[Exclusive] Tens of Billions Embezzlement Incident at Shinhan Bank... Employee Disappears After Resignation

Embezzlement Through Export-Import Corporate Accounts
Employee Missing After Resignation... Bank Trying to Locate
Embezzlement Reported to Financial Supervisory Service the Previous Day
Shinhan, Once Seen as a "Model Case," Suffers Critical Blow to Trust and Image
Two Incidents This Year... Lax Internal Controls Under Scrutiny

It has been confirmed that a multi-billion won embezzlement incident occurred at Shinhan Bank. Despite Shinhan Financial Group emphasizing the strengthening of internal controls as its first management strategy this year, such an incident has occurred, dealing a fatal blow to the image of Shinhan Financial Group. In particular, in this embezzlement case, the employee involved is believed to have siphoned off money while evading surveillance for three years, drawing criticism toward the lax internal controls of Shinhan Financial Group.

According to the financial industry on the 7th, Shinhan Bank recently became aware of an employee's embezzlement and is conducting an internal audit.

This employee is confirmed to have been involved in embezzlement while handling export-import trade accounts at branches including the Apgujeong branch in Seoul for over three years. Export-import trade accounts are financial accounts used by export-import companies for receiving and making payments during trade transactions. To manage risks arising from exchange rate fluctuations, currency exchange is also conducted, and the employee exploited this to siphon off money from export-import corporate customers.

Within Shinhan Bank, rumors are widespread that the embezzled amount ranges from 25 billion to 29 billion KRW. However, Shinhan Bank stated that the embezzlement amount is not in the hundreds of billions of won. The amount reported by Shinhan Bank to the Financial Supervisory Service the previous day is estimated to be around 1.7 billion KRW. The employee is believed to have evaded detection by using a scheme of withdrawing money and partially returning it. After transferring to the Samseong-dong branch, the employee resigned and is currently missing, with the bank still trying to locate him. A Shinhan Bank official said, "We are conducting an internal investigation" and "We are verifying the exact circumstances." The final embezzlement amount is expected to change after the internal investigation. Shinhan Bank anticipates the embezzlement amount to increase. Accordingly, the final embezzlement amount is likely to reach at least 2 to 3 billion KRW.

This is the second financial accident at Shinhan Bank this year. Last month, the bank disclosed a financial accident involving fraud by an external party amounting to 1.998 billion KRW. It is related to a large-scale loan fraud case that occurred in Sejong City, where the suspect illegally obtained loans from major banks including Shinhan Bank by using the names of colleagues.

Last year, a breach of duty incident involving 1.34 billion KRW occurred. During the process of executing corporate collateral loans, a loan officer at a branch was caught in an internal audit for inflating credit evaluations and pushing through excessive loans.

Compared to other banks, Shinhan Bank had relatively fewer financial accidents in terms of frequency and amount over the past two years, thus escaping criticism of internal controls. Nevertheless, various incidents have occurred in the financial sector, and CEO Jeong Sang-hyuk emphasized in his New Year's address this year, "Let us make this year a year to enhance the completeness of internal controls." However, with this incident, it has become clear that Shinhan Bank also has many loopholes in its internal control system. Currently, rumors say that the incident was uncovered when the victim company discovered a significant shortage of funds during accounting settlement and requested the bank to verify the facts, but Shinhan Bank denied this. A Shinhan Bank official explained, "During ongoing audits, we noticed something unusual about the maturity extension of the case and conducted an on-site audit, where it was revealed."

An industry insider said, "Despite last year’s efforts by each bank to inspect and strengthen internal control systems ahead of the implementation of the 'Accountability Structure,' known as the Serious Accident Punishment Act in the banking sector, financial accidents continue to occur," and added, "Despite stern warnings from financial authorities, repeated financial accidents in the banking sector from the beginning of the year will put internal control deficiencies back under scrutiny."