Naver headquarters located in Seongnam, Korea

Naver Corp. (formerly NHN) is being investigated for alleged foreign exchange transaction act violations and judicial action seems unavoidable.

Officials admitted that Naver had violated foreign exchange rules but claimed that it was "unintentional". However, the prosecution said that it will carry out legal proceedings in accordance with established guidelines.

The prosecution received the case from Seoul Customs last month and is currently investigating into Naver Corporation and its finance director for alleged foreign exchange transaction act violations.

For now, the prosecution is investigating into Naver for suspected omission of investment report in the process of buying Japanese portal company Livedoor in 2010 through its Japanese branch, NHN Japan.

The prosecutors and customs authorities suspect that Naver also omitted investment reports for several times from 2009 to 2011.

Under the Foreign Exchange Transaction Act, capital transactions prescribed by Presidential Decree are required to be reported. Any person, who fails to do it while the value of the object related to the violation exceeds 5 billion won, shall be punished by imprisonment for not more than one year or by a fine not exceeding 100 million won.

This law is intended to regulate tax evasion and asset concealment in foreign countries.

An official from Naver stated, "We didn't know that we had to submit investment reports of foreign branches even when they made investments in affiliated or subsidiaries. The omission is due to a simple mistake."

A chief prosecutor, who had investigated foreign exchange cases, stated, "It sounds unreasonable that Naver didn't know about submitting reports. Typically, a company remits money through a bank, where they normally inform you notice of reports and even submit reports on behalf of you."

Another prosecutor pointed out, "I think it's just an excuse for Naver to omit reporting since they have legal team and other related department. Even if they didn't know, we don't have any problem in handling judicial actions."

Indeed, Naver's claim is rather far-fetched since CEO Kim Sang-Hun, who served as a judge at the Seoul Central District Court before taking over legal affairs at LG as vice president, has been deeply involved in Naver's trial strategy since 2007. Naver has its own legal team and is under the protection and legal advice of large law firms including 'Kim & Chang'.

The prosecution will summon related officials for further questioning.