Citibank Korea has become the latest victim in a string of fraudulent loans involving large corporate customers.
Digitech Systems, a main supplier of Samsung Electronics’ assembly lines in China, is currently under investigation for taking money worth 18 billion won ($17 million) in loans from the bank with forged documents, according to the Financial Supervisory Service.
According to the financial watchdog, the local touch-panel producer borrowed the money from Citibank with false account receivables through a loan service known as factoring.
Factoring refers to bank loans tied to accounts receivables and is often used by big Korean firms for short-term financing.
The regulator said it was also looking into whether the bank had offered the loans using proper procedures, though the lender declined to comment on the report.
The FSS is on full alert as financial regulators have pledged to crack down on fraudulent loans.
The FSS said Sunday that it would widen its investigation into all financial institutions across the country amid a series of loan scams involving several major commercial banks.
The watchdog is looking particularly closely at financial firms’ corporate loan services as it appears that they have lax management on lending to conglomerates.
The loan scandal came just one week after other major banks were involved in another fraudulent loan scandal.
The FSS and prosecutors discovered that an employee of KT ENS, an affiliate of KT Corp., took bribes from subcontractors in exchange for helping them obtain up to 280 billion won in loans with forged documents.
The country’s top three banks ― KB Kookmin Bank, Hana Bank and NH NongHyup Bank ― and several other saving banks are believed to have offered the money without properly checking the fake documents, according to the FSS.
By Oh Kyu-wook (email@example.com)