which can be denominated or paid in foreign currency);
3.Transactions between non-residents on the accrual, modification, or extinction of claims which can be denominated or paid in domestic currency;
4.Acquisition of securities in foreign currency or any title thereon by a resident from any other resident;
5.Acquisition of securities or any title thereon which can be denominated or paid in domestic currency by a non-resident from any other non-resident;
6.Acts falling under Article 3 (1) 18 (h) of the Act between any business office or other office of an individual in the country and his business office or other office in a foreign country, and giving and receiving of money according to them;
6-2.Acts relevant to the establishment and operation, etc. of school or hospital between the residents and the school or hospital in a foreign country, and giving and receiving of money according to them; and
7.Other transactions on the accrual, modification, or extinction of claims between residents and non-residents (excluding the export and import of goods and service transaction) or transaction on the accrual, modification, or extinction of claims which can be denominated or paid in foreign currency which are recognized by the Minister of Finance and Economy.

Article 10 (Classification into Residents and Non-Residents)
(1)The following persons shall be deemed to be residents pursuant to Article 3 (2) of the Act:
1.Overseas diplomatic missions of the Republic of Korea;
2.Organizations, agencies or other equivalent entities whose main offices are in the Republic of Korea;
3.Nationals of the Republic of Korea hereunder:
(a) Persons who have stayed at a foreign country for the purpose of serving in an overseas diplomatic mission of the Republic of Korea; and
(b) Persons who, falling under paragraph (2) 5, have stayed for not less than three months after entering the country for the purpose of temporarily returning home from abroad; and
4.Foreigners hereunder (excluding those falling under paragraph (2) 2 and 6):
(a) Persons who have been in business offices or other offices or have been engaged in business activities in the Republic of Korea;
(b) Persons who have stayed in the Republic of Korea for not less than six months; and
(c) Persons who, having been resident foreigners, have returned to Korea within six months after leaving the country for the purpose of staying for not less than six months and stayed.
(2)The following persons shall be deemed to be non-residents pursuant to Article 3 (2) of the Act:
1.Diplomatic missions of foreign governments and international organizations at home;
2.The United States Armed Forces and equivalent United Nations Forces (hereinafter in this paragraph referred to as ¡°United States Armed Forces¡±), members, civilian employees, invited contractors of the United States Armed Forces and their family members living together and non-appropriated fund agencies, military post offices and banking institutions of the United States Armed Forces;
3.Business offices or other offices abroad;
4.Organizations, agencies or other equivalent entities whose main offices are abroad;
5.Nationals of the Republic of Korea hereunder:
(a) Persons who have been in business offices or other offices abroad;
(b) Persons who have served in international organizations abroad;
(c) Persons who have left the country for the purpose of staying abroad for not less than two years and stayed abroad; and
(d) Persons who have stayed abroad for not less than two years; and
6. Foreigners hereunder:
(a) Diplomats, consuls who have been dispatched to serve in foreign governments¡¯ missions or international organizations at home and stayed; and
(b) Persons who enter the country for official functions of foreign governments or international organizations.
(3)Family members living together whose livelihood is mainly maintained by a resident or non-resident shall be classified as residents or non-residents, depending on the classification of the resident or non-resident concerned.

Article 11 (Suspension of Foreign Exchange Transactions)
(1)Where the Minister of Finance and Economy intends to take or modify measures under Article 6 (1) and (2) of the Act, he shall determine and publicly announce the following matters. The same shall apply where he intends to remove such measures pursuant to Article 6 (3) of the Act:
1.Where he intends to temporarily suspend the payment or receipt (hereinafter referred to as ¡°payment¡±) or transactions pursuant to Article 6 (1) 1 of the Act: The scope and suspension period of the payment or transactions in question;
2.Where he has means of payment or precious metals safekept, deposited, or sold pursuant to Article 6 (1) 2 of the Act: The objects, scope and period;
3.Where he has capital transactions permitted pursuant to Article 6 (2) of the Act: The types, scope, period and permitting procedures of capital transactions; and
4.Where he has a person doing capital transactions deposit part of the means of payment acquired through such transactions pursuant to Article 6 (2) of the Act: The objects to be deposited, deposit ratios, interest rates and period, and agencies to receive the deposit.
(2)The deposit ratios and interest rates under paragraph (1) 4 shall be determined by the following standards: <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
1.Deposit ratios shall be determined taking into account the balance of international payments, currency, movements in exchange rates as a whole;
2.Deposit interest rates shall be interest-free: Provided, That this shall not apply where the Minister of Finance and Economy deems it especially necessary for the smooth and orderly management of foreign exchange; and
3.Deleted. <by Presidential Decree No. 17021, Dec. 27, 2000>
(3)Notwithstanding the provisions of paragraph (1), where there is no time to make public notification due to any urgent cause, the Minister of Finance and Economy may immediately take measures pursuant to Article 6 (1) and (2). In this case, the Minister of Finance and Economy shall publicly announce the contents of such measures without delay. <Amended by Presidential Decree No. 17021, Dec. 27, 2000>

