Banking Scams

Living in Korea is very safe and this safety can lead to a sense of complacency. Financial fraud through scams is a problem and here I will warn of some of the most common and how to avoid them. The Korean Police take scams very seriously, however as in all countries recovery rates are low.

The 2 Bankbook Scam

Your employer will ask you to open a separate bank account and get an ATM card and give it to them with the PIN. They may even tell you this is normal in Korea. It is not, it is illegal. This scam is popular with some recruiters and companies because they get payments paid into your bank account and then withdraw cash to pay you and themselves tax free. They get tax free money because you are liable for the tax on the whole amount. This violates the real name transaction laws in Korea, and leaves you personally liable to large tax bills. Do not ever give anyone your bankbook, card and PIN.

The Cheap Good Online in a Remote Part of the Country

A cheaper than normal good is advertised online. You reply to the ad and they negotiate a deal where if you transfer money to their bank account, they will ship the good to you from the remote part of the country. You transfer your money and then wait but the good never arrives. The best way around this is to either get on a bus and go and meet the person or only pay COD which can be arranged by courier companies.

Voice Phishing

You get a phone call telling you to pay money into a bank account. The caller may present themselves as a banker, a public servant, or a kidnapper. They may even tell you it's to avoid being robbed. Do not transfer money to people whom you don't know. Banks can freeze an account that is at risk, they don't need you to transfer money to another account.

Internet Phishing

Your bank sends an email asking you to click a link to confirm your details including name and password. Do not click the link. Banks do not send emails asking for security details.

Card Skimming

This can be done at an ATM or by a merchant at POS. Your card is read and recorded on a separate device and a concealed video camera records your PIN. Never use an ATM that has a strange looking card reader, and hide the keypad under your hand, bankbook or wallet when entering your PIN.  Also remember that debit(check) and credit cards can be used without a signature or with minimal checking of the signature, do not have your life savings in a checkcard account and do not carry too many credit cards.

Letter, Email Scams

Hello, I don't know you and I want to give you half of $10 million dollars. We have all seen these emails, the writer wants to empty a large unclaimed bank account but of all the people in the world they want you to help them. Either that or “congratulations”, you have won a lottery you never entered. These emails have 2 purposes to either gain all of your personal information to commit identity fraud or should you wish to proceed, they will ask for money to help cover costs incurred in recovering the money. Do not respond to these emails, living abroad we are particularly vulnerable to identity fraud in our home countries.

Identity Fraud

By gaining personal information about you, fraudsters will either empty your bank accounts, or apply for credit in your name, which they will never repay. Be careful who you give your details to, including passport, drivers license, ID number, bank and workplace.

Have you been a victim of any of these scams or can you add to this article? Write to koreanbankingblog@gmail.com

A Good Day to Finish Early

Well it's Thursday.  Many years ago I was advised by a very senior public servant in Australia that Thursday is a good day to finish at lunchtime and go to play golf.  His rationale was that if then stayed in your office until 6.30pm on Friday night,  everyone would think you were a hard worker.

Unfortunately that doesn't work for me in Korea.

I haven't written for the blog today, but I did write to FN Hub Korea to clarify the policy for international residents to remit money home and hold international access cards.  I hope to get a response next week to share with you.

I hope that you are now on the golf course, or at least the 19th hole.

International Transfer Rules for International Residents in Korea

Several years ago, I wanted to transfer a couple of hundred dollars home to pay some small bills.  I went to the local bank where the teller told me that it would be impossible without bringing proof of income, he then proceeded to show me what the proof should look like by producing an income statement that another customer had provided, the punchline was I knew the customer although I hadn't previously  known his income.

Why is it so hard to transfer money home?

1. In Korea there was a cultural aversion to importing.  Until 1986 foreign cars and cigarettes were illegal.  If you work in Korea and send the money home, your service is an export from your home country, older people may think this is wrong, although if you look at the young, this has changed fast;
2. Like many currencies in the world the Korean Won is subject to exchange controls;
3. A complicated legal and regulatory framework;

The easiest thing to do is take your passport, ARC, proof of employment and housing to the bank when you open the account, register this bank as your primary foreign exchange bank and register for online transactions, then you can transfer money home by ATM or Internet Banking.  If you do this you can transfer, spend or withdraw a total of US $50,000 a year.

This process is cumbersome, anti-competitive and unnecessary but it is the rule.

