Embezzlement and Improper Loans at 'Saemaeul Geumgo'... Ministry of the Interior and Safety Implements Comprehensive Measures to Strengthen Soundness

Formed a Special Task Force with 5 Related Agencies to Promote 9 Projects in 3 Major Areas

[Asia Economy Reporter Lim Cheol-young] The Ministry of the Interior and Safety announced on the 25th that it will implement a comprehensive plan to strengthen the soundness of Saemaeul Geumgo starting from the 26th, aiming to eradicate financial accidents such as embezzlement and improper loans recently occurring at Saemaeul Geumgo.

The comprehensive plan includes three major areas and nine tasks (30 detailed tasks): ▲Prevention of financial accidents (4 major tasks) ▲Strengthening soundness (3 major tasks) ▲Restructuring of small-scale Geumgo (2 major tasks).

First, fundamental measures were prepared to prevent the recurrence of financial accidents such as embezzlement incidents that occurred at Songpa Jungang and Gangneung Sacheon Saemaeul Geumgo. Since recent accidents mainly occurred in small-scale Geumgo, the inspection system for small-scale Geumgo will be completely revamped by introducing a covert inspector system (itinerant inspectors) utilizing financial industry experts. The current inspection frequency, conducted once every two years, will be significantly increased to at least twice a year, and surprise cash inspections will be made regular to enhance the effectiveness of checks.

To establish and strengthen a transparent and effective internal control system, all Geumgo will be required to implement a mandatory ordered leave system, strengthen the inspection of the rotation cycle and concurrent positions of internal control officers, and expand the operation of internal control teams to Geumgo with assets of 300 billion won (down from 500 billion won). Furthermore, to improve the identity verification system during financial transactions, additional mobile phone authentication will be introduced when registering or changing customer information, Geumgo employees will be prohibited from keeping customers’ passbooks and seals, and mandatory notification items to customers will be expanded.

Additionally, to prevent financial accidents and enable early detection through internal reporting within Saemaeul Geumgo, the reward for the whistleblower reward system will be significantly increased. A provisional internal misconduct whistleblower protection guideline, including protection for internal informants and collaborators, disciplinary mitigation, and rewards, will be established and implemented.

Measures to strengthen soundness through prevention of non-performing loans and improper acts (brokerage and solicitation), and reinforcement of post-loan management have been prepared. First, to prevent non-performing loans, a detailed list of prohibited collateral items will be specified, banning collateral loans on certain movable properties such as precious metals and antiques.

To strengthen soundness through post-loan management, a new computerized management system at the Central Association will be established for joint loans and highly volatile bonds such as undeveloped land. Management and supervision roles at the Central Association level will also be strengthened by significantly adding management improvement measures for insolvent Geumgo. In addition, to prevent improper acts by the Central Association, the supervisory body of Saemaeul Geumgo, internal regulations will be revised to the level of the public officials’ code of conduct, and internal personnel regulations will be amended to allow immediate suspension of those under investigation or prosecution for misconduct.

Support for mergers of small-scale Geumgo and strengthened management will also be promoted. For small-scale merged Geumgo, activation funds (interest-free loans ranging from 3 billion to 10 billion won) will be provided, and the system will be improved to allow small-scale Geumgo to merge with nearby city, county, or district Geumgo, actively encouraging autonomous mergers of small-scale Geumgo.

In the mid to long term, legal grounds such as amendments to the Saemaeul Geumgo Act will be prepared to allow forced mergers of insolvent Saemaeul Geumgo. Choi Byung-kwan, Director of the Local Finance and Economy Office at the Ministry of the Interior and Safety, said, “This comprehensive plan will be a fundamental improvement measure to create structural conditions to prevent recurrence through thorough cause analysis,” and added, “We will strive to ensure that Saemaeul Geumgo, as a representative grassroots financial institution in Korea, gains public trust and grows further.”

Meanwhile, regarding the recent power abuse incident at a regional Geumgo in Jeonbuk, the Ministry of the Interior and Safety recognized the seriousness of the situation and instructed the Saemaeul Geumgo Central Association to conduct a thorough investigation and hold those responsible accountable. In particular, to prevent such incidents from recurring, measures related to grievance handling system inspection and organizational culture improvement have been prepared and will be implemented.

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