Embezzlement Occurred Every Month This Year... Strengthening Internal Controls and Punishment Standards Needed

From Ostem to Woori Bank and AmorePacific... Major Embezzlement Cases Every Month
Mostly Lost to Illegal Gambling and Coin Investments... 'One-Shot Mentality' Widespread
"Internal Controls and Penalty Standards Must Be Strengthened"

Employee A of Woori Bank, who was arrested on charges of embezzling 61.4 billion won of company funds, is being transferred from Namdaemun Police Station in Jung-gu, Seoul to the Seoul Central District Prosecutors' Office on the morning of the 6th.
[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] This year, embezzlement cases have occurred about once a month, increasing distrust in companies' internal controls. There are calls to further strengthen internal control systems as well as to enhance punishments.

◆ Embezzlement once a month... Coin investment and gambling ‘one-shot mentality’= According to the industry on the 17th, Amorepacific recently experienced an embezzlement case involving around 3 billion KRW. Since January this year, major embezzlement incidents have occurred monthly, starting with Ostem Implant, the number one company in the implant market, followed by Seoul Gangdong-gu Office, Gyeyang Electric, Clio, Woori Bank, and others.

Most of them invested embezzled funds in high-risk, high-return investment destinations such as virtual assets or stock futures options, or squandered the money on illegal gambling or sports betting sites. Professor Hong Ki-hoon of Hongik University’s Department of Business Administration explained, "Unlike in the past, embezzlement cases are becoming increasingly bold," adding, "As the entry barriers to high-risk, high-return investments like the coin market have lowered, the ‘one-shot mentality’ seems to be more widespread."

◆ Need to strengthen internal controls and punishments= As embezzlement incidents continue to surface, there are calls for a comprehensive review of corporate internal controls. Although embezzlement and breach of trust cases can be partially prevented through audits under the existing internal accounting management system, it is analyzed that a more systematic strengthening is necessary through firm commitment at the top management level.

In fact, a 2020 analysis by the Association of Certified Fraud Examiners (ACFE) of 2,504 fraud cases across 125 countries worldwide found that corporate losses due to fraud and embezzlement amount to 5% of annual sales. This means that incidents like embezzlement are not problems occurring under special circumstances but issues that must be controlled and managed routinely within a system.

There are also voices calling for tougher punishment standards. The background enabling the ‘one-shot mentality’ of offending employees is interpreted as the psychology that embezzlement is still seen as a ‘gain’ even if detected. The recommended sentencing guidelines for embezzlement and breach of trust crimes in Korea have remained unchanged since the 2009 enforcement plan. Even for the highest category, Type 5 (criminal proceeds of 30 billion KRW or more), the basic sentencing guideline is 5 to 8 years. Even if the method of the crime is severe and causes serious damage, increasing the sentence, the recommended sentencing is only 7 to 11 years. Under the Act on the Aggravated Punishment of Specific Economic Crimes (Special Act), embezzlement sentences are generally around 10 years of imprisonment.

Lee Sang-ho, a research fellow at the Korea Capital Market Institute, pointed out, "When the criminal proceeds exceed 5 billion KRW, aggravated punishment under the Special Act can be applied, allowing for life imprisonment or imprisonment of five years or more, and fines equivalent to the criminal proceeds can be imposed concurrently." He added, "However, regarding the reasonable sentencing for embezzlement and breach of trust crimes in listed companies that cause stock price crashes due to loss of company credibility and harm to many shareholders, a specific re-examination is necessary."

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