Financial watchdog chief meets Chinese counterpart to reinforce financial ties

Lee Bok-hyun, governor of South Korea’s Financial Supervisory Service (FSS). [Photo by Yonhap]

Lee Bok-hyun, governor of South Korea’s Financial Supervisory Service (FSS), made a surprise visit to China last week after announcing the results of the reinspection of three asset management funds associated with the Lime fund fiasco.

Lee’s trip to China is expected to quicken local investigations as China’s cooperation is key in rooting out various illegal financial crimes involving illegal fund capital and abnormal remittances to other countries.

According to the financial circle on Thursday, Lee visited Beijing on August 31 to meet with Li Yunze, director of China’s National Administration of Financial Regulation (NAFR), where the duo agreed to strengthen financial cooperation between the two countries.

It is the first time in six years that an FSS head has visited China since Zhin Woong-seob, former governor of the FSS, met with the heads of the China Banking Regulatory Commission and the China Securities Regulatory Commission in July 2017.

As the relationship between Korea and China cooled following an administration change, analysts note that Lee’s visit to Beijing laid the groundwork for enhanced cooperation between the two countries‘ financial authorities.

Lee’s visit is aimed at strengthening exchanges and cooperation in financial supervision between Korea and China after the founding of Chinese financial watchdog NAFR, according to sources.

The NAFR was launched in March 2023 by integrating the role of financial group supervision and consumer protection previously performed by the China Banking and Insurance Regulatory Commission and the People’s Bank of China as well as the investor protection function of the China Securities Regulatory Commission.

Lee and Li exchanged views on economic and financial trends, as well as issues related to financial supervision in the two countries and reportedly agreed to closely cooperate and promote exchanges on matters of financial supervision.

The FSS uncovered $12.2 billion worth of abnormal foreign currency remittances at 84 financial firms in a full inspection last year but struggled to identify remittances transferred to China, among other countries.

Cooperation from the Chinese authorities is also needed to uncover the details of overseas remittances of illegal funds involved in the Lime, Optimus, and Discovery fund scandals.

The Korean financial watchdog announced on August 24 that it re-probed into the Lime scandal that triggered a large-scale selloff, where it discovered additional cases of selloff made in favor of some influential people and embezzlement worth hundreds of billions of won.

“Most of Korea’s unfair transactions and illegal remittances are laundered through other countries such as China, so cooperation between the financial authorities between Korea and China is needed,” according to an official from the financial circle. “Lee’s visit will be instrumental in our future crackdown on unfair transactions.”