Gyeongnam Bank Sanctioned for 'Employee's Illegal Nominee Transactions'

An employee of BNK Gyeongnam Bank was found to have engaged in illegal nominee transactions and was sanctioned by financial authorities. It was also revealed that accounts were opened without customers visiting the branch, and private equity funds were sold incompletely.

A real estate project financing loan embezzlement incident involving approximately 56 billion KRW occurred at BNK Gyeongnam Bank. The photo shows a BNK Gyeongnam Bank branch in downtown Seoul on the 3rd. Photo by Jinhyung Kang aymsdream@

According to the financial sector on the 19th, the Financial Supervisory Service (FSS) conducted a sector inspection of Gyeongnam Bank and detected illegal nominee transactions, incomplete sales of private equity funds, and violations of the obligation to confirm explanations of financial transactions. One former branch manager, a branch deputy, a senior private banker (PB), and a PB were identified and reported to the Financial Services Commission (FSC) with a disciplinary proposal at the end of June. At the 12th regular meeting, the FSC accepted the FSS’s measures as originally proposed, imposing a fine of 60 million KRW on Gyeongnam Bank and a fine of 10.5 million KRW on the former branch manager. The three employees received warnings.

Bank employees who also perform financial investment sales duties must conduct stock trading under their own names and report the trading details quarterly. However, the former branch manager of Gyeongnam Bank invested in stocks over 53 days using a nominee account under the name of his mother-in-law instead of his own name and did not notify the bank of the trading details.

Cases of violating the obligation to verify the real name in financial transactions were also uncovered. At three branches of Gyeongnam Bank, three collective investment securities accounts were opened. During this process, the account holders did not visit the branch at the time of account opening, but accounts were opened as if the holders had visited in person without proper delegation documents or real name verification identification. The bank did not obtain confirmation through signatures, recordings, or other methods that general investors understood the risks of financial investment products. No explanatory documents were provided to fulfill the explanation obligation.

Meanwhile, an employee of Gyeongnam Bank has been under prosecution investigation for embezzling and misappropriating 56.2 billion KRW over about 15 years since 2007 while handling real estate project financing (PF) loan operations. Typical methods such as arbitrarily transferring loan repayments to family accounts and forging loan documents were used. The FSS began an emergency on-site inspection on the 21st of last month and confirmed the embezzlement and misappropriation allegations. Lee Bok-hyun, Governor of the FSS, recently expressed his determination to hold the highest legal responsibility for accidents related to core banking operations and to eradicate such issues thoroughly.

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