February 21, 2012 12:47
A large number of the new W50,000 banknotes that went into circulation in June of 2009 are unaccounted for. Some 56.36 million W50,000 bills have been issued since 2009, with a value of W28 trillion (US$1=W1,123), but as of the end of January, four out of 10 of the bills have gone missing.
When the bills were first printed, there were concerns that they could be used to amass slush funds or to stash away to dodge taxes. The missing bills suggest that these concerns were well-founded.
According to the Bank of Korea on Monday, the amount of W50,000 banknotes that have been printed totaled W28.2 trillion, up 32.5 percent or W7 trillion over the past year. That has increased since January last year when it surpassed W20 trillion. And W50,000 bills now account for 53.6 percent of the total number of bills in circulation, up 10 percentage points over the past year.
By contrast, the amount of W10,000 bills in circulation totaled W19.8 trillion as of the end of last month, down W2.5 trillion from last year. It amounted to W20.1 trillion until February last year but fell to W19.2 trillion the next month and ceded the top spot to W50,000 bills.
The explosive demand for W50,000 bills stems from their widespread use as cash gifts for special occasions like weddings and anniversaries, replacing the W100,000 bank checks which had been frequently used. Before the W50,000 bills were circulated, a total of W7 trillion worth of W100,000 bank checks were printed each month, but that plummeted after the W50,000 bills were printed to W3.4 trillion in December 2011.
But some attribute the surge in the number of W50,000 bills to increased demand from the black economy, involving bribes, gambling and illicit transfers of wealth. A key example is an W11 billion stash of cash discovered under a plot of farmland in North Jeolla Province last year that consisted mostly of W50,000 bills. The cash was the proceeds of an illegal online gambling operation.
Supporting such suspicions is the low collection rate of the W50,000 banknotes compared to other bills. The collection rate refers to the number of bills that are printed and later collected again by the BOK. In the case of W50,000 bills, it is less than 60 percent, meaning four out of every 10 of them are stashed away somewhere. For W10,000 and other bills, the collection rate is more than 90 percent.
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