South Korea to probe fund transfers to tax havens

South Korea's financial regulator said it would start a probe into possible illicit fund transfers after a media group reported it uncovered hundreds of people who opened paper companies in offshore havens.

"We will investigate every one of them," Lee Gyeong-su, an official at the Financial Supervisory Service's foreign exchange team, said. "When doing capital transactions, they are required to report to the authorities prior to the trades, so now we are investigating whether they violated the law."

President Park Geun-hye's government has pledged to crack down on tax evasion to fund her pledges to boost welfare spending. In separate probes, prosecutors on Wednesday searched the home of CJ Group chairman Lee Jay-hyun and tax authorities raided the life insurance unit of Hanwha Group on Thursday.

"This is part of Park's plan to uncover the underground economy and it looks like this is only the beginning," said Kang Byung- goo, an economics professor researching tax reforms at Inha University in Incheon.

"The Park government needs to come up with 135 trillion won (HK$927 billion) during her term to finance welfare and other pledges made during the presidential election."

The Korea Centre for Investigative Journalism said on May 22 that it found 245 South Koreans established paper companies in tax havens including the British Virgin Islands and Cook Islands from 1995 to the end of 2009.