-Written by Yeajin Shim
Hello, readers! I remember the first article that I wrote in March, which was about donation. It was to warm your hearts with good news. But today, I’m writing about ‘borrowed-name account’ which stirs up negative impressions instantly.
This year marked the 20th anniversary of Korea’s implementation of the so-called real-name financial transaction system to help prevent illegal activities such as bribery and money laundering. The real-name financial transaction system contributed a lot to the Korean financial system in terms of strengthened transparency. This system made holding bank accounts and properties under fictitious names illegal while permitting to hold bank accounts and properties under borrowed-names. This loophole in the system has become tools for crime and illegal transactions which is proven by the recent conglomerates’ tax evasion. A controversial bipartisan agreement has been made to overhaul the related regulations to ban financial transactions using borrowed name accounts.
As we all know, borrowed name bank accounts are mainly used by conglomerates as a means to hide secret funds and evade taxes. It is not an issue of today but the recent scandals brought attention to the necessity in overhauling the system. According to a research, 1% of total borrowed name financial accounts are abused by conglomerates or chaebols. The other 99% are used for its original purpose and by well-intentioned people like us. As that 1% malicious use, however, is so big in size it gives some legitimacy to the necessity to overhaul the current system. Those who argue the need for banning the borrowed name accounts claim that 99% of well-intentioned accounts can be permitted as an exception when the system is banned. It sounds plausible but who decides and on what grounds are those accounts considered malicious or not?
FSC Chairman Shin Je-yoon is close to opposing the ban of the borrowed name accounts. He highlights the 99% well-intentioned use of borrowed name accounts. Actually, most of us are the users of borrowed name accounts. Parents making bank accounts using their children’s name is also a case of borrowed name accounts. It is a custom to use other family member’s name when making bank accounts in Korea. If the system is banned, all those non-malicious use can falsely be accused of as a crime. Those who are against banning the system claim that the current punishment and penalty system are sufficient enough to handle the abuse of borrowed name accounts. So, basically they want to maintain the system and punish only those who falsely take advantage of the system. But the major error in this claim is that malicious borrowed name accounts are nearly untraceable. Even if it’s detected it takes ages to find them all.
Personally, when I heard of borrowed name accounts, a negative image spontaneously popped up in my head because of all those scandals of tax evasion related to conglomerates. But with all those flaws there are good functions to be reckoned with. There were several attempts to ban the system but it has never succeeded. Though there have been a bipartisan agreement, division of opinions within the party and between economic and political circles still remain. So the both country’s financial authorities as well as government officials should remain cautious about the law. I couldn’t decide my stance on this issue. What is yours?
By. Yeajin Shim (email@example.com)