Embezzlement Amount in Mutual Finance Sector Totals 31.2 Billion Won Over 4 Years

[Asia Economy Reporter Eunju Lee] Embezzlement incidents in mutual finance sectors over the past four years have amounted to a total of 31.2 billion KRW. Although incidents have consistently occurred over the four years, the amount recovered was only about one-third (11.4 billion KRW). It appears that the monitoring systems both inside and outside the mutual finance sectors are not fully functioning for the cooperatives operating on a small scale throughout various regions.

According to Yoon Chang-hyun, a member of the People Power Party, the amount of embezzlement incidents reported from 2019 to the first half of this year in Nonghyup, Suhyup, Saemaeul Geumgo, and Shinhyup totaled 31.2 billion KRW. The amounts were 5 billion KRW in 2019, 9.9 billion KRW in 2020, 3.6 billion KRW in 2021, and 12.5 billion KRW in the first half of 2022. Considering the time gap between the detection and the occurrence of embezzlement incidents, it is understood that various large and small embezzlement cases have been continuously occurring across cooperatives over the past four years.

Although a total of 31.2 billion KRW in embezzlement incidents was recorded, only 11.4 billion KRW was recovered. The amount recovered from Nonghyup, which had the highest embezzlement amount (16.1 billion KRW), was only 3.2 billion KRW. In June, a case occurred at Seoul Central Nonghyup where a loan of 4.9 billion KRW was taken out under a customer's name, but no amount has been recovered. The same applies to the embezzlement of 470 million KRW in customer deposits. Saemaeul Geumgo (10.2 billion KRW) also recovered only about half, 5 billion KRW. Suhyup and Shinhyup showed similar patterns. Suhyup recovered only 1.4 billion KRW out of 3.3 billion KRW embezzled, and Shinhyup recovered 1.7 billion KRW out of 2.9 billion KRW embezzled.

The positions of employees who committed embezzlement were also diverse. Embezzlement incidents were caused by almost all positions within the banking sector, including chairpersons, executive directors, department heads, deputy managers, managers, assistant managers, staff, tellers, and account managers. In cases of relatively small-scale embezzlement, weak disciplinary actions were sometimes taken. For example, an employee who embezzled 51 million KRW in deposits at a Suhyup in Jeolla Province last year was only suspended for six months. Among the types of embezzlement, customer deposit embezzlement was the most common.

Industry insiders diagnose that internal and external controls over the mutual finance sector are not functioning smoothly. In particular, the fact that each cooperative is under a different government ministry makes external government control difficult, which is cited as a problem. The Financial Services Commission supervises only the soundness of Nonghyup, Suhyup, and the Korea Forest Service cooperatives. Comprehensive supervision is handled by the Ministry of Agriculture, Food and Rural Affairs for Nonghyup, the Ministry of Oceans and Fisheries for Suhyup, and the Ministry of the Interior and Safety for Saemaeul Geumgo. An industry official said, “The mutual finance sector basically operates with small local branches having a certain degree of autonomous authority and responsibility,” adding, “It is necessary to consider managing and monitoring two or three or more regions collectively at the central association level and to strengthen internal audits.”

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