Article 12 (Duty of Collection for Claims)
(1)The scope of claims to be collected pursuant to Article 7 (2) of the Act shall be the claims which the Minister of Finance and Economy determines and publicly notifies from among the claims exceeding the amount equivalent to U.S. 50,000 dollars per case. <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
(2)A resident who holds claims to be collected under paragraph (1) shall collect and bring them to the Republic of Korea within six months from the date of maturity or fulfillment of the condition for such claims.
(3)Where the Minister of Finance and Economy deems that it is impossible to collect claims or inevitable to extend the collection period, he may ex officio or on application exempt the resident from the duty to collect claims or extend the collection period for claims.
(4)With respect to foreign residents and residents falling under the proviso of Article 3 (1) 13 of the Act, the provisions of paragraphs (1) through (3) shall apply only to claims acquired through transactions subject to application of the Act or this Decree.



CHAPTER II REIGN EXCHANGE AGENCIES


Article 13 (Registration of Foreign Exchange Businesses)
(1)A person who intends to conduct a foreign exchange business shall make an application for registration stating the following matters, accompanied by documents as determined by the Minister of Finance and Economy such as balance sheets and income statements to the Minister of Finance and Economy:
1.Name;
2.Seat of home office and domestic business offices of a foreign exchange agency;
3.Coverage of foreign exchange business; and
4.Matters on capital, facilities and expert manpower.
(2)Any person who intends to register pursuant to paragraph (1) shall meet the following requirements:
1.Its capital size and financial structure shall be adequate in light of asset quality standards applied to the financial institution as set by the Financial Supervisory Commission;
2.It shall be linked up with an agency which relays, concentrates, interchanges data on foreign exchange transactions and payment under Article 25 (2) of the Act (hereinafter referred to as ¡°foreign exchange information concentration agency¡±) by means of computer network;
3.It shall be well-equipped with computerized facilities which can conduct foreign exchange business and its attendant after-service smoothly; and
4.It shall ensure that there are not less than two persons for each business office engaged in foreign exchange business for not less than two years.
(3)Where the Minister of Finance and Economy receives an application for registration under paragraph (1), he may request the Governor of the Financial Supervisory Service under the Act on the Establishment, etc. of Financial Supervisory Organizations (hereinafter referred to as the ¡°Financial Supervisory Service Governor¡±) and the head of the foreign exchange information concentration agency to confirm whether it meets the requirements under paragraph (2). In this case, the Financial Supervisory Service Governor and the head of the foreign exchange information concentration agency shall notify the Minister of Finance and Economy of the results of confirmation within ten days from the date of receipt of request for such confirmation.
(4)The Minister of Finance and Economy shall issue certificate of registration to the applicant if he deems that the latter meets the requirements under paragraph (2).
(5)Where it is deemed that there are errors in documents submitted pursuant to paragraph (1), the Minister of Finance and Economy may request the applicant to supplement them within a specified period, and may return such documents for application if the applicant fails to supplement them within this period.
(6)The term ¡°financial institutions as determined by the Presidential Decree¡± in the proviso of Article 8 (1) of the Act means postal government offices under subparagraph 5 of Article 6.

Article 14 (Coverage of Foreign Exchange Business)
The coverage of foreign exchange business which financial institutions under Article 8 (2) of the Act can conduct shall be: <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
1.Financial institutions under the Banking Act or the Long-Term Credit Bank Act, the banking sector of the National Agricultural Cooperative Federation under the Agricultural Cooperatives Act, banking sectors of the National Federation of Fisheries Cooperatives and its members, fisheries cooperatives under the Fisheries Cooperatives Act, the Korea Development Bank under the Korea Development Bank Act, the Export-Import Bank of Korea under the Export-Import Bank of Korea Act, and the Industrial Bank of Korea under the Industrial Bank of Korea Act: Business listed in items of Article 3 (1) 14 of the Act;
2.Merchant banks under the Merchant Bank Act: Business except the following business among that listed in items of Article 3 (1) 14:
(a) Acceptance of deposits (excluding deposits which can be denominated or paid in foreign currency by foreign exchange agencies and financial institutions abroad); and
(b) Issue of a letter of credit and payment between the Republic of Korea and foreign countries not directly related to the operations provided for in the Merchant Bank Act;
3.Postal government offices: Foreign exchange business hereunder:
(a) Buying of money orders denominated in foreign currency (including payment orders by mail or telegram; hereinafter in this subparagraph the same shall apply); and
(b) Issue of money orders denominated in foreign currency and selling and buying of foreign means of payment, which are businesses as recognized by the Minister of Finance and Economy; and
4.Financial institutions not falling under subparagraphs 1 through 3: Business directly related to the financial institutions¡¯ operations among the following business as determined and publicly announced by the Minister of Finance and Economy:
(a) Selling and buying of foreign currency bonds;
(b) Issue and selling and buying of foreign currency securities;
(c) Selling and buying of securities and bonds denominated or paid in domestic currency with non-residents;
(d) Borrowing and lending or guarantee of deposits and money which can be denominated or paid in foreign currency with residents;
(e) Borrowing and lending or guarantee of deposits and money with non-residents;
(f) Selling and buying of foreign means of payment;
(g) Transaction of derivatives;
(h) Insurance transaction denominated by foreign currency with the residents, or insurance transactions with the non-residents; and
(i) Facility loan denominated by foreign currency.

