Woori Financial Group Fined for Embezzlement and Miscalculated Values
Key Highlights :
The Financial Supervisory Service (FSS) fined Woori Financial Group 100 million won ($76,254) after an employee of the group’s savings bank subsidiary was found to have embezzled over 200 million won, in yet another indication of internal control failures, according to market watchers, Thursday. The fine adds to criticisms of the group still reeling from last year's unprecedented embezzlement of 70 billion won at Woori Bank. Also damning is Wednesday’s report of the bank’s loss of 96.2 billion from miscalculated values of its derivatives products in the second quarter.
The FSS stated that the employee embezzled 234 million won between Feb. 2, 2015, and Oct. 27, 2020. The employee falsified records to generate unwarranted costs to pay certain fees, wire money to borrowers and cover other costs needed in the process of credit financing. The FSS further noted that Woori Bank's books recorded 96.2 billion won in additional losses for the second quarter due to a dealer at the department attempting to hedge the losses by increasing holdings of long-term options positions, but the sustained market volatility only ended up extending the losses.
Woori Bank maintains that the 96.2 billion won loss has no bearing on the bank customers, adding the matter is a negative factor for its corporate financials only. “The incident did not impact consumers financially. The loss was found during our internal risk management review. We found the problem and solved it and the employee was put under a review for disciplinary action,” a Woori official said.
However, market watchers believe that the financial group's credibility – the most important value of a financial service provider – will be severely undermined, unless the internal controls including heavy penalties are fortified to prevent repeated offenses. An industry official was of the opinion that the mindset of ‘no harm, no foul’ is too brazen, since everybody knows that risk management is all about prevention and early detection. “The 70 billion won embezzlement case from last year has left a permanent stain on the financial group. Similar cases of this sort only go to show how neglectful the group is in instituting necessary measures.”
The FSS has taken action against Woori Financial Group for the embezzlement and miscalculated values, and it is important for the group to take steps to ensure that such incidents do not occur in the future. The group must strengthen its internal control systems and ensure that all employees are aware of the consequences of their actions. Additionally, the group must also ensure that its risk management systems are up to date and effective. Only then can the group restore its credibility and ensure that such incidents do not occur in the future.
