On January 13, 2026, the Korea Customs Service (the “KCS”) announced that it had established a “Task Force to Crack Down on Illegal Trade and Foreign Exchange Transactions in Response to High Exchange Rates,” aimed at addressing illegal foreign exchange transactions that could undermine exchange rate stability. The KCS also indicated that it would begin all year-round, focused monitoring. According to media reports, under the announced plan, the KCS plans to select 1,138 companies with significant discrepancies between foreign currency receipts/payments and their import and export amounts for foreign exchange inspections, to be conducted by 24 foreign exchange investigation teams across customs offices nationwide.

A KCS foreign exchange inspection is an administrative investigation conducted under the Foreign Exchange Transactions Act, in which the Commissioner of the KCS, acting pursuant to authority delegated by the Minister of Economy and Finance, examines the business activities of transaction parties (or related persons) subject to the Foreign Exchange Transactions Act. Media reports indicate that the KCS selected the targets for these inspections based on indicators suggesting potential involvement in the following three major categories of illegal conduct related to trade and foreign exchange: 
 

• Non-repatriation of export proceeds: Failing to repatriate trade proceeds that should be received in Korea for an extended period without reporting, or improperly evading repatriation through sham or false transactions.

• Irregular trade settlement schemes: Settling trade payments through alternative means—such as hawala-style unofficial remittance networks or virtual assets—thereby impeding efforts to secure US dollar liquidity.

• Overseas flight of assets: Illicitly retaining the price differential overseas by under-declaring export prices, or causing unjustified foreign-currency outflows by over-declaring import prices.
   

Additionally, on January 15, 2026, news outlets reported that the “Pan-Government Joint Response Team for Illegal Foreign Exchange Transactions”—comprised of six agencies, namely the Ministry of Economy and Finance, the National Intelligence Service, the National Tax Service, the KCS, the Bank of Korea (the “BOK”), and the Financial Supervisory Service (the “FSS”)—was officially launched. This team reflects the government’s strong commitment to track cross-border illicit fund flows without blind spots through inter-agency information sharing. Meanwhile, the KCS has indicated that overall compliance with foreign exchange regulations in the trade sector remains low, based on its 2025 foreign exchange inspections that found illegal foreign exchange transactions at 97% of the companies inspected.

Where violations are identified in the course of a KCS foreign exchange inspection, matters that may initially appear to be mere procedural or administrative errors can, in some cases, morph into criminal investigations or proceedings—leading to sensitive and challenging developments such as search and seizure and questioning of relevant officers and employees as suspects. Accordingly, it is critical to respond to foreign exchange inspections with a clear understanding that they may potentially develop into criminal procedures.

In this environment, companies engaged in foreign exchange transactions should proactively prepare for potential KCS inspections by reviewing whether their internal compliance systems for foreign exchange transactions are operating effectively and whether fund flows involving overseas affiliates are being managed transparently.