Article 15 (Registration of Money Exchange Business)
(1)A person who intends to conduct the money exchange business under Article 8 (3) of the Act (hereinafter referred to as ¡°money exchange business¡±) shall make an application for registration stating the following matters, accompanied by documents as determined by the Minister of Finance and Economy, to the Minister of Finance and Economy:
1.Name;
2.Seat of money exchange business office; and
3.Coverage of money exchange business.
(2)Any person who intends to register pursuant to paragraph (1) shall have a business office necessary for conducting the money exchange business.
(3)The Minister of Finance and Economy shall issue a certificate of registration to the applicant if he deems that the latter has a business office under paragraph (2).
(4)Where it is deemed that there are any errors in documents submitted pursuant to paragraph (1), the Minister of Finance and Economy may request the applicant to supplement them within a specified period, and may return such documents for application if the applicant fails to supplement them within this period.

Article 16 (Modification of Registered Contents)
(1)The matters to be reported pursuant to Article 8 (4) of the Act by financial institutions which registered foreign exchange businesses pursuant to Article 8 (1) of the Act and those who registered money exchange businesses pursuant to Article 8 (3) of the Act (hereinafter referred to as ¡°money changer(s)¡±) shall be:
1.For foreign exchange agencies: Modification of matters listed in Article 13 (1) 1 through 3 and the establishment or closure of domestic business offices; and
2.For money changers: Modification of matters listed in any subparagraph of Article 15 (1).
(2)A person who intends to report the modification of registered matters or the closure of a foreign exchange business or money exchange business pursuant to Article 8 (4) of the Act shall submit documents as determined by the Minister of Finance and Economy to the Minister of Finance and Economy seven days prior to the intended date of such modification or closure.

Article 17 (Standards on Business Performance)
Foreign exchange agencies under Article 8 (5) of the Act (hereinafter referred to as ¡°foreign exchange agencies¡±) and money changers shall conduct business according to the following standards pursuant to Article 8 (6) of the Act:
1.Foreign exchange agencies and money changers shall record the detailed transactions and keep related documents;
2.Foreign exchange agencies and money changers, where they combine the foreign exchange business or money exchange business and other business shall manage such foreign exchange business or money exchange business separately from the other business; and
3.Foreign exchange agencies shall establish and operate a comprehensive risk management system in order to efficiently manage any attendant risk in conducting the foreign exchange business.

Article 18 (Authorization of Foreign Exchange Brokerage)
(1)A person who intends to operate a foreign exchange brokerage pursuant to Article 9 (1) of the Act shall make an application for authorization stating the following matters, accompanied by documents as determined by the Minister of Finance and Economy, to the Minister of Finance and Economy:
1.Name;
2.Seat of business office; and
3.Matters on capital, facilities and expert manpower.
(2)Any person who intends to obtain authorization for a foreign exchange brokerage shall meet the following requirements;
1.His paid-in capital shall be not less than five billion won;
2.He shall be equipped with computerized facilities for conducting foreign exchange brokerage and reports thereon; and
3.He shall have expert manpower with the capacity necessary for conducting the business, such as knowledge and experience in foreign exchange brokerage.
(3)Where any foreign exchange broker referred to in Article 9 (2) of the Act (hereinafter referred to as ¡°foreign exchange broker¡±) intends to merge, transfer or take over all or part of its business, it shall make an application for authorization, accompanied by documents as determined by the Minister of Finance and Economy such as balance sheets and income statements, to the Minister of Finance and Economy.
(4)The Minister of Finance and Economy, where he receives an application for authorization under paragraph (1) or (3), shall determine whether to grant authorization thereon within thirty days from the date of application, and notify the applicant.
(5)A foreign exchange broker who falls under any of the following subparagraphs shall submit documents to be reported as determined by the Minister of Finance and Economy seven days prior to the intended date of its dissolution, closure, or modification:
1.Where it intends to be dissolved;
2.Where it intends to close all or part of its business; and
3.Where it intends to modify matters falling under any subparagraph of paragraph (1).
(6)The Minister of Finance and Economy may have a foreign exchange broker deposit an amount equivalent to the ratio as determined by the Minister of Finance and Economy within the limit of 20/100 of paid-in capital in a financial institution as determined by the Minister of Finance and Economy. In this case, deposit procedures, and the methods of operating and managing deposits shall be determined by the Minister of Finance and Economy.
(7)Where a foreign exchange broker falls under any of the following subparagraphs, deposits made pursuant to paragraph (6) shall, on the foreign exchange broker¡¯s application, be returned:
1.Where it closes foreign exchange brokerage; and
2.Where it winds up its business with its authorization cancelled.

