[Viewpoint]Zero tolerance for corruption

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[Viewpoint]Zero tolerance for corruption

Amid a worsening unemployment crisis and looming recession, the Bank of Korea announced that household debt hit a record high, casting a gloomy shadow over the people. Just as in the United States, concerns are growing that the vicious cycle of this recession will continue due to higher household debts.

The Lee Myung-bak administration plans to allocate supplementary funds to support those affected. And yet, we will face serious problems if this enormous budget is not spent properly to support those in need. As household debt grows, companies will fall and more people will lose their jobs. Then, the number of people in trouble will increase, which could cause some of them to bear a grudge against society. That can lead to soaring crime rates.

Day after day, we hear news about embezzlement at home and abroad. At the end of last year, Bernard Madoff, former chairman of the Nasdaq stock exchange and a onetime legend on Wall Street, was accused of embezzling $50 billion in a ponzi scheme, shocking the world. Just a few days ago, a top executive at the Stanford Financial Group was arrested on charges of defrauding investors of $8 billion.

Then, a similar report came out in Korea last week. A rank-and-file officer at the Yangcheon District Office was accused of embezzling $2.6 billion in subsidies for the disabled, shocking the nation.

Embezzlement is not a new crime in Korea. We saw a lot of it in the wake of the 1997 foreign exchange crisis. Many were punished for pocketing local taxes, tuition and compensation and using the money for stock investments. When their investments failed to yield profits, they were not able to return the money, and they eventually they were caught and punished.

One of the most outrageous cases was a crime committed by a local tax official, who was in charge of managing state property. Over a decade, he illegally registered swaths of state land under his own name, and eventually he was the registered owner of plots 20 times the size of Yeouido.

Economic crises usually breed corruption.

In order to prevent crimes during times of economic hardship, we must strengthen monitoring and supervision. These crimes can take place anywhere without us knowing, and more are on the way. The alleged embezzlement of subsidies for the disabled is probably the tip of the iceberg.

It is time for government watchdogs to take action. The financial supervisory authorities must make sure that there is no ponzi scheme like the Madoff fund in Korea. The Board of Audit and Inspection, the ministries and the regional governments must make sure that no tax money is embezzled or wasted. All state-run institutions must do the same.

We, however, must remember that sometimes 10 people are not enough to keep a single theft from happening. The system should be tightened so that no theft of tax money can exist. The internal control system must be checked thoroughly to make sure that it functions properly.

According to reports, the embezzlement at the Yangcheon District Office was only possible because there was a serious loophole in the internal control system. The Seoul city government has handed down guidelines that do not require local officials to turn in a list of subsidy recipients, in an attempt to allow more people to qualify for the subsidy. The changed rules were like building a dark corner where the theft could be carried out with impunity.

For an internal control system to work perfectly, a specialist must be appointed as an auditor and a comptroller in charge. White-collar crimes are evolving rapidly, and auditors who do not understand accounting and computing system will never be able to catch up the criminals.

Korea long had a practice of appointing non-specialists as auditors or comptrollers in state bodies, because of the traditional spoils system in politics. Tax theft will never be stopped unless we change the thinking that auditing is a job that anyone can do.

*The writer is the vice chairman of the Deloitte Anjin LLC. Translation by the JoongAng Daily staff.

by Pyun Ho-bum
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