Financial Scandal Hidden Close to Home: "All Done by Internal Employees"

Financial Fraud by Internal Employees Amounts to 864.6 Billion KRW, Accounting for 78% of All Financial Incidents
Recovery Rate of Damages is 43%, with Banks Recovering Only 11%
Assemblyman Kim Seong-ju: "System Improvements Needed to Ensure Compliance with Internal Control Standards"

Over the past five years, financial accidents have continued to occur, with incidents caused by internal employees accounting for a significant proportion.

According to data submitted by the Financial Supervisory Service to National Assembly member Kim Sung-joo of the Political Affairs Committee on the 30th, out of the total financial accident amount of 1.1066 trillion KRW over the past five years, 864.6 billion KRW was due to financial accidents caused by internal employees. This accounts for 78% of all financial accidents. During the same period, out of 451 total financial accident cases, 264 were caused by internal employees, representing 59% of all financial accidents.

From 2018 to July of this year, the total amount of financial accidents reached 1.1066 trillion KRW, with a total of 451 cases. Looking at the accident amounts by industry sector, financial investment recorded the highest amount at 703.6 billion KRW, followed by banks (262.1 billion KRW), insurance (54.3 billion KRW), savings banks (41.2 billion KRW), specialized credit finance (38.7 billion KRW), and lending (6.7 billion KRW). Among these, the amount of accidents in banks has been steadily increasing from 6.6 billion KRW in 2020 to 31.7 billion KRW in 2021, and 91.5 billion KRW in 2022. As of July this year, it has already reached 59.7 billion KRW. In terms of the number of cases, banks lead with 207 cases, followed by insurance (104 cases), financial investment (65 cases), specialized credit finance (38 cases), savings banks (36 cases), and lending (1 case).

During the same period, the amount recovered from total financial accident damages was 436.4 billion KRW, resulting in a recovery rate of about 39%. By industry, the recovery rates were financial investment (45%, 319.4 billion KRW), insurance (43%, 23.6 billion KRW), savings banks (34%, 14.2 billion KRW), banks (27%, 70.5 billion KRW), specialized credit finance (23%, 8.8 billion KRW), and lending (0.1%, 0.01 billion KRW).

Meanwhile, examining the amount of financial accidents caused by internal employees by industry over the past five years, financial investment was the highest at 594.3 billion KRW, followed by banks (196.2 billion KRW), insurance (31.4 billion KRW), savings banks (20.9 billion KRW), specialized credit finance (15.3 billion KRW), and lending (6.7 billion KRW). The number of cases was highest in banks (149 cases), followed by financial investment (47 cases), insurance (29 cases), specialized credit finance (26 cases), savings banks (12 cases), and lending (1 case). The amount of financial accidents caused by internal employees in banks has also increased sharply each year, from 1 billion KRW in 2020 to 29.6 billion KRW in 2021, and 90.3 billion KRW in 2022. As of July this year, it has already reached 58.5 billion KRW.

During the same period, the amount recovered from damages caused by internal employees was 375.5 billion KRW, with a recovery rate of about 43%. By industry, the recovery rates were insurance (60%, 18.8 billion KRW), savings banks (57%, 11.8 billion KRW), financial investment (53%, 315.6 billion KRW), specialized credit finance (47%, 7.1 billion KRW), banks (11%, 22.1 billion KRW), and lending (0.1%, 0.01 billion KRW). Excluding the lending industry, the recovery rate for banks is very low at 11%.

Assemblyman Kim Sung-joo stated, “Financial accidents caused by internal employees of financial companies have continued to occur in recent years,” and added, “Although the financial authorities have operated a task force and proposed institutional improvement measures following last year’s major financial accident, it is questionable whether these measures are effective.”

He continued, “According to the Supreme Court ruling, the current 'Act on the Governance of Financial Companies' only stipulates the obligation to establish internal control standards for financial companies but does not mandate compliance with these standards,” emphasizing, “It is time to implement practical institutional improvements to ensure that financial companies comply with internal control standards.”

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