A former loans manager at South Korea’s NH Bank (NongHyup) has been accused of embezzling company funds to buy cryptocurrency, resulting in losses. NH Bank discovered irregularities during an audit in August this year, revealing that the manager had stolen a total of $12.5 million worth of loans over four years, from June 2020 to August 2024. The audit found a suspicious flow of loans at a branch in Seoul, with one loan worth over $7.3 million made using nonexistent real estate as collateral. The manager, surnamed Kim, admitted to taking out loans using fake documents, including bogus real estate registry certificates, to invest in crypto.
NH Bank has determined that $8.8 million of the total stolen amount was embezzled using illegal lending methods, sparking an ongoing investigation. The bank has vowed to resolve all issues related to the case and improve its system to prevent future occurrences. It is also investigating other employees involved in the scandal. NH Bank’s media outlet noted that a decade ago, the bank implemented a network of roving auditors composed of former employees. However, there are concerns about impartiality in the system, as all 369 roving auditors are former Nonghyup Bank employees. Lawmaker Kang Jun-hyun emphasized the need for internal control systems to prevent financial accidents in the future.
In a similar incident earlier this year, NH Bank’s rival Woori Bank faced a breach involving a former loan manager accused of stealing funds for crypto investments. The ex-Woori staffer confessed to stealing $7.3 million of the bank’s funds, primarily for crypto purchases. He admitted that most of his crypto investments had failed, leading to significant losses. Both NH Bank and Woori Bank’s incidents highlight the risks associated with internal fraud and misuse of company funds for personal gain. The South Korean National Assembly is expected to examine the matter closely to ensure that financial institutions have robust control systems in place to prevent such incidents from occurring.
Cryptocurrency-related embezzlement cases involving bank employees raise concerns about the security measures and oversight mechanisms of financial institutions in South Korea. The use of fake documents and fraudulent activities to obtain loans for crypto investments underscores the importance of stringent internal controls and audits to detect and prevent such fraudulent activities. The impact of such incidents extends beyond financial losses to reputational damage for the affected banks, highlighting the need for proactive measures to strengthen internal controls and oversight. The South Korean government and regulatory bodies may need to introduce stricter regulations and penalties to deter such fraudulent activities and protect the interests of investors and the banking sector at large.
In response to the embezzlement scandals, NH Bank and Woori Bank are likely to review their internal control systems and security protocols to enhance detection and prevention measures. Strengthening employee training on ethics and compliance with regulations, as well as improving transparency in financial transactions, could help mitigate the risks of internal fraud. Implementing advanced technologies such as blockchain for secure and transparent record-keeping of transactions could also enhance the overall integrity and security of banking operations. The incidents involving NH Bank and Woori Bank underscore the importance of maintaining vigilance and implementing robust risk management practices to safeguard against financial crimes and protect the interests of stakeholders.
