The Financial Supervisory Service Conducts Intensive On-Site Inspections of Lime Trade Finance Fund Selling Banks Throughout This Week

[Asia Economy Reporter Kim Hyo-jin] The Financial Supervisory Service (FSS) will conduct intensive on-site investigations throughout this week on major sellers of the Lime Asset Management trade finance fund.

According to financial authorities and the financial sector on the 21st, the FSS joint on-site investigation team began on-site inspections of Woori Bank and Hana Bank the day before. The FSS has dispatched investigators to the branches of these banks that sold the Lime funds to examine various circumstances related to suspicions of incomplete sales.

The FSS is currently focusing its investigation on the trade finance fund (Pluto TF-1) whose losses have been confirmed. Along with a detailed investigation of complaints claiming damages due to incomplete sales by the selling banks, the FSS is also conducting three-party interviews involving Lime Asset Management, Shinhan Financial Investment, and the selling banks.

An FSS official stated, "The investigation of the relevant banks will continue throughout this week," adding, "There is no decision yet regarding the situation after that."

In February, the FSS formed a joint on-site investigation team related to the Lime fund, led by the head of the Dispute Resolution Division 2 and involving a large number of personnel from related inspection departments. The on-site investigation was originally planned to start in early last month but was delayed due to concerns over the spread of the novel coronavirus (COVID-19).

Woori Bank sold approximately 69.7 billion KRW worth of the Lime trade finance fund, while Hana Bank sold about 50.9 billion KRW. In the case of Gyeongnam Bank, the sales amount was only 100 million KRW, so the FSS considers the need for an on-site investigation to be low.

The FSS believes that Lime Asset Management and Shinhan Financial Investment are suspected of fraud for concealing the occurrence of the trade finance fund’s insolvency and continuing sales despite knowing about it. Around June 2018, they recognized that the IIG fund, the investment destination of the trade finance fund, was not providing a net asset value (NAV), but they fabricated the IIG fund’s NAV to appear as if it was increasing by 0.45% monthly until November of that year.

Despite receiving an email from the IIG fund stating that "liquidation procedures have begun," they are also suspected of covering up the insolvency of the trade finance fund by using funds from other Lime Asset Management funds to prepare 50 billion KRW in redemption payments.

Meanwhile, investors who suffered losses after investing in the fund have filed numerous dispute resolution requests with the FSS, claiming that the selling banks did not properly inform them about the nature or risks of the fund before selling it.

The FSS plans to complete the dispute resolution procedures surrounding the fund within the first half of the year if possible. Internally, the FSS is also reviewing a dispute resolution proposal that would refund up to 100% of the invested principal.