Getting a Mortgage in Korea

I have limited experience in this area and so details will be sketchy at best.  There is no rule saying that you must be Korean to get a mortgage.  But in any country getting a mortgage is a lengthy and difficult process and just look to the US if you want to see why this is a good thing.

In Korea generally your first mortgage will be a 3 year interest only deal, in 3 years time, you will need to refinance.  Korean banks will loan a maximum of 60% of the banks value for the property or 60% of the sale price whichever is lower.  Many Koreans will take out extra loans to reach the 40% cash threshold, but that won't be an option for most international customers nor a very good idea.

If you have the 40%+ difference in value+real estate fees+legal fees+taxes you then can apply for a mortgage.  I have only met 2 international residents who have successfully gotten a mortgage.  Under Korean law generally, you cannot be refused because you aren't Korean.  One permanent resident did successfully win a case in the National Human Rights Commission after a mortgage insurer refused to cover him due to being "foreign".

I have heard of an E2 visa holder (language teachers visa) who received a mortgage but I don't personally know this person.

In theory it is possible, my bank said to me you can get a mortgage in your name but it would be much easier for you and us if you did it in your (Korean) wifes name.

I will update this entry as more information comes to hand.

If you have any information please write to koreanbankingblog@gmail.com 

Why banking in Korea is better than your home country.

In Korea the mantra is quick, quick.  This applies to everything, including banking.

I once had cause to email a bank V.P. on a Monday after being refused a checkcard, and by 2pm Wednesday the bank's policy had changed.  In another instance, an acquaintance had a problem with a bank regarding getting an ATM card, 2 days later the bank clarified the policy.  Korean banks are rising to the challenge of becoming more sensitive to the needs of international customers and will be successful to put Korea onto the global financial map.

Another good thing in Korea is that banks here are yet to discover the joys of fee revenue.  If you are Australian, you are well aware of banks gouging excessive fees for diminishing services. In Korea the only fees that affect most international customers are, ATM withdrawal fees, and transfer fees.  There are even accounts that waive these fees.  If you don't have sufficient funds for a direct debit, there is no fee charged to you.  If you visit a branch there is no fee to you.  If you are late paying a credit card there is no fee to you, other than interest.  I almost believe that Koreans wouldn't pay extra fees and introducing them would be huge a first mover disadvantage.  Korean banks are in fact innovating to introduce new fees.  If you want an SMS every time there is a transaction on your account pay w1,000 per month seems very reasonable.  If Korean banks can lift their fee revenue by innovation, they will be serving their customers and earning the extra income.

I was talking to a bank in Seoul once about a project that unfortunately didn't get off the ground, and I mentioned that many international company expats were paid offshore, later I saw that bank had developed a local account for these people that could be linked to the offshore account, I am sure it was a coincidence, but it shows the innovation of Korean banks.

I know I have an easier time banking in Korea than expats in many other countries and better than in my home country and if this customer service commitment and innovation could reach the branch level, Korea could be number 1 in the world for retail banking.

Why don't you just put it in your wife's name?

I have been asked the above question many times and there are several reasons:

1. I am stubborn;
2. I still have a "fix the world" streak;
3. Sometimes my wife says no, like when I wanted to get highly leveraged to buy an apartment;
4. I believe if people want my money, they should be prepared to make a contract with me;
5. I had reservations about placing debt in the name of my non-working spouse, now they are reservations about putting debt in the name of my spouse who earns less than me;
6. Finally I believe that Korea cannot become a global financial centre while the word foreigner is used to justify not providing services to customers.

I have my mobile phone, our apartment (rental) and our car in my name.  I hope one day to be able to put a mortgage in my name too.

I hope you're having a great day.

Monday and Back to Business

Welcome back for another week.

I want to extend my sympathies to the people who suffered due to this weekend's events in Japan.

In the next two weeks we will be looking at getting a car loan, a mortgage, and how to check your credit here in Korea.  I also want to look at the Capital Markets Consolidation Act and increasing efficiency in retail banking in Korea.

One of the difficulties foreigners face in Korea is that there is a lot of flexibility in the application of rules.  We are trained through our culture and legal systems to look to precedents.  So if my friend an E2 visa got a credit card, I should get one too.  In Korea precedents take a back seat to personal relationships.  So if your friend got a credit card on an E2 visa, your friend must have a better relationship than you.