Article 19 (Authorization of Foreign Exchange Brokerage in Foreign Countries)
(1)A foreign exchange broker, if it intends to obtain authorization under Article 9 (4) of the Act in order to conduct a foreign exchange brokerage in a foreign country, shall submit an application, accompanied by documents for application as determined by the Minister of Finance and Economy, to the Minister of Finance and Economy. The same shall apply where it intends to modify the authorized matters.
(2)Foreign exchange brokerage in a foreign country under Article 9 (4) of the Act shall be conducted by the following methods:
1.The method of establishing branches and offices;
2.The method of participating in the management of a foreign corporation through acquiring stocks or investment equities of the foreign corporation engaged in the foreign exchange business; and
3.The method by which the foreign exchange broker virtually controlling the managerial right of a foreign corporation has the foreign corporation acquire another foreign corporation¡¯s stocks or investment equities and participate in management.

Article 20 (Business Performance by Foreign Exchange Brokers)
The provisions of subparagraphs 1 and 2 of Article 17 shall apply mutatis mutandis to the business conducted by foreign exchange brokers.

Article 21 (Regulation on Asset Quality)
The Minister of Finance and Economy, if he intends to set necessary restrictions on the business of foreign exchange agencies, money changers, and foreign exchange brokers (hereinafter referred to as ¡°foreign exchange agencies¡±) pursuant to Article 11 (2) of the Act, shall do so according to the following standards: <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
1.Where the minimum of payment reserves for specific foreign currency liabilities is set, the scope of such foreign currency liabilities, and the currency subject thereto, when to accumulate, and the minimum of payment reserves shall be determined;
2.Where the limit on excess of buying or selling foreign currency is set, the separation and limit on excess of buying and selling foreign currency, the scope of assets and liabilities as standards for calculation, the calculating method, and the time and period shall be determined;
3.Where the method of raising and operating foreign currency funds is designated, such raising and operating items and the raising and operating method by item shall be determined;
4.Where the ratio of foreign currency assets and liabilities is set, the raising and operating method of funds by maturity and the scope of and standards for assets and liabilities shall be determined;
5.Where it is necessary to establish an account operated for non-residents by raising funds from non-residents, the scope of foreign exchange agencies to be established, the standards for raising and operating method of funds, and the accounting method shall be determined;
5-2.Where the accounting standards for the foreign exchange account at the institutions dealing with the foreign exchange business are set, the title of accounts and the accounting methods shall be determined;
6.Where risk management standards incidental to foreign exchange business are set, such business to be covered and standards shall be determined;
7. Where standards for foreign exchange brokerage are set, the business subject thereto or the operational methods shall be determined; and
8.Where standards for foreign exchange business on money changers are set, objects subject to restrictions and standards for selling foreign currency shall be determined.

Article 22 (Restrictions on or Suspension of Business)
Where the Minister of Finance and Economy intends to restrict or suspend business pursuant to Article 12 (1) 2 or 3, he shall notify in writing the foreign exchange agencies concerned of the business to be affected and the period.



CHAPTER III FOREIGNEXCHANGE EQUALIZATION FUND


Article 23 (Creation and Operation of Foreign Exchange Equalization Fund)
(1)The term ¡°funds as determined by the Presidential Decree¡± in Article 13 (2) 5 of the Act means receipts such as interest accruing from the operation of any foreign exchange equalization fund.
(2)The term ¡°methods as determined by the Presidential Decree¡± in Article 13 (3) 4 of the Act means a guarantee of obligations pursuant to foreign exchange transactions by the Bank of Korea, foreign exchange agencies, or foreign financial institutions.

Article 24 (Issue of Fund Bonds)
(1)Foreign exchange equalization fund bonds under Article 13 (7) of the Act (hereinafter referred to as ¡°fund bonds¡±) shall be issued through public offering, sale or bidding methods.
(2)Where it is deemed necessary for the smooth issue of fund bonds, the Minister of Finance and Economy may have any of the following agencies accept such fund bonds:
1.The Bank of Korea;
2.Foreign exchange agencies;
3.Trust companies under the Trust Business Act;
4.Securities companies and securities finance companies under the Securities and Exchange Act;
5.Management companies under the Securities Investment Trust Business Act; and
6.Insurance companies under the Insurance Business Act.

