[1mm Financial Talk] 'Fake Employment Certificate Leads to Hundred-Million Won Loan'... Banks Falling Victim to Fraud

Status of Financial Incidents at Four Major Banks
Loan Fraud by Jeonse Scam Groups and Fake IDs
Large-Scale Embezzlement and Breach of Trust Also Occurred

"They submitted a fake employment certificate to the bank and received a loan worth hundreds of millions of won, but only realized the document was forged after the borrower stopped repaying, by which time there was no way to recover the money."

"A relative of the account holder forged an ID card, withdrew tens of millions of won from a fixed deposit at the bank, and then fled."

"An accounting staff member who knew the corporate account password even forged the company seal and withdrew the money in the account."

These are various fraud methods banks fell victim to last year. And that's not all. There was also a case where someone lent their name to a group committing jeonse (long-term lease) loan fraud, registered as the owner of two villas in Seoul and Incheon, made a false lease contract with accomplices, and then embezzled 200 million won in jeonse loans from the bank.

According to the '2022 Status of Financial Incidents at Commercial Banks' received by Rep. Yoon Chang-hyun of the People Power Party from the Financial Supervisory Service on the 23rd, besides internal financial incidents within banks, cases where banks were defrauded by outsiders causing financial incidents were not uncommon.

Hana Bank (1 case, 800 million won), Woori Bank (1 case, 660 million won), Shinhan Bank (3 cases, 310 million won), and Kookmin Bank (1 case, 10 million won) all suffered fraud damages. The main method was forging documents to deceive bank employees, obtaining loans, and then absconding. A bank official said, "If the forgery is sophisticated enough, the bank is helpless," adding, "We need to strengthen verification procedures more than now."

Including failures in internal controls that led to major financial incidents, the scale of incidents is much larger. Looking at the financial incident status by bank, Woori Bank had the largest amount at 70.95 billion won (embezzlement 70.13 billion won, fraud 660 million won, theft 160 million won). Kookmin Bank had 14.97 billion won (breach of trust 14.95 billion won, fraud and theft 10 million won each), Hana Bank had 1.52 billion won (fraud 800 million won, breach of trust 600 million won, embezzlement 120 million won), and Shinhan Bank had 610 million won (fraud 310 million won, embezzlement 300 million won) in that order.

The Financial Services Commission is currently developing measures to improve internal controls. One approach is to impose internal control management obligations to prevent CEOs and executives from escaping responsibility for large-scale financial incidents such as private equity fund scandals or massive embezzlement cases.

Banks have also significantly increased internal control personnel. According to last year's business reports, Woori Bank increased compliance monitoring staff by 5 (from 45 to 50), and also increased legal department (from 25 to 31) and anti-money laundering center staff (from 39 to 45) by 6 each. Kookmin Bank also increased compliance support department (from 58 to 66) and legal support department staff (from 17 to 30) by 8 and 13 respectively. Shinhan Bank established a compliance management department in January this year.