Financial Supervisory Service to Directly Sanction Mutual Finance Sector Employees Over Repeated Embezzlement Issues

Published 07 Nov.2023 08:26(KST)

Financial authorities are pushing for measures to directly sanction institutions and executives to prevent embezzlement incidents in the mutual finance sector.

According to the financial sector on the 7th, the Financial Supervisory Service (FSS) recently proposed an amendment to the Mutual Finance Act to the Financial Services Commission, which includes grounds for directly sanctioning embezzlement and breach of trust incidents in the mutual finance sector. An FSS official stated, "So far, there have been grounds such as regulations or enforcement ordinances to take action in the banking sector for embezzlement and breach of trust cases, but the mutual finance sector and the credit finance industry lack such grounds, so it is necessary to establish them." However, it is expected to take considerable time until the bill is amended.

The mutual finance sector has consistently experienced various financial incidents, both large and small. According to data submitted by the FSS and each mutual finance central association to the office of Yoon Chang-hyun, a member of the People Power Party, the scale of financial incidents such as embezzlement from 2019 to the first half of this year amounts to 51.143 billion KRW.

In particular, the mutual finance sector has faced continuous criticism for its complicated management and supervision system issues, as well as its weak internal control systems. In cases of financial incidents in the mutual finance sector, the central association often supervises and inspects individual cooperatives and then takes prosecution actions on its own. Because of this, disciplinary actions have sometimes been mere slap-on-the-wrist punishments or have excluded certain cases from prosecution.

In response, the FSS recently instructed that the central association must report any financial incidents to investigative authorities without exception. Additionally, it has been guided that executives and employees who caused the incidents should not be assigned to handle financial duties upon their return.