Article 25 (Operation and Management, etc. of Foreign Exchange Equalization Fund)
(1) The Minister of Finance and Economy shall establish the account of foreign exchange equalization fund at the Bank of Korea in order to clarify the receipts and payments of the foreign exchange equalization fund. <Newly Inserted by Presidential Decree No. 17021, Dec. 27, 2000>
(2)A foreign exchange equalization fund shall be separated into won currency fund accounts and foreign currency fund accounts.
(3)The value of foreign funds held by a foreign exchange equalization fund shall be evaluated based on exchange rates, and such profits or losses shall disposed of as appraisal profits or losses at the closing to arrive first after such profits or losses are made or suffered.
(4) Detailed matters necessary for the operation and management of the foreign exchange equalization fund under paragraphs (1) through (3) shall be determined by the Minister of Finance and Economy. <Newly Inserted by Presidential Decree No. 17021, Dec. 27, 2000>

Article 26 (Issue of Certificates of Deposits)
(1)A person who intends to have a certificate of deposits issued pursuant to Article 13 (9) of the Act shall submit an application stating the amount deposited and its use to the Minister of Finance and Economy.
(2)Where an application under paragraph (1) is made, the Minister of Finance and Economy shall issue and deliver a certificate of deposit as deemed necessary to issue within seven days from the date of such application.



CHAPTER IV PAYMENTAND TRANSACTIONS


Article 27 (Permission of Payment)
(1)Where it is required to obtain permission on payment pursuant to Article 15 (1) of the Act, the Minister of Finance and Economy shall determine and publicly announce any cause for obtaining such permission, and the type and scope of payment.
(2)A person who intends to obtain permission on payment under paragraph (1) shall submit documents for application for permission as determined by the Minister of Finance and Economy to the Minister of Finance and Economy.
(3)Where the Minister of Finance and Economy receives an application for permission on payment under paragraph (2), he shall determine whether he grants permission thereon by examining the following matters, and notify the applicant:
1.Whether such payment is subject to permission;
2.The cause for and an amount of such payment; and
3.Contents of any transactions or acts which bring about such payment.
(4)Where any cause for taking measures to obtain permission on payment pursuant to Article 15 (1) of the Act ceases to exist, the Minister of Finance and Economy shall promptly remove such measures.

Article 28 (Report on Methods of Payment)
A person who makes a report on the payment method pursuant to Article 16 of the Act shall submit documents for report as determined by the Minister of Finance and Economy to the Minister of Finance and Economy.

Article 29 (Permission of Export and Import of Means, etc. of Payment)
(1)The case where it is required to obtain permission or make report on the export or import of means of payment, precious metals or securities (hereinafter referred to as ¡°means of payment¡±) pursuant to Article 17 of the Act shall be as follows: Provided, That this shall not apply where any person who has obtained permission or made a report pursuant to Articles 16 and 18 of the Act exports or imports means of payment according to the contents of such permission or report:
1.Where it is necessary to fulfill in good faith treaties concluded by the Republic of Korea and generally accepted international laws and regulations; and
2.Where it is necessary to prevent the illegal outflow or inflow of capital.
(2)Where it is required to obtain permission or make report on the export or import of means of payment, the Minister of Finance and Economy shall determine and publicly announce the scope of and standards for the export or import of means of payment to be permitted or reported or other necessary matters.
(3)A person who intends to obtain permission on the export or import of means of payment pursuant to paragraph (1) shall submit application documents for permission as determined by the Minister of Finance and Economy, and a person who intends to make report shall submit documents for report as determined by the Minister of Finance and Economy to the superintendent of a customhouse.
(4)Where the Minister of Finance and Economy receives an application for permission under paragraph (3), he shall determine whether to grant permission thereon by examining the following matters, and notify the applicant:
1.Whether the export or import of such means of payment is subject to permission;
2.Contents of any transactions or acts which bring about the export or import of such means of payment; and
3.Whether the export or import of such means of payment conforms to ordinary business practices.

Article 30 (Report of Capital Transactions)
(1)A person who intends to report capital transactions (including a report under Article 18 (3) of the Act) pursuant to Article 18 (1) of the Act shall submit documents for report as determined by the Minister of Finance and Economy to the Minister of Finance and Economy.
(2)Where the Minister of Finance and Economy designates any capital transactions not requiring a report pursuant to the proviso of Article 18 (1) of the Act, he shall announce them publicly.
(3)A person who intends to obtain permission on capital transactions pursuant to Article 18 (2) of the Act shall submit application documents for permission as determined by the Minister of Finance and Economy to the Minister of Finance and Economy.
(4)Where the Minister of Finance and Economy receives an application for permission under paragraph (3), he shall determine whether to grant permission thereon by examining the following matters, and notify the applicant:
1.Whether such capital transactions are subject to permission;
2.Any cause for and contract contents of such capital transactions;
3.Effects which such capital transactions have on the balance of international payments, and on the domestic financial, capital and foreign exchange market; and
4.Effects on domestic industrial activities and foreign economic cooperative relations.
(5)The term ¡°capital transactions as determined by the Presidential Decree¡± in Article 18 (2) 6 of the Act means: <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
1.Provision of guarantee by residents to non-residents;
2.Loan of securities by the residents to the non-residents; and
3.through 6.Deleted. <by Presidential Decree No. 17021, Dec. 27, 2000>



