Prime Minister Jeong Orders 'Thorough Investigation of Nominee Accounts'... Financial Services Commission's 'Delayed Probe' One Week Later

[Asia Economy Reporter Seong Gi-ho, Sejong = Reporter Moon Chae-seok] Financial authorities have come under criticism for the slow pace of their investigation into the loan process for land parcel purchases, including nominee transactions, related to allegations of land speculation by employees of Korea Land and Housing Corporation (LH) as they launched the investigation on the 15th. Although public opinion had strongly demanded that nominee accounts be scrutinized when the joint investigation team was launched on the 4th, it took ten days to begin the related investigation. In particular, it has been a week since Prime Minister Chung Sye-kyun upgraded the special investigation team led by the National Police Agency’s National Investigation Headquarters to the “Government Joint Special Investigation Headquarters (Special Investigation Headquarters),” including related agencies such as the Financial Services Commission and the National Tax Service, on the 8th, and ordered a thorough investigation into all illegal and illicit speculative activities, including nominee transactions.

According to the financial sector, the Financial Services Commission and the Financial Supervisory Service dispatched five personnel to the Special Investigation Headquarters on the same day to examine whether the loan process of LH employees suspected of speculation was lawful. As early as this week, an on-site investigation of the NongHyup Buksiheung branch, which is under controversy, is also planned to be conducted concurrently.

The core of the current LH scandal is to uncover the illegal aspects such as real and nominee transactions and unregistered transactions. To do this, tracking the flow of funds focusing on transactions in areas where speculation is concentrated is essential. However, concerns have been raised about the destruction of related evidence due to the delayed dispatch of personnel from the financial authorities to the Special Investigation Headquarters and the late start of the investigation.

Professor Kim Sang-bong of Hansung University’s Department of Economics pointed out the government’s lack of investigative will, saying, “In the case of nominee accounts, the Financial Intelligence Unit (FIU) of the Financial Services Commission can monitor all financial transaction information over 10 million won without individual consent,” adding, “It’s not that they can’t track the speculative funds, but that they are not doing it.” Although there were institutions and personnel who could look into this, it is said that they were negligent in the early stages of the investigation. Professor Kim added, “The investigation target should be expanded to include the Ministry of Land, Infrastructure and Transport, Korea Expressway Corporation, and Korea Railroad Corporation.”

It took about a week for the government joint investigation team (Joint Investigation Team) under the Office for Government Policy Coordination to complete the first investigation after the initial suspicion surfaced on the 2nd. Since a full-scale investigation must be conducted again at the investigation stage, there are also criticisms that the delay in the Joint Investigation Team’s request for investigation caused a delay in the Special Investigation Headquarters’ investigation.

Meanwhile, financial authorities plan to announce household debt management measures this month. The measures are expected to include strengthened regulations on non-housing secured loans (non-housing collateral loans) such as land and commercial buildings. This is because, as collateral loan regulations have been tightened recently to curb real estate prices, non-housing collateral loans from mutual finance institutions such as NongHyup have been criticized for being used as a loophole for loans to ordinary people rather than farmers and fishermen. The LH employees involved in this issue also borrowed a total of 4.3 billion won through non-housing collateral loans from Gyeonggi Buksiheung NongHyup. While commercial banks apply a loan-to-value (LTV) ratio of around 60% through internal regulations, the LTV for non-housing collateral loans in mutual finance institutions such as NongHyup ranges from 40% to 70%. Because of this, NongHyup Central Association’s own investigation found that the NongHyup Buksiheung branch did not violate soundness regulations or collateral value assessment standards in the process of lending to nine LH employees, which has drawn criticism.

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