Financial Scandals Exceeding 100 Billion Won... Large-Scale Financial Incidents and Loss Amounts Surge Last Year

[Asia Economy Reporter Kim Hyo-jin] It has been revealed that large-scale financial accidents exceeding 10 billion KRW significantly increased last year. The total amount of accidents also surged, surpassing 300 billion KRW.

On the 26th, the Financial Supervisory Service (FSS) announced the '2019 Financial Accident Occurrence Status and Response Measures' containing these details.

According to the FSS, there were 141 financial accidents last year, a decrease of 5 cases compared to the previous year (146 cases). The FSS stated that financial accidents have been continuously decreasing since 2014 due to preventive efforts such as the internal audit consultation system.

However, the total amount of financial accidents last year rose to 310.8 billion KRW, an increase of 181.2 billion KRW (139.8%) compared to the previous year (129.6 billion KRW).

This was due to six large-scale financial accidents exceeding 10 billion KRW, an increase of five cases from one case the previous year, including financial accidents exceeding 100 billion KRW.

These include JB Asset Management's 123.2 billion KRW Australian real estate fund loan fraud, Asia Trust's 50.8 billion KRW investment fund embezzlement fraud, and Busan Bank's 30 billion KRW improper loan case related to LCT.

Financial accidents exceeding 100 billion KRW occurred for the first time since the 2016 meat collateral loan fraud (390.7 billion KRW).

By type of financial accident, 'fraud' accounted for the highest amount, while 'embezzlement and misappropriation' accounted for the highest number of cases.

Fraud cases increased by 3 to 46 cases compared to the previous year (43 cases), but the amount involved rose by 150.8 billion KRW to 220.7 billion KRW from 69.9 billion KRW the previous year.

In particular, among the six large-scale financial accidents, four were identified as fraud types involving forgery of loan documents by small and medium-sized financial companies such as trust and asset management firms.

By financial sector, accidents related to 'small and low-income households' were the most frequent with 63 cases (44.7%), while the highest amount was in 'financial investment' at 202.7 billion KRW (65.2%).

In the banking sector, there were 41 financial accidents amounting to 54.2 billion KRW, a decrease of 7 cases compared to the previous year. The amount involved also decreased by 8.3 billion KRW.

Banking sector fraud (2 billion KRW) decreased by 57.4 billion KRW from 59.4 billion KRW the previous year, as no large corporate loan frauds using forged documents occurred.

However, breach of trust due to improper handling of credit screening tasks (31 billion KRW) increased by 30.4 billion KRW compared to 0.6 billion KRW the previous year.

In the small and low-income household sector, 63 financial accidents amounting to 25.5 billion KRW occurred. The number of cases increased by 7 compared to the previous year, but the amount involved decreased by 6.1 billion KRW.

Breach of trust (4.3 billion KRW) significantly decreased by 16.8 billion KRW compared to the previous year (21.1 billion KRW), as the amount of accidents in mutual finance companies dropped from 13.2 billion KRW to 2.7 billion KRW.

On the other hand, fraud (16 billion KRW) increased by 12.6 billion KRW compared to the previous year (3.4 billion KRW), with loan fraud in mutual finance companies rising from 1.5 billion KRW to 11.5 billion KRW.

In the financial investment sector, 10 financial accidents amounting to 202.7 billion KRW occurred. Although the number of cases decreased by 9 compared to the previous year, the amount involved increased by 172.9 billion KRW.

This was due to four large-scale accidents exceeding 10 billion KRW in asset management and trust companies, causing the amount involved to surge to 200.8 billion KRW from 5.5 billion KRW the previous year, an increase of 195.3 billion KRW.

In the insurance sector, 22 financial accidents amounting to 28.2 billion KRW occurred. The number of cases remained the same as the previous year, but the amount involved increased by 22.5 billion KRW.

Breach of trust (25.2 billion KRW) due to real estate PF loans through forgery of private documents increased by 24.6 billion KRW compared to 0.6 billion KRW the previous year.

The FSS plans to promote the establishment and inspection of internal control procedures for large loans and investments to prevent loan and investment fraud using forged or false documents, which are major types of large-scale financial accidents.

The FSS also plans to expand the implementation of the internal audit consultation system for asset management companies, trust companies, and others where large-scale financial accidents are increasing.

Additionally, the FSS intends to activate whistleblower systems within financial companies by diversifying reporting channels to prevent organized financial accidents in small and medium-sized financial companies such as asset management companies and mutual cooperatives.

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