FSS probes Kookmin’s dealings in Kazakhstan

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FSS probes Kookmin’s dealings in Kazakhstan

Following an allegation that Kookmin Bank was trying to create a slush fund in Tokyo, the nation’s financial authority plans to investigate other dubious practices of the bank in Kazakhstan.

The Financial Supervisory Services said yesterday it will dispatch a delegation led by Senior Deputy Governor Cho Yeong-je to Kazakhstan to look into allegations of Kookmin Bank’s mismanagement involving Bank CenterCredit (BCC), a Kazakhstan bank Kookmin bought in 2008.

The FSS investigation comes after the Kazakhstan financial authority reported the result of its investigation of BCC. The two authorities have a memorandum of understanding to share financial industry information.

Kookmin Bank held a 29.56 percent stake in BCC as of September. In 2008, the bank under the stewardship of then-President Kang Chung-won bought a 41.93 percent stake for 939.2 billion won ($883.7 million), but has incurred a 300 billion won loss. Kang was held responsible and sacked.

The bank had planned to make BCC a subsidiary in January 2013, but was the move was not approved by the financial authority due to vulnerable finances of the Kazakhstan bank.

“If the BCC case turns out to be true following the Tokyo case, the authority will hold the bank accountable for poor management of its overseas branches,” said an FSS official.

According to the JoongAng Ilbo, the FSS is inspecting the promotion of the chief of Kookmin Bank’s Tokyo branch, surnamed Lee, suspecting him of leading creation of a slush fund from 2004 to 2006, and 2010 to early this year. The FSS is focusing on connections between Lee and former top management at KB Financial Group.

It is also investigating an allegation that a Korean company branch in Tokyo lent Lee a bank account to help him send slush funds to Korea.

In September, the FSS found in its special probe that the Tokyo branch of Kookmin Bank issued 200 billion won in loans illegally to 20 local companies since Lee became the branch head. The authority also found the branch received 2 billion won in commission fees for the loans through a separate account under a false name.

BY SONG SU-HYUN. LEE JI-SANG [ssh@joongang.co.kr]
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