(6)Transactions which are subject to report or exempted from permission or report pursuant to Article 18 (3) of the Act shall be according to the following classification: <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
1.Transactions to be reported:
(a) Transactions listed in Article 18 (3) 1 and 3 of the Act; and
(b) Transactions designated as those to be reported by the Minister of Finance and Economy pursuant to Article 18 (3) 5 of the Act; and
2. Transactions exempted from permission and report:
(a) Transactions mediated by any futures trader among those listed in Article 18 (3) 2 of the Act;
(b) Transactions listed in Article 18 (3) 4 of the Act; and
(c) Transactions designated as those exempted from permission and report by the Minister of Finance and Economy.
(7)In determining whether to accept a report pursuant to Article 18 (4) of the Act, the Minister of Finance and Economy shall determine whether he accepts or rejects the report, or recommends modifying the trading contents after examining whether it meets the requirements for accepting a report hereunder within the processing period referred to in paragraph (11), and notify the applicant:
1.Adequacy of the amount invested and plan;
2.Adequacy of the plan for raising funds; and
3.Effect on the fulfillment in good faith of treaties and generally accepted international laws and regulations or the maintenance of international peace and public order.
(8)In making an examination under paragraph (7), where he deems it difficult to examine as the contents of report are indefinite, the Minister of Finance and Economy may request the applicant to promptly supplement them by specifying a reasonable period and return documents for report if the applicant fails to supplement them within this period.
(9)A person who has been advised to modify the trading contents pursuant to paragraph (7) shall give the Minister of Finance and Economy notice on whether he will accept such recommendations for modification within ten days from the date of receipt of recommendations for modification, and if no notice given within the said period, he shall be deemed not to have accepted them.
(10)Where the Minister of Finance and Economy receives a notice of non-acceptance under paragraph (9), he shall determine whether he will modify or suspend such capital transactions within ten days from the date of receipt of such notice (ten days from the date on which the reporter receives recommendations for modification in the absence of such notice), and notify the reporter.
(11)The term ¡°processing period as determined by the Presidential Decree¡± in Article 18 (5) of the Act means thirty days. In this case, the period required for a supplement referred to in paragraph (8) shall not be reckoned in the processing period.



CHAPTER V SUPPLEMENTARY PROVISIONS


Article 31 (Administrative Dispositions)
(1)The Minister of Finance and Economy may give a warning pursuant to Article 19 (1) of the Act in any of the following subparagraphs:
1.Where a report is not submitted by its deadline; and
2.Where permitted or report-accepted matters are fulfilled after the expiry of their term.
(2)The Minister of Finance and Economy may suspend or restrict foreign exchange transactions or payment or cancel such permission within the limits of one year pursuant to Article 19 (1) of the Act in a case falling under any of the following subparagraphs:
1.Where a transaction or act is done without a permission or report on the matters to be permitted or reported;
2.Where a transaction or act is done without a report being accepted on the matters requiring the acceptance of report;
3.Where documents such as documentary evidence of payment and contract sheet which the parties are obliged to submit are made falsely, forged, or altered;
4.Where matters to be reported are falsely reported;
5.Where related documents are used for more than one transaction;
6.Where permitted, report-accepted or reported matters are violated (excluding cases falling under paragraph (1) 2); and
7.Where a person who has been given warnings under paragraph (1) not less than two times in the most recent one year commits a violation listed in the subparagraphs of paragraph (1) or subparagraphs 1 through 6.
(3)The provisions of Article 22 shall apply mutatis mutandis where he intends to suspend or restrict foreign exchange transactions or payment pursuant to paragraph (2).

Article 32 (Report on Present Conditions of Holding Claim)
(1)Claims subject to report, where the Minister of Finance and Economy has any resident make a report on his claims against non-residents, shall be claims exceeding ten thousand U. S. dollars. In this case, the scope, time of and time limit for claims subject to report or other necessary matters shall be determined and publicly announced by the Minister of Finance and Economy.
(2)With regard to foreign residents and residents falling under the proviso of Article 3 (1) 13 of the Act, the provisions of paragraph (1) shall apply only to claims acquired through transactions to which the Act or this Decree is applied.

Article 33 (Inspection)
(1)An inspection under Article 20 (3) of the Act may be carried out as a written or an on-the-spot inspection.
(2)The term ¡°other person as determined by the Presidential Decree¡± in Article 20 (6) of the Act means the Commissioner of the Korea Customs Service.
(3)Where the Minister of Finance and Economy entrusts the Bank of Korea Governor, the Financial Supervisory Service Governor or the Commissioner of the Korea Customs Service and has their staff conduct inspection activities pursuant to Article 20 (6) of the Act, the following classification shall apply: <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
1.Bank of Korea Governor: Persons falling under any of the following items;
(a) Money changers (excluding money changers in open ports) and foreign exchange brokers and their trading partners and persons concerned;
(b) Trading partners and persons concerned (excluding the financial institutions) of the transactions which have been permitted, or the receipt or acceptance thereof is made, by the Bank of Korea Governor, relevant to the business performed by him under the entrustment pursuant to Article 35 (3) 6 through 9 and 12; and
(c) Persons subjected to the report relevant to the business performed by the Bank of Korea Governor under the entrustment pursuant to Article 35 (3) 11;
2. Financial Supervisory Service Governor: Foreign exchange agencies and their trading partners and persons concerned or persons other than those listed in subparagraphs 1 and 3; and
3.Commissioner of the Korea Customs Service: Money changers (limited to money changers in open ports) and their trading partners and persons concerned, parties to and persons concerned in export and import transactions and service transactions directly related thereto.
(4)The Minister of Finance and Economy shall specify the business to be inspected where he entrusts inspection activities pursuant to paragraph (3).
(5)A person who has been entrusted with inspection activities pursuant to paragraph (3) may determine the standards, methods and procedures for such inspection or other matters necessary for inspection activities.

