"Increase Punishment Severity and Make the Financial Supervisory Service the Supervisory Authority" [Corruption Award Saemaeul Geumgo④]

As Saemaeul Geumgo branches nationwide face turmoil after being identified as hotbeds of corruption, experts suggest that to overcome moral hazard, Saemaeul Geumgo must strengthen its inspection and supervision system and increase the severity of punishments for financial crimes such as embezzlement.

The primary task experts mention is granting the Financial Supervisory Service (FSS) supervisory authority over Saemaeul Geumgo. Currently, among mutual financial institutions, Saemaeul Geumgo is the only one without direct supervisory authority by law from the FSS. Under the current Saemaeul Geumgo Act, the minister in charge (Minister of the Ministry of the Interior and Safety) supervises credit and mutual aid businesses in consultation with the Financial Services Commission (FSC), and can only request 'support' from the FSS during inspections.

On the other hand, credit cooperatives under the jurisdiction of the FSC have supervisory authority over economic, credit, and mutual aid businesses, while agricultural cooperatives, fisheries cooperatives, and forestry cooperatives?each under different ministries?have their credit and mutual aid businesses supervised by the FSS. Professor Kim Sangbong of Hansung University’s Department of Economics said, "Fintech companies are also incorporated under the FSS’s supervisory system, so Saemaeul Geumgo cannot be an exception," adding, "Even if other tasks remain under the Ministry of the Interior and Safety, at least the supervisory authority over financial-related businesses should be transferred to the FSS."

Professor Han Jaejun of Inha University’s Department of Global Finance stated, "Since the FSC is the competent authority for credit cooperatives, they are subject to numerous regulations comparable to banks," and emphasized, "Even if not to the level of credit cooperatives, it is necessary to elevate the supervisory system at least to the level of agricultural, fisheries, and forestry cooperatives."

There is also an opinion that fundamentally expanding direct elections is necessary to resolve the issue of the ‘imperial chairman.’ This is because regional Saemaeul Geumgo branches are managed independently by their chairpersons, making their capabilities crucial.

With the Saemaeul Geumgo Act amendment passing the National Assembly plenary session last year, from 2025, the chairman election method will shift from an indirect election (delegate council) to a direct election. However, the enforcement decree allows regional branches with total assets under 200 billion KRW to choose between indirect and direct elections. Currently, about 70% of regional branches have assets below 200 billion KRW, undermining the legislative intent. Lee Heedong, chairman of the National Saemaeul Geumgo Union, said, "The Saemaeul Geumgo Central Association chairman should step up and revise this threshold to below 100 billion KRW."

Going further, there are calls to increase the severity of punishments for fraudulent acts related to financial businesses. Overseas, astronomical fines or severe prison sentences are imposed for financial crimes to strictly regulate banks. In 2016, Wells Fargo in the United States was fined 3.6 trillion KRW for opening deposit and credit card accounts without customer consent. John Stumpf, then chairman of Wells Fargo, also had about 45 billion KRW of assets confiscated.

Experts point out that domestic punishments are too lenient, leading employees to calculate that fraudulent acts are more profitable. Professor Ha Jun-kyung of Hanyang University’s Department of Economics said, "While high-level corruption has existed in the past, nowadays it occurs frequently even among lower-level employees," adding, "They think the benefits gained from embezzled money outweigh the penalties if caught." According to the Supreme Court, sentencing guidelines for embezzlement and breach of trust in Korea are 5?8 years (aggravated 7?11 years) for amounts over 30 billion KRW, and 4?7 years (aggravated 5?8 years) for amounts between 5 billion and 30 billion KRW.