|A woman walks past Merrill Lynch headquarters in New York in this 2009 file photo. / Yonhap|
Financial watchdog stays mum on massive outflow of cash
|Merrill Lynch International Seoul Branch head Park Seung-gu, left, and Financial Supervisory Service Governor Yoon Suk-heun / Korea Times file|
Merrill Lynch International's Seoul branch sent a large sum of money to its United States headquarters again this year, despite continuous backlash against the annual practice of foreign brokerages that transfer the national wealth back to their own countries.
Financial Supervisory Service (FSS) Governor Yoon Suk-heun previously emphasized the necessity of thoroughly investigating foreign financial companies in Korea to find out whether or not their hefty dividends were intended to avoid taxes. But the financial watchdog is still assuming a passive attitude toward them to avoid possible negative impact on the nation's lofty vision of becoming a financial hub.
According to a regulatory filing by Merrill Lynch, Wednesday, its Seoul branch decided last week to send 83.4 billion won ($75 million) to the headquarters. The amount is nearly double the 41.7 billion won net income it generated a year ago.
The U.S. securities firm's local office gave its headquarters 53.6 billion won in 2019 and 47.9 billion won in 2018. It increased the amount this year, although its accumulated net income during the first three quarters decreased 56 percent to 16.6 billion won, year-on-year. It has sent about 280 billion won over the past five years.
The Korea Times asked the company for a comment on the issue, but it has not responded.
Merrill Lynch's latest decision came a month after Rep. Park Kwang-on of the ruling Democratic Party of Korea (DPK) criticized hefty dividends paid by foreign brokerages during the National Assembly audit of the FSS in October.
"JPMorgan, ING and HSBC have annually sent their entire profits made here to other countries," the lawmaker said at that time. "They cited management consulting and construction of IT systems as reasons for their dividends."
He asked FSS Governor Yoon whether the watchdog had a plan to collaborate with the country's tax agency to look into issues regarding their dividend payments. At that time, the governor answered, "We will talk with the National Tax Service (NTS) and consider conducting investigations if necessary."
However, he added a careful approach is needed toward dividends paid by foreign financial companies here because the country is accelerating efforts to become a financial hub. In response, the lawmaker said the watchdog should not allow foreign financial firms to regard Korea as a place to earn money without any regulations.
An FSS official said the agency is not allowed to restrict dividend payments, so it does not have any plans to scrutinize foreign brokerages.
"Compared to foreign banks, securities firms send smaller dividends," the official said.
As the supervisory authority appears to be generous, UBS' Seoul branch also sent 80 billion won to its headquarters in July this year after it sent 80 billion won in 2019 and 71 billion won in 2018.
Local offices of JPMorgan, Citigroup Global Markets and Goldman Sachs respectively sent 52.9 billion won, 37 billion won and 23 billion won to their headquarters last year.