This makes dealing with banking issues difficult.  Here are some rules that come to mind, feel free to add your own:

1. Be polite, one poor comment will make you an enemy for life;
2. Don't call racism, yes telling someone "You can't, you're foreign" is racist, "You can't because your visa expires in 4 weeks" is not racist but to some people, they mean the same thing, "You can't";
3. Even if the teller is racist, they can use the excuse you were suspicious, they are legally required to refuse service to and report suspicious people, I suggest you report the teller to the English helpline as the bank may notice a pattern if the only suspicious people the teller identifies are international customers and the bank may provide the teller with counselling, but;
4. Bank employees basically have tenure in this country.  Their union is strong and they believe that they will have a job forever, you cannot get them fired;
5. Charming the cute young teller who speaks great English to get what you want, won't help very much, the head teller will be watching to prevent you getting what the head teller doesn't think you deserve;
6. If you read this blog for a magical answer you will be disappointed, things can change quickly for example late last year a credit card company that had been good to international customers decided not to accept any new applications, and to reduce the credit limits for some international customers, only to start issuing cards to international customers one month later;

Anyway have a great week, I have a lot of research to do.  Feel free to forward your experiences to koreanbankingblog@gmail.com

Bank of Korea raises base rate.

The Bank of Korea yesterday (10th March, 2011) raised the base rate by 25 points from 2.75% to 3%.

Getting a Credit Card

It isn't illegal for international customers to get credit cards in Korea, but nor is it a right to have a credit card. I got my credit card because the card company had a relationship with the company I was working for, yet I met a vice-president for Asia of an international company who could not get a credit card here.

When someone says “You can't have a credit card, you're foreign” you need to understand that it could mean, “I don't know and I won't check”, or it can mean “I don't think you should have a credit card because you're foreign”, or it can mean that “You can't have a credit card because you are foreign”. Asking them to check will always result in them being right and is a waste of time. If this happens it's better to change teller, branch, or bank.

The first and best place to start is your bank, particularly if you have been saving money. Even with a pattern of saving some banks will still only issue a secured credit card, where you make a term deposit and the credit card is issued with a limit of 90% of the term deposits value. This is easy and straightforward although these banks will then still charge you the highest interest rate, on cash service (cash advance) and installment purchases (where the merchant doesn't have an interest free purchase offer) even though there is no risk to the bank. It don't use these services you don't pay interest because in Korea credit cards are in fact usually charge cards. There is no interest because you must pay your card in full each month. Interest is only charged if you use the cash service, or make an installment purchase, or pay late. By the way some banks have a zero tolerance policy to late payment, if you pay late, your card will be canceled and some people have reported the card company calling their employer to recover the money. Pay on time.

If your bank says “no” it's time to go shopping. Take your ID card, and Health Insurance card (this is used to verify your employer) and go from bank to bank, and booth to booth. Be careful at this point not to give your ID card unless they are prepared to take an application for a card as multiple attempts to get credit look bad. I have personally met international people who received a credit card from Samsung Card, KB Card, KEB Card, Hyundai Card, Lotte Card, Nonghyup Bank, and Shinhan Card. Criteria do change and different people will quote different rules, so shop around. When someone says, “yes” you can apply, the next difficult part is choosing a card. The benefits are many and varied from free flights, hotel rooms, wine, airline mileage, to discounts on cups of coffee. Know how you spend your money.

Good luck in your search and please send your feedback to koreanbankingblog@gmail.com so I can keep the site up to date.

Opening a Korean Bank Account

With few exceptions opening a bank account is going to require visiting a branch.  You will need your passport or  Alien Registration Card (ARC) but if you open an account with your passport, you will have problems setting up direct debits later as the ID numbers won't match.  I will assume you have your ARC from this point as opening an account with a passport can require employment letters, housing contracts and a lot of bother.

Now some bank tellers will quote a rule stating that you cannot have an ATM Card or Internet Banking for the first 3 months you have an account.  There is no rule stating this but the Korean Federation of Banks issued a guideline in 2007 for people that didn't appear to have jobs or a place to live.  If a bank teller tells you this you have 2 options:

1. Call the English help line for the bank and getting them to talk to the teller;
2. Walk out and go to the next bank or branch and send me the details of the bank, branch and teller name (try and get their card).

