The South Korean financial watchdog said Monday that it has launched an investigation into 27 local investors for allegedly violating foreign exchange laws and pocketing illicit gains.

Disguising themselves as foreigners, the investors allegedly established 45 paper companies in tax haven countries, including Hong Kong and Luxembourg, and invested in South Korean securities, according to the Financial Supervisory Service.

The local foreign exchange regulations require all South Koreans to report to the authorities when they set up an overseas entity.

The FSS presumed that the people did not comply with the law and received illegal profits thanks to some privileges and exemptions that are given to foreign investors.

The FSS said it is calculating the amount of their ill-gotten profit, and will fine them for violating the foreign exchange law or file criminal charges with the prosecution.

According to the latest parliamentary data, the number of foreigners based in such tax havens stood at 8,169 as of end-July, with the amount of their investments reaching 47.3 trillion won ($40 billion). (Yonhap)