IBK Bank's 88.2 Billion Won Improper Loans Detected...FSS "Strict Sanctions on Illegal Activities"

Improper Loans of 88.2 Billion KRW Involving Current and Former IBK Executives and Employees Uncovered
Bithumb Provided High-Priced Company Housing to Current and Former Executives Without Internal Controls
FSS: "Financial Companies Still Have Inadequate Internal Controls, Strict Sanctions Planned"

The Financial Supervisory Service (FSS) has uncovered improper loans amounting to 88.2 billion KRW involving current and former executives and employees of IBK Industrial Bank of Korea. Cryptocurrency exchange Bithumb was found to have provided company housing worth 11.6 billion KRW to four current and former executives without internal control procedures. The FSS pointed out that financial companies were aware of employee misconduct but tolerated it and failed to properly report related incidents, indicating a failure of internal controls, and announced strict sanctions.

Improper Loans of 88.2 Billion KRW Involving Current and Former IBK Executives and Employees Uncovered

On the morning of the 25th, the Financial Supervisory Service held a briefing at its headquarters in Yeouido, Seoul, disclosing 'Recent FSS Inspection Cases on Improper Transactions with Interested Parties.'

A representative case revealed by the FSS involves a former IBK employee, Mr. A, who conspired with his spouse (a loan officer currently employed at IBK) and colleagues who joined the bank at the same time (head of the screening center, branch manager) to receive or arrange improper loans totaling approximately 78.5 billion KRW over about seven years from 2017 to last year.

Mr. A, who worked at IBK for 14 years before retiring, engaged in real estate development and conspired with current executives and employees, including his spouse, to falsify loan-related documents and proof of self-funding capacity. The involved parties colluded and tacitly approved these actions, resulting in a total of 51 cases of improper loans amounting to 78.5 billion KRW.

Misconduct by other employees was also detected. Mr. B, head of the IBK screening center, conspired with a corporate client while serving as a branch manager to handle improper credit five times, totaling 2.7 billion KRW. He is also accused of receiving 98 million KRW over two and a half years through his sister-in-law’s salary account. Mr. E, a branch team leader at IBK, handled improper loans twice totaling 7 billion KRW without verifying the purpose of funds or loan documentation at the request of retired employee Mr. F.

Lee Se-hoon, Senior Deputy Governor of the FSS, explained, "As of the end of last month, the total improper loan amount at this bank is 88.2 billion KRW (58 cases), with an outstanding loan balance of 53.5 billion KRW, of which 9.5 billion KRW (17.8%) has become non-performing." He added, "Following the detection of these improper loans, it has become difficult to roll over loans, so defaults are expected to increase in the future."

The FSS viewed the failure of internal controls as a major issue, noting that the department responsible for investigating misconduct within IBK attempted to conceal and downplay incidents despite receiving reports of improper conduct by employees. An FSS official emphasized, "Although the department confirmed the related misconduct, it submitted false, reduced, and delayed reports to the FSS. During the FSS inspection period, six employees deleted 271 files and internal messenger records under the department head’s orders, obstructing the inspection in an organized manner."

Kim Sung-tae, President of IBK Industrial Bank of Korea, stated, "We sincerely apologize for causing concern to our customers and the public due to this incident. We will take the FSS audit results as an opportunity for thorough reflection and do our best to implement flawless follow-up measures and establish prevention plans." He also explained that IBK plans to soon announce strong reform measures covering business processes, internal controls, and organizational culture.

Bithumb Accused of Providing Company Housing Worth 11.6 Billion KRW to Executives Using Company Funds

The FSS also disclosed an improper company housing lease contract case at cryptocurrency operator Bithumb. Bithumb is accused of providing high-priced company housing with a total lease deposit of 11.6 billion KRW to four current and former executives without internal regulations or internal control procedures related to support limits, duration, and deposit recovery while operating a leased housing system.

Mr. K, a current executive at Bithumb, independently decided to provide himself with high-priced company housing (lease deposit of 3 billion KRW) despite a conflict of interest. It was also revealed that Mr. L, a former executive and current advisor at Bithumb, personally purchased a house and disguised it as company housing to receive a deposit of 1.1 billion KRW from the company. Mr. L used this deposit to pay the remaining balance on the personal property and later rented the house to a third party without providing it as company housing, collecting a deposit of 2.8 billion KRW.

Additionally, at C Nonghyup Cooperative, improper loans totaling 108.3 billion KRW occurred over 392 cases. Mr. M, a legal affairs office manager who handled corporate affairs at C Cooperative for over 10 years, brokered improper loans amounting to a tentative 108.3 billion KRW over five years by manipulating housing sales contracts and engaging in loan brokerage, registration, and document submission based on his long-standing personal network with cooperative executives and employees. Despite numerous suspicious signs in sales contracts and registration certificates, the cooperative neglected to properly verify original contracts, deposit receipts, and actual transaction prices during loan screening.

Senior Deputy Governor Lee emphasized, "We will strictly sanction violations such as improper loans confirmed through inspections according to relevant laws and procedures. Suspected criminal acts by related executives and employees will be reported and notified to investigative authorities, and we will actively cooperate with investigations to clearly establish facts regarding violations and related parties."