FSS Issues 'Management Caution' Notice to Shinhan and Woori Banks for Inadequate Internal Controls

[Asia Economy Reporter Bu Aeri] Shinhan Bank and Woori Bank received management caution notices from the Financial Supervisory Service (FSS) due to inadequate internal controls.

According to the FSS disclosure on the 19th, during a recent sector inspection of Shinhan Bank, the FSS ordered management caution to enhance the effectiveness of operations related to the Fraud Detection System (FDS) and to strengthen the financial accident reporting system.

With the digitalization of financial transactions and policies expanding loans to medium- and low-credit borrowers, Shinhan Bank’s small loan handling volume has increased. The FDS should play a preventive role by monitoring transaction behaviors and analyzing patterns to prevent financial accidents in advance. However, Shinhan Bank operated the system with a focus only on recurrence prevention.

Shinhan Bank’s FDS consultative body also convened irregularly only when major incidents such as financial accidents occurred, and in some electronic financial accident cases, the FDS consultative body did not thoroughly discuss response measures among related departments. For some agenda items, it was difficult to verify and confirm the contents of the FDS consultative body discussions afterward.

The FSS pointed out that Shinhan Bank needs to strengthen related work procedures by establishing internal audit implementation and suspension judgment criteria for incidents subject to financial accident reporting.

Additionally, during the FSS inspection period, Shinhan Bank was found to have delayed electronic financial accident reports due to interdepartmental notification delays and absence of responsible personnel.

The FSS issued a caution to one Shinhan Bank employee who informed a specific customer that the bank had provided financial transaction information about the customer’s account to the police, despite the police’s request for notification deferment.

Through a sector inspection of Woori Bank, the FSS pointed out management caution items including strengthening the post-management process of asset management companies, enhancing conflict of interest management in concurrent businesses, and reinforcing internal controls related to prior review of explanatory documents.

It was found that Woori Bank did not review the appropriateness of maintaining consignment sales contracts even after knowing that the asset management company operated assets differently from the proposal.

The FSS stated that recently, large-scale consumer damages have occurred due to illegal and unfair acts by asset management companies and incomplete sales by banks related to private equity funds, damaging public trust. Therefore, the FSS demanded that Woori Bank strengthen internal controls by revising guidelines and approval authority related to the relevant work.

The FSS also ordered Woori Bank to strengthen internal controls related to prior review of explanatory documents so that, when recommending financial investment products, the documents can be provided only after prior review by the compliance officer or the person responsible for financial consumer protection.

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