Financial Supervisory Service vs. Woori Financial Group 'Power Struggle'... What Is the Financial Services Commission, the Higher Authority, Doing? (Comprehensive)

1.5 Years Ago Dormant Account Password Theft Incident
Timing of DLF Disciplinary Appeal Revealed
Growing Criticism Toward Financial Services Commission Ignoring the Issue

[Asia Economy Reporter Kangwook Cho] As the Financial Supervisory Service (FSS) and Woori Financial Group clash head-on, voices criticizing the role of the Financial Services Commission (FSC) are emerging. While the FSS and financial companies are taking a 'strong versus strong' confrontational stance, there are criticisms that the higher authority, the FSC, is merely standing by and showing no presence at all.

According to financial authorities on the 10th, the FSS has internally decided to bring the case of unauthorized password misuse of dormant accounts by Woori Bank employees to the disciplinary committee as soon as possible. The core of this incident is that some branch employees increased customer acquisition performance by changing customers' dormant account passwords without authorization. Woori Bank reported to the FSS that approximately 23,000 customers' passwords were unauthorizedly used across about 200 branches. The FSS, having learned of the audit findings during the management evaluation rather than from Woori Bank's report, conducted additional investigations and stated that altogether about 40,000 cases of unauthorized use were found.

This incident was revealed as a result of the IT (Information Technology) sector inspection during Woori Bank's management evaluation conducted in October-November 2018. At that time, the FSS instructed Woori Bank to prepare and implement recurrence prevention measures and confirmed through a comprehensive inspection that there were no similar cases across the entire banking sector. They also explained that they reviewed legal violations and conducted further fact-finding investigations.

The problem lies in the timing when the incident surfaced. The FSS had already been aware of this case more than a year ago but did not notify customers of the related facts, and this unauthorized use incident was revealed through media reports rather than an FSS announcement. In particular, suspicions arise because the incident resurfaced immediately after the CEO disciplinary actions related to the DLF (Derivative Linked Fund) scandal were finalized and Woori Financial Group showed signs of appealing against it.

Moreover, the FSS's unusually swift decision to hold a disciplinary committee immediately after the incident became known raises various questions. Initially, no disciplinary committee was held for about 14 months following the inspection of Woori Bank. This is why there are rumors in the financial sector about the 'FSS's counterattack.' Regarding this, an FSS official explained, "When a problem is found, an inspection is conducted, and once it is completed, a disciplinary committee is held as a standard procedure."

As the conflict between the FSS and financial companies deepens, calls for the FSC's role are also growing. The FSC is the main agency overseeing financial supervision and overall financial policy. In short, in financial incidents, the FSS acts as the 'prosecutor,' and the FSC as the 'court.' However, criticism has arisen that the opposite situation occurred during the DLF disciplinary process. The FSS applied the Financial Company Governance Act to the CEO disciplinary actions related to the DLF scandal, but it is argued that the Capital Markets Act should have been applied for sanctions related to improper sales.

The core issue is whether there is sufficient legal basis to impose sanctions under the Governance Act. Article 24 of the Governance Act stipulates that 'internal control standards must be established,' but there is no provision for sanctions if this is not followed. The amendment bill to the Governance Act, which includes grounds for sanctioning executives, is currently pending in the National Assembly. Specifically, according to Article 35 of the Governance Act, the FSS Governor can take measures such as reprimands, cautionary warnings, and warnings against executives of financial companies violating the Governance Act. On the other hand, under Article 438 of the Capital Markets Act, the FSS can only impose cautionary warnings and warnings for executive sanctions. Severe disciplinary actions such as dismissal requests, suspension of duties, and reprimands are decisions made by the FSC.

However, the FSC did not express any significant dissent during this disciplinary committee. In an official statement, it said, "It is not true that there is a disagreement between the FSC and the FSS regarding the disciplinary committee decision." Beyond the controversy over the FSS 'passing over' the FSC, criticism arises that the FSC is merely standing by, watching the conflict between the FSS and financial companies without taking action.

A financial sector official said, "Chairman Sohn Tae-seung of Woori Financial, who received a heavy disciplinary sanction in the DLF disciplinary committee, is considered to have crossed the line by appealing and pushing for reappointment, so the FSS is expected to increase pressure." He added, "Whether there is any consultation or conflict between the FSS and the FSC is unknown, but it is inevitably questionable that the highest authority, the FSC, is acting so indifferent."

This content was produced with the assistance of AI translation services.