Article 34 (Notification to Commissioner of National Tax Administration)
(1)The term ¡°other persons as determined by the Presidential Decree¡± in Article 21 of the Act means the head of a foreign exchange information concentration agency.
(2)Where the Minister of Finance and Economy orders the Bank of Korea Governor, head of a foreign exchange agency, Commissioner of the Korea Customs Service or head of any foreign exchange information concentration agency, under Article 21 of the Act, to notify the Commissioner of the National Tax Administration or Commissioner of the Korea Customs Service, he shall determine and publicly announce necessary matters such as transactions subject to notification and time period for notification. <Amended by Presidential Decree No. 17021, Dec. 27, 2000>

Article 35 (Delegation and Entrustment of Authority)
(1)The Minister of Finance and Economy¡¯s authority for the following matters shall be delegated to the Commissioner of the Korea Customs Service pursuant to Article 23 (1) of the Act:
1.Supervision of, and orders necessary for the supervision of, money changers (limited to money changers in open ports) under Article 11 (1) of the Act;
2.Restrictions on or suspension of business by money changers (limited to money changers in open ports) under Article 12 (1) 2 and 3 of the Act;
3.Where the Minister of Finance and Economy requests that permission on the export or import of means of payment be obtained pursuant to Article 17 of the Act, permission on export or import of such means of payment (limited to that on export or import); and
4.Administrative dispositions (limited to those taken against any person falling under Article 33 (3) 3) under Article 19 of the Act.
(2)The Minister of Finance and Economy¡¯s authority for the following matters shall be entrusted to the Financial Supervisory Commission pursuant to Article 23 (1) of the Act: <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
1.Receipt of report on the establishment, closure, or modification of a foreign exchange agency¡¯s domestic business office under Article 8 (4) of the Act;
2.Supervision of, and orders necessary for the supervision of, foreign exchange agencies under Article 11 (1) of the Act;
3.Restrictions on or suspension of business by foreign exchange agencies under Article 12 (1) 2 and 3 of the Act;
4.Administrative dispositions (excluding dispositions taken against any person falling under Article 33 (3) 2, which fall under paragraph (4) 3) referred to in Article 19 of the Act;
5.Request for report (limited to that for managing any business entrusted under this paragraph) under Article 20 (2) of the Act; and
6.Regulation on asset quality under subparagraphs 4 through 6 of Article 21.
(3)The Minister of Finance and Economy¡¯s authority for the following matters shall be entrusted to the Bank of Korea Governor pursuant to Article 23 (1) of the Act: <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
1.Receipt of report on the registration, changes in registered matters and closure of money exchange business under in Article 8 of the Act;
2.Supervision of, and orders necessary for the supervision of, money changers (excluding money changers in open ports) and foreign exchange brokers under Article 11 (1) of the Act;
3.Cancellation of registration of money changers under Article 12 (1) 1 of the Act;
4.Restrictions on or suspension of business by money changers (excluding money changers in open ports) and foreign exchange brokers under Article 12 (1) 2 and 3 of the Act;
5.Operation of foreign exchange equalization fund and the conduct of business relevant to management under Articles 13 and 14 of the Act;
6.Where the Minister of Finance and Economy requests that permission on payment be obtained pursuant to Article 15 of the Act, permission on such payment;
7.Report on methods of payment under Article 16 of the Act (excluding that falling under paragraph (4) 1);
8.Where the Minister of Finance and Economy requests that permission on export or import of means of payment be obtained pursuant to Article 17 of the Act, permission on the export or import of such means of payment (excluding that falling under paragraph (1) 3);
9.Permission on capital transactions under Article 18 of the Act and receipt or acceptance of report thereon (limited to matters announced publicly by the Minister of Finance and Economy);
10.Administrative dispositions under Article 19 of the Act (limited to dispositions taken against any person falling under Article 33 (3) 1);
11. Request for report under Article 20 (1) and (2) of the Act (limited to cases for managing business entrusted under this paragraph and necessary for preparing the statistics of foreign exchange);
12.Exemption from the duty to collect claims and the extension of such collection period under Article 12 (3); and
13.Regulation on asset quality under subparagraphs 1 through 3, 7 and 8 of Article 21: Provided, That for the raising and operating method of foreign exchange funds under subparagraph 3 of Article 21, it shall be limited only to that which is applied to foreign exchange agencies other than the Bank of Korea.
(4)The Minister of Finance and Economy¡¯s authority for the following matters shall be entrusted to the heads of foreign exchange agencies pursuant to Article 23 (1) of the Act:
1.Report on the method of payment such as setoff under subparagraph 1 of Article 16 of the Act (limited to matters publicly announced by the Minister of Finance and Economy);
2.Receipt of report on capital transactions under Article 18 (1) and (3) of the Act (limited to matters publicly announced by the Minister of Finance and Economy);
3.Warning under Article 19 of the Act or suspension of or restrictions on related foreign exchange transactions or payment (limited where credit card companies under the Specialized Credit Financial Business Act do so to cardholder members); and
4.Request for report under Article 20 (2) of the Act (limited to cases for managing business entrusted under this paragraph).
(5)Where a foreign exchange agency entrusted with authority pursuant to paragraph (4) intends to determine the standards for management of entrusted operations, it shall consult in advance with the Minister of Finance and Economy and the head of the related foreign exchange agency.

