[Exclusive] 'Major Shareholder Money Laundering Hub' Samho Savings Bank to Receive Institutional Warning

Authorities Detect Money Laundering Transactions by Major Shareholders at Jeonbuk's Top Savings Bank
No Outside Directors or Audit Committee Members Present
Institutional Warning Issued and CEO Disciplined

[Asia Economy reporters Junho Hwang and Seungseop Song] The behavior of the major shareholder family of a savings bank, who engaged in money laundering transactions amounting to a total of 13.6 billion KRW and failed to report these transactions to the Financial Intelligence Unit (FIU), has come under the scrutiny of financial authorities. Notably, they entrusted the compliance officer, who should have been responsible for internal control duties, with managing the rental of buildings personally owned by the major shareholder, and failed to establish checks and balances such as outside directors and auditors, resulting in severe disciplinary actions from the authorities.

According to the financial industry on the 5th, the Financial Supervisory Service (FSS) held a disciplinary review committee on the 9th of last month regarding the results of a sector inspection of Samho Savings Bank and finalized the disciplinary measures.

Through this inspection, Samho Savings Bank received an 'institutional warning.' Executives and employees, including the CEO, will face measures such as reprimands, warnings, and salary reductions. An institutional warning is one of the severe disciplinary actions, imposed when misconduct occurs due to the management of the financial institution. Despite the major shareholder family continuously conducting money laundering transactions by depositing and transferring cash, they failed to report these transactions as required, leading to unavoidable severe disciplinary measures.

Major Shareholder's Money Laundering Transactions Detected

According to the 'Pre-notification of Measures Following Inspection Results' obtained by Asia Economy from the FSS, between August 2016 and June 2021, reasonable grounds for 61 cases of money laundering activities were found across 22 accounts belonging to the major shareholders, their families, and various corporations they own. In particular, the major shareholders conducted cash transactions suspected of money laundering totaling 13.6 billion KRW, ranging from a minimum of 10.4 million KRW to 2.0585 billion KRW per day, without reporting these to the FIU. The FIU requires reporting of cash transactions exceeding 10 million KRW per day and suspicious money laundering transactions extracted from the Korea Federation of Savings Banks' central computer network.

A source familiar with the bank stated, "Employees repeatedly suggested reporting to the FIU to prevent non-reporting, but the major shareholders ignored these suggestions," adding, "During this investigation, employees actively testified and submitted relevant documents."

Contrary to its reputation as the number one savings bank in Jeollabuk-do by total assets, Samho Savings Bank became a channel for the major shareholder's money laundering. The largest shareholder (100%) of Samho Savings Bank is Samho Industry Co., Ltd., a construction company. The CEO of this company is Byeongju Lee, who is also appointed as an executive director at Samho Savings Bank. Lee's eldest son, Gyuwan Lee, serves as the CEO of the savings bank and is expected to receive a reprimand following this investigation. The third son, Hyunguk Lee, is the de facto largest shareholder of Samho Industry, holding shares in its subsidiaries, while the second son, Gyusang Lee, is a major shareholder of Samho Industry.

Compliance Officer Entrusted with Major Shareholder's Rental Management and Fire Safety Duties

They not only engaged in money laundering but also paralyzed the bank's overall internal control functions. They appointed a deputy-level employee as the compliance officer responsible for internal control and entrusted him with managing rental fees and lease contracts for 23 commercial units across four buildings owned by themselves. Additionally, they required him to obtain fire safety management certification and registered him as a fire safety manager. Furthermore, they arranged for Samho Savings Bank to pay accounting monitoring service fees for Samho Industry, provided office space under the name of the chairman's office, and even arranged cleaning services for CEO Byeongju Lee's residence.

While the compliance officer was busy demanding rent for buildings owned by the major shareholder, basic mechanisms such as outside directors or audit committee members, which should oversee overall management, were not established. As a result, situations arose where branch loan managers issued loans and received commissions, or employees approved loans exceeding the credit limit of 50 million KRW through their own authority.

The financial authorities stated regarding the inspection results and disciplinary actions, "In principle, we cannot comment on matters currently under investigation."