Embezzlement Scandal Hits Saemaeul Geumgo... New Executives Verified by City and Provincial Governors

[Asia Economy Reporter Song Seung-seop] The government has decided to strengthen the executive verification system of Saemaeul Geumgo, which has been embroiled in a series of embezzlement incidents. From now on, when establishing a new Geumgo, the head of the local government will directly verify the identity of executives and review the approval status. Although specific embezzlement prevention measures are being discussed separately by a task force (TF), it appears that the government is releasing possible measures first.

According to the "Partial Amendment Notice on Saemaeul Geumgo Establishment Approval Processing Standards" announced by the Ministry of the Interior and Safety on the 8th, the procedures for criminal record checks and identity verification of executives and promoters have been revised. The criminal records and disqualification grounds of executives or promoters of newly established Geumgo will be checked by the "Special Self-Governing City Mayor, Special Self-Governing Province Governor, or Mayor, County Governor, District Head." Until now, the executives themselves had to request the inquiry from the relevant agency.

Authority related to establishment approval is also granted. After reviewing whether to approve the establishment, the local government head will attach their review opinion in writing to the Minister of the Interior and Safety and the President of the Saemaeul Geumgo Central Association. If the local government head’s evaluation differs from that of the Central Association after reviewing various items, an evaluation committee will be formed to continue discussions related to the establishment.

This administrative notice was made to organize necessary matters in accordance with the revised Saemaeul Geumgo Act, which has been in effect since January last year, and to improve some deficiencies found in the current system operation. The amendment includes changing the authority to approve new Saemaeul Geumgo establishments from the "Minister of the Interior and Safety" to the heads of local governments.

Poor Management and Supervision by Ministry of the Interior and Safety... Comprehensive Improvement Measures to be Prepared by TF

Recently, Saemaeul Geumgo has been involved in various embezzlement cases, raising concerns about the morality of executives and employees and the internal control system. In May, it was revealed that an employee embezzled 4 billion KRW of bank funds, including customer deposits, over 16 years, and last month, a 2 billion KRW embezzlement incident was uncovered at a Geumgo in Gangneung. There was also a case where a Saemaeul Geumgo executive colluded with a loan company representative and brokers to obtain a 38 billion KRW loan using fake diamonds as collateral.

As a result, there have been many criticisms in the financial sector that the Ministry of the Interior and Safety, the competent authority, has failed to properly supervise Saemaeul Geumgo. Due to the extensive branch network, asset size, and workforce, comprehensive and specialized monitoring like that of financial supervisory authorities has not been conducted. Currently, Saemaeul Geumgo operates 1,297 headquarters, and including branches, about 3,200 locations are in operation. Total assets amount to 253 trillion KRW, comparable to the Korea Development Bank.

However, there are many evaluations that fundamental strengthening of internal controls at Saemaeul Geumgo will be difficult even with this administrative notice. Although the verification authority when establishing new Geumgo has been transferred to local government heads, the management and supervision of existing Geumgo and their executives and employees remain the responsibility of the Ministry of the Interior and Safety.

Accordingly, since the 30th of last month, the Ministry of the Interior and Safety has formed a TF team to prepare comprehensive improvement measures for embezzlement and illegal loans at Saemaeul Geumgo. The TF consists of staff from the Ministry of the Interior and Safety, the Financial Supervisory Service, the Korea Deposit Insurance Corporation, and the Saemaeul Geumgo Central Association.

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