When you open a bank account you need to apply separately for telephone banking, Internet Banking, ATM or Check Card and designate the bank as your sole bank for international transactions (I will be looking at this later in the month).  Now at this point some bank tellers may tell you that you can't have a Check Card because you are foreign, there is no rule and I know for a fact that SC Firstbank, KEB, and Shinhan Bank definitely have no policy that prevents international Check Cards from being issued to foreigners.  Some Check Cards will offer discounts depending on where you spend your money, I prefer a cash back card myself.  Also in the past your card spend provided you a tax deduction on your annual return, but the extension of this benefit is currently being debated by the National Assembly.  You may be asked to pay for a card, but I would leave at that point the very first bank account I opened in Korea charged me w3,000 for an ATM card, but I have never been charged for one since.  

Almost all Internet Banking in Korea requires a PC with MS Internet Explorer and digital certificates are used to identify the account holder with the addition of a secret number card or an OTP device.  OTP devices are more secure, but you do pay for them.  Most large banks provide Internet Banking in English some banks will allow you to send money through an ATM or Internet Banking to your home country and I highly recommend this option as it will save you a lot of time in the bank branch and prevent the teller trying to stamp your passport, which I will also discuss later.

If at any stage the teller tells you "You can't do this, you are foreign", it is probably best to leave and try another teller or just go to another bank.

In Korea bank deposits are insured to w50,000,000 by the KDIC.

Finally these are the English Call Centre Numbers for Korean banks, these numbers, and menu selections are subject to change:

HSBC Direct                                                             1544-3311 and press 9
HSBC                                                                       1588-1770 and press 9
SC Firstbank                                                             1577-7744
Woori Bank                                                               1588-5000 or 1599-5000 and press 7
Shinhan Bank                                                             1577-8380
Hana Bank                                                                 1599-1111 then press 8,1
KEB                                                                          1544-3000
Citibank                                                                     02-3704-7100
KB                                                                             1588-9999 then press 9,0,1
IBK                                                                            1566-2566 then press 5,7,1
National Federation of Fishing Cooperatives Bank       02-2240-3322
NH Bank                                                                   1588-2100 then press 730 for an interpreter

Remember to write to koreanbankblog@gmail.com should you have any stories.

Welcome to The Korean Banking Blog

From the time I was 9 years old when I opened my first bank account I have been interested in banking. I still have this interest and intend to write about banking in South Korea. Coming from Australia to Korea was a revelation, Korean banks have a lot of branches, and they have yet to discover fee revenue in the big way that banks back home have. Outsourcing and centralised back office functions haven't taken off here either. These things will change, but hopefully Korean banks can learn from the mistakes made in other countries and provide service for the fees rather than removing services and charging more. I hold a masters degree in international business from Griffith University in Australia, which I did after I sold my business as a mature age student without a bachelor degree, not something I would recommend as being particularly easy. I studied accounting, corporate finance, management and marketing for this degree.

I do not and have not worked for a bank and this site does not provide investment advice, but aims to act as a centralised knowledge base for banking in Korea.

I want to keep the tone of this blog positive so if I become aware of banking problems I will contact the relevant body first and when the issue is solved I will then post the story here. The aim of this blog is to minimise the “No, you can't you're foreign” response and hopefully play a small part in developing Korea into a global financial centre.

The Global Financial Crisis (GFC hereafter) was a wake up call for the old adage, high return and low risk are oxymoronic, or maybe you don't need the oxy there. Of course some governments are now looking at punishing consumers for this by introducing a special tax (sorry levy) on banks which will inevitably be passed onto the consumer, but I will look at this later.

I believe the problems experienced by international residents in Korea come down to the following issues:

• A complicated regulatory structure;
• Further complicated by many made up regulations, sometimes spread by the local media who have difficulty distinguishing between public servants statements and government legislation, to be fair as public servants enforce the law, sometimes there is no difference;
• Language difficulties, not that bank staff don't speak English, but usually it is the job of the most junior person to talk to the English speakers;
• Cultural difficulties, if Koreans don't know an answer they will usually deem this as shameful and say “no” instead of checking;
• Unreasonable expectations from international customers, “Hi, I'm here on a 1 year visa, can I have some unsecured debt please?” although this might not be unreasonable when the person has lived here for 5 years and has a Korean wife and child, but is still on a 1 year visa;
• Bank staff being inherently conservative, not a bad thing when you consider the GFC, but in Korea that can mean believing that “foreigners” are the cause of all ills from the IMF period to voice phishing and buying Korean banks cheap to sell them for a profit later.

Should you have any banking stories, successful or otherwise please forward them to koreabankingblog@gmail.com and indicate if you wish to be a guest blogger or if you want me to write about the issues contained in your story.