Woori Bank 60 Billion Won Embezzlement Scandal... Reviewing Past Financial Incidents

Woori Bank Headquarters, Jung-gu, Seoul. [Image source=Yonhap News]

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[Asia Economy Reporter Heo Midam] A major embezzlement case involving 60 billion KRW has occurred at a commercial bank, where the fund management system is supposed to be the strictest, causing a stir. This embezzlement took place at a first-tier financial institution where trust is paramount, and despite the funds being siphoned off over a long period, it went undetected, raising concerns about potential issues in the internal control system. In particular, the scale of the embezzlement is exceptionally large for a banking financial incident, prompting unusual reactions.

According to Woori Bank and others, employee A is suspected of embezzling company funds amounting to 61.4 billion KRW (provisional) on three occasions: October 12, 2012; September 25, 2015; and June 11, 2018. A, a deputy general manager who has worked at Woori Bank for over 10 years, was part of the Corporate Improvement Department, which manages companies requiring structural improvements, at the time of the embezzlement. It is reported that he continued to work in this department until recently.

The police, while tracking the flow of funds through A’s accounts, found clues that some of the embezzled money had flowed into business funds of A’s younger brother, B, and arrested B on the 29th of last month on the same charges. B is known to have suffered losses of about 8 billion KRW while pursuing a golf resort development project in New Zealand. It is estimated that out of the 61.4 billion KRW embezzled, A spent about 50 billion KRW, and his brother B about 10 billion KRW. Most of the embezzled funds are believed to be contract deposits that Woori Bank must return to Entekhap, an Iranian home appliance company that participated in the sale of the former Daewoo Electronics.

Employee A of Woori Bank, who was charged with embezzling 61.4 billion won of company funds, is entering the courtroom at the Seoul Central District Court in Seocho-dong, Seoul, on the afternoon of the 30th of last month to undergo a pre-arrest detention hearing (warrant review). [Image source=Yonhap News]

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The embezzlement case has drawn reactions noting that the amount is unusually large for a single banking financial incident. According to the '2021 Financial Accident Status by Industry and Type' report received by Yoon Changhyun, a member of the People Power Party, from the Financial Supervisory Service, the total embezzlement amount under the 'embezzlement and misappropriation' category for seven banks (Shinhan, KB Kookmin, Hana, Woori, Industrial Bank, NongHyup, SC First Bank) was only 6.76 billion KRW (16 cases) last year. In other words, A embezzled more than nine times the total amount of embezzlement and misappropriation incidents that occurred in the banking sector last year.

Looking back at past large-scale embezzlement cases, in 2005, an employee in charge of fund settlement at the Myeonmok South Branch of Choheung Bank embezzled 41.2 billion KRW of public funds. At that time, the Financial Supervisory Service confirmed that the internal control system was not functioning properly in the fund settlement office and related departments and took disciplinary actions against 20 employees involved in the incident.

In 2013, a KB Kookmin Bank employee embezzled about 9 billion KRW by selling National Housing Bonds and other bonds on the market. National Housing Bonds allow the principal and interest to be received upon maturity, but if the statute of limitations expires, they revert to the national treasury. This employee forged National Housing Bonds that were about to revert to the treasury after maturity and, with the help of a friendly branch employee, cashed them out, embezzling about 9 billion KRW.

Additionally, in 2017, a KEB Hana Bank employee was caught embezzling 1.3 billion KRW. A second-year employee responsible for cash handling at a branch in Cheonan, Chungnam, embezzled bank funds by classifying normal currency as damaged currency, which was not usable. This was discovered during a regular internal audit at the branch.

Meanwhile, Jeong Eunbo, Governor of the Financial Supervisory Service, stated that he is considering initiating an audit of the accounting firm in relation to Woori Bank’s 60 billion KRW embezzlement incident.

Governor Jeong told reporters after a meeting with CEOs of foreign financial companies held at the Millennium Seoul Hilton Hotel in Jung-gu, Seoul, on the 29th of last month, "Basically, accounting firms should verify whether cash on hand exists and whether inventory assets exist during an audit. However, we need to look into why this part was not properly investigated for some reason." When asked if he is considering initiating an audit of the accounting firm, he replied, "We are definitely considering it."

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