A Woori Bank employee under police investigation for allegedly embezzling more than 60 billion won is appearing at the Seoul Central District Court for a hearing on April 30. (Yonhap)
South Korean financial authorities failed to notice a gigantic embezzlement scheme at a major bank here, in which an employee withdrew a total of 61.4 billion won ($48.84 million) from 2012 to 2018, despite completing 11 audits during the period, sources said on Monday.
Police arrested the employee surnamed Jeon, who is in his 40s, last Wednesday just hours after Woori Bank reported the theft. Jeon – who had worked at Woori Bank for nearly a decade – turned himself in.
The employee invested the stolen money in derivatives and helped his brother’s business linked to the development of a golf resort in New Zealand, police said. The employee withdrew a total of 61.4 billion won in three separate withdrawals – in 2012, 2015 and 2018 – Woori said in a regulatory filing on Thursday.
On Monday, Namdaemun Police Station raided the Woori Bank headquarters in central Seoul and Jeon’s home to search for evidence related to the embezzlement. They also raided the home of Jeon’s brother, who received around 10 billion won of the stolen money and was arrested on Thursday as a suspected accomplice.
Prior to his arrest, Jeon allegedly attempted to transfer some of the money to his wife and daughter in Australia, but failed to do so after Woori found out about the plan.
The scandal was quickly condemned by the public, who said authorities and lax oversight at Woori Bank had allowed such massive embezzlement to continue under their noses for a decade.
The Financial Supervisory Service watchdog reportedly carried out a total of 11 inspections and audits on Woori Bank between 2012 and 2018, when the embezzlement took place. In 2015, the FSS uncovered a case of loan fraud amounting to nearly 11.2 billion won that took place between 2008 and 2013 at Woori’s Tokyo branch, but Jeon’s embezzlement is gone unnoticed.
“We will definitely be looking at companies that have audited Woori Bank. I also don’t understand how they missed the irregularities,” said Jeong Eun-bo, head of the FSS.
Neither of the two accounting firms that have audited the bank over the past decade had raised any red flags.
But the head of the watchdog was reluctant to hold Woori Bank executives criminally responsible for the theft, saying it would be too early to do so.
“If we find out they were negligent, that would be a different story,” he said.
In an email to employees, Woori Bank CEO Lee Won-duk pledged to find out if there were other accomplices in the case and to take legal action if necessary. He pledged to restore customer trust, which the bank had failed to protect in the recent case.
“The embezzlement case arose when Woori entered a new era after its privatization,” Lee said in the email.
“The bad intentions and selfish crimes of one man have shaken Woori’s reputation and the trust that our employees have built for a long time. We are currently investigating the matter and if there are other accomplices, we will tell them. we will ask to take responsibility for it.
Woori Bank was technically fully privatized in November last year after the government sold its remaining shares in the bank to private investors and clawed back some 897.7 billion won of taxpayers’ money it funneled through. to the lender following the Asian financial crisis of 1997-98. .
The stolen 61.4 billion won was part of the compensation Woori was to pay Iran’s Dayyani Group for the settlement of an investor-state dispute in 2015.
Dayyani, the family behind Iranian consumer electronics group Entekhab, has demanded Seoul return a $50 million deposit used for a failed bid to buy a controlling stake in Daewoo Electronics. In 2018, the World Bank’s settlement body ordered Korea to pay compensation totaling 73 billion won.
But the transfer of the money has been suspended due to US sanctions against Iran. An exemption was granted to facilitate the transfer at the beginning of the year, causing a review of the accounts and the discovery of the theft which had gone unnoticed for a decade.
Authorities believe Jeon managed to stay under the radar for the past 10 years by falsifying account records. Yet critics say the bank would have detected the theft much sooner had it put in place the appropriate internal and external monitoring measures.