Watchdog widens investigation into massive loan fraud case
Published : 2014-02-07 20:21
Updated : 2014-02-07 20:21
Financial authorities are widening the scope of their investigation into possible fraudulent financial transactions in the wake of loan scams involving a unit of KT Corp. and some major commercial banks.
The Financial Supervisory Service said Friday it would investigate all commercial and saving banks as well as other capital services companies to crack down on irregularities or violations.
The announcement came while police are questioning an employee of KT ENS, affiliated with KT Corp., the nations’ leading telecom company, on suspicions of taking bribes from subcontractors in exchange for helping them obtain up to 280 billion won ($260 million) in loans with forged documents.
Three major banks ― KB Kookmin Bank, Hana Bank and NH NongHyup Bank ― and 10 other saving banks are believed to have offered the money without properly checking the fake documents, according to the FSS.
The financial regulator said it will do on-the-spot inspections at banks, not only the major ones involved in the financial fraud case, but also small and medium-size regional banks.
“We’ve decided to launch a nationwide crackdown as we presume there may be more financial firms victimized by the fraud,” said an official from the FSS.
The official noted the regulators were looking at banks with corporate lending in particular.
“We presume the suspect took advantage of a loophole in financial firms’ loan-lending systems ― they tend to have blind faith in conglomerates or big business firms.”
According to police, the 51-year-old employee only identified by his surname Kim is believed to have duped several banks by getting loans with false accounts receivables.
An accounts receivable is used when a company has made a sale but has not yet received a remit for the goods from the customer. As a source of short-term financing, the bonds are often used by business firms as they offer a less-rigid framework.
Police believe the employee had used his close connections with the subcontractors, which supply mobile handsets to KT’s affiliated firm, to get the loans sanctioned for them by creating false orders. The subcontractors are believed to have given him millions of won in bribes each time for taking the illegal loans.
Although the banks involved in the case claim that they offered the loans through the proper procedures, the regulator’s probe will deal yet another heavy blow to local major banks that have been under investigation for the massive data breach scandal.
Last month, the FSS and prosecution revealed that some 20 million clients’ personal data from several credit card firms including the ones affiliated with KB and NH were leaked.