Article 36 (Permission by Electronic Documents)
(1)The Minister of Finance and Economy may make arrangements such that permission, authorization, notice or notification is granted or made by electronic data interchange, using a foreign exchange information concentration agency¡¯s computer network or other computer network as determined by the Minister of Finance and Economy pursuant to Article 24 (1) of the Act.
(2)The Minister of Finance and Economy may determine matters on the standard form, methods, and procedures necessary in submitting documents or data of permission by electronic data exchange pursuant to paragraph (1).
(3)Where documents or data of permission are submitted by electronic data interchange pursuant to paragraph (1), the matters on the validity and receipt time of such electronic documents shall be determined by the Act on Expansion of Dissemination and Promotion of Utilization of Information System.

Article 37 (Relay, Concentration and Interchange of, or Analysis, etc. on, Data on Foreign Exchange Transactions)
(1)The Minister of Finance and Economy shall, in case where he designates the foreign exchange information concentration agency or the agency analyzing the data on transaction or payments, etc. of foreign exchanges (hereinafter referred to as the ¡°agency analyzing foreign exchange information¡±) pursuant to Article 25 (2), publicly announce thereof. <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
(2)Foreign exchange agencies shall notify, when conducting business such as foreign exchange transaction or payment, the foreign exchange information concentration agency of its content, and the foreign exchange information concentration agency may furnish the data on foreign exchange transactions stipulated by the criteria for business dispositions under paragraph (4) to the agency analyzing foreign exchange information. <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
(3)The head of a foreign exchange information concentration agency shall work out technical and physical security measures against illegal access to the foreign exchange information computer system by a third person or transformation, damage, destruction or other danger to the stored information, and the head of an agency analyzing foreign exchange information shall work out the security measures for prevention, etc. of the outflow of and damages on the foreign exchange information. <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
(4)The Minister of Finance and Economy may determine the standards for management of operations for the foreign exchange information concentration agency and the agency analyzing foreign exchange information, and may have the foreign exchange information concentration agency and the agency analyzing foreign exchange information establish the detailed operating standards. <Amended by Presidential Decree No. 17021, Dec. 27, 2000>
(5)The head of a foreign exchange information concentration agency and the head of an agency analyzing foreign exchange information shall promptly notify the Minister of Finance and Economy of the contents of any detailed operating standards as he establishes them pursuant to paragraph (4). <Amended by Presidential Decree No. 17021, Dec. 27, 2000>

Article 38 (Imposition and Collection Procedures of Fine for Negligence)
(1)In imposing a fine for negligence pursuant to Article 32 (2) of the Act, an offense and the amount of fine for negligence, after an investigation and confirmation of such offense, shall be specified in writing and notifications shall be made to the person subject to a disposition of fine for negligence.
(2)Where the Minister of Finance and Economy intends to impose a fine for negligence pursuant to paragraph (1), he shall give the person subject to a disposition of fine for negligence an opportunity to state his opinions orally or in writing for a specified period of not less than ten days. In this case, if no statement is made by the latter by the designated date, he shall be deemed to have no opinion.
(3)The Minister of Finance and Economy shall, in determining an amount of fine for negligence, take into account the motive of such offense and consequences thereof.



ADDENDA


Article 1 (Enforcement Date)
This Decree shall enter into force on April 1, 1999.

Article 2 (Repealed Acts and Subordinate Statutes)
The Enforcement Decree of the Foreign Exchange Control Act shall be hereby repealed.

Article 3 Deleted.
<by Presidential Decree No. 17021, Dec. 27, 2000>



ADDENDUM <Presidential Decree No. 17021, Dec. 27, 2000>


This Decree shall enter into force on January 1, 2001: Provided, That the amendments to Article 3 of the Addenda of the Presidential Decree No. 16207, Enforcement Decree of the Foreign Exchange Transactions Act shall enter into force on the date of its promulgation.

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