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Prosecutors discover more FSS misconduct

Prosecutors have uncovered additional alleged ethical breaches by former and incumbent staff at the Financial Supervisory Service.

The further allegations of corruption by FSS officials are adding to public criticism the regulatory body is facing for its irregularities in supervising savings banks.

The alleged scandals mostly involve FSS staff overlooking illegitimate practices in the market in return for kickbacks.

The prosecution is now alleging that a senior FSS official leaked internal regulatory information after receiving 120 million won ($110,000) in bribes from debt-ridden Busan Savings Bank. This official is suspected of instructing the savings bank to conceal irregularities, informing it of a scheduled low-key audit by the FSS.

Meanwhile, another employee at the financial watchdog has been taken into custody for receiving a car in return for glossing over irregular practices of Bohae Savings Bank.

According to the prosecution, the regulatory official demanded Hyundai Motor’s Grandeur sedan worth 40 million won. This official, who was in charge of inspecting Bohae Savings, had also allegedly urged 56 employees of the bank to buy insurance products to help his wife who was working for an insurance company.

A former deputy director general is also wanted by the prosecution for taking kickbacks of 200 million won from Bohae Savings Bank.

Concerning the secondary banking sector, prosecutors said a number of confidential documents held by the FSS were leaked into the market.

Amid the series of fresh allegations, the prosecution has decided to widen the scope of investigation into the corruption related to savings banks.

The extended probe is based on new allegations that VIP customers had been tipped off on classified information several weeks before Busan Savings Bank were halted their operations.

While the prosecution had investigated customers who withdrew their deposits a day before business suspension in mid-February, depositors who took out their money since late January will become targets of the extended investigation.

Most of the FSS staff appeared to be stunned by the criminal charges against their colleagues, but observers attributed the prosecution’s tough stance as reflecting Cheong Wa Dae’s determination to weed out regulatory wrongdoings.

Meanwhile, several observers argue it was the presidential office which banned the FSS from taking punitive measures against ailing savings banks due to the G20 Seoul Summit last November.

By Kim Yon-se (