Hana Bank Fined 370 Million Won for Violating Banking Act and Electronic Financial Transactions Act

Hana Bank has been fined for violating procedures related to credit extensions to specially related parties of its major shareholders.

According to a disciplinary notice from the Financial Supervisory Service on January 9, the previous day Hana Bank was notified of a fine of 370 million won. In addition, two retired employees received warnings, one current employee received a warning, and eight employees were conditionally exempted from compliance training requirements.

Hana Bank extended credit to specially related parties of its major shareholders in amounts exceeding the regulatory threshold, but failed to promptly report this to the Financial Supervisory Service and did not disclose the information on its website or other public channels. Subsequent disclosures also omitted these details.

Under the Banking Act, when a bank extends credit to specially related parties of major shareholders in an amount exceeding either 0.1% of its equity capital or 5 billion won, whichever is less, it must first obtain board approval, promptly report it to the Financial Supervisory Service, and disclose the information on its website or other public channels.

Furthermore, at the end of each quarter, the bank must disclose the total amount of credit extended to major shareholders, the net change in credit extensions during the quarter, and the terms of such transactions within one month after the end of each quarter.

In addition, Hana Bank failed to comply with obligations under the Electronic Financial Transactions Act to protect electronic data in its internet and mobile banking systems.

When testing a program designed to consolidate funds from multiple accounts into a single account for corporate clients, Hana Bank omitted the 'account ownership verification process.' This allowed funds from accounts belonging to other corporations to be fraudulently transferred to the requesting corporation's account. As a result, one customer attempted to consolidate funds from multiple accounts of other corporations several times, illegally transferring hundreds of millions of won into their own corporate account.

Other violations included failure to report changes to financial transaction terms and conditions as required by the Banking Act, failure to notify customers of changes to electronic financial transaction terms and conditions as required by the Electronic Financial Transactions Act, and failure to report collateral loans secured by equity securities exceeding 20% as required by the Banking Act.