Rooting out embezzlement at banks

The internal financial crime cases must be thoroughly examined for financial authorities and companies to devise a scientific control system.

Another major bank admitted that one of its employees dealing with project-financing (PF) loans had stolen money from a customer’s loan account over the past 15 years. The employee of BNK Kyongnam Bank based in Changwon, South Gyeongsang, is suspected of taking out and embezzling a whopping 56.2 billion won ($44 million) from the customer’s account over the years. The employee misappropriated repayment of the loans lent to builders of real estate development.

According to the Financial Supervisory Service (FSS) last week, the employee surnamed Lee has been committing the crime since he took charge of PF loans from 2007. More specifically, he withdrew 7.79 billion won from soured PF loan accounts and transferred them to his family accounts from 2016 to 2017. From 2021 to last year, he fabricated withdrawal requests from the PF borrowers to channel 36.2 billion won to his family-run company.

That’s not all. He has been accused of misappropriating 15.8 billion won loans repaid by a PF borrower in May last year to pay off another PF loan dues. The bank money the employee is accused of embezzling amounts to 56.2 billion won.

What’s more bizarre is that the bank had been unaware of Lee’s financial crimes. He was investigated by the prosecution on personal charges earlier this year. The bank learned of the crime in April upon receiving the prosecution’s request to examine his financial records.

The bank first discovered Lee’s embezzlement of 7.7 billion won. An on-site inspection by the FSS uncovered an additional theft of 48.4 billion won worth. Without outside help, the bank would not have been aware of the theft at all. The FSS found that the bank had neglected the rotation principle for employees dealing with the same business for a long time, not to mention its laidback checks on employees dealing with high-risk businesses.

Embezzlement in banks and financial institutions had been a regular event. According to the FSS report, embezzlement by employees of financial institutions amounted to 33 cases, amounting to 59.27 billion won until July this year. Last year, the amount reached a record-high of 110 billion won with a Woori Bank employee blamed for embezzling more than 70 billion won.

Financial authorities and organizations vowed stricter internal controls each time. Nevertheless, such shady practices continued.

The global financial industry has been evolving to fintech through the application of information technology. But the Korean financial sector remains laggard, as effectively proven by a recent string of embezzlement cases. The internal financial crime cases must be thoroughly examined for financial authorities and companies to devise a scientific control system.