Hardly a day goes by without news about financial scandals breaking out. A massive theft of credit card users’ data shook the nation recently. This was followed by illegal loan scandals involving Tokyo branches of two major banks, and another massive loan fraud case is now being unraveled.
These cases raised doubts about, among other things, the capabilities of the nation’s financial regulators and watchdogs ― namely the Financial Supervisory Commission and the Financial Supervisory Service.
Then came the shocking news that a senior FSS official was under investigation over allegations that he provided information about his agency’s investigation into a large-scale loan fraud case involving KT ENS Co., a subsidiary of the telecom giant KT.
Police said the official allegedly had corrupt ties with perpetrators of the loan scandal and provided information about the FSS investigation into a key suspect in January before police took over the probe. The suspect fled overseas and is believed to be in Vanuatu.
The suspect is accused of having played a key role in the scandal, in which employees of KT ENS and its subcontractors used fake documents to illegally borrow 1.83 trillion won ($1.7 billion) from 16 local banks.
That the FSS leaked information about a probe into such a massive loan fraud and even aided a core suspect fleeing the country should not be taken lightly.
As the top financial watchdog, the FSS is obligated to maintain very high ethical standards and implement foolproof anti-corruption mechanisms. If not, it would be little more than a dog sniffing around for tasty bribes and wagging its tail at dirty crooks.
Many were surprised not only by the scale of the latest loan fraud but also the fact that all of the concerned parties ― the FSS, KT and banks ― had been kept in the dark. It would not be going too far to say that the nation’s financial system, especially its surveillance and auditing functions, is in disarray.
Besides ferreting out those responsible for the fraudulent loan scandal, both the FSS and the FSC, the chief regulator, should make a full review of their monitoring of the financial system to make sure there are no more such cases.