Bank controls under a microscope
According to KB Kookmin Bank, from 2009 until recently, Park from the housing funds department liquidated a total of 9 billion won worth of national housing bonds by forging documents with the help of a fellow employee from a different branch. The bank, however, was not aware of this until an insider reported irregularities.
“After receiving an insider report, we conducted our own inspection and were able to conclude that two employees - one from the headquarters [Park] and the other from a branch - plotted the crime by forging housing bonds documents to pocket large sums of money,” KB Kookmin Bank said in a statement Sunday.
This wasn’t the first case of an irregularity at KB Kookmin Bank.
In June, an employee allegedly helped a criminal withdraw 10 billion won by accepting a forged bank check.
The country’s financial regulator notes that above all, the bank’s poor internal control system played a huge part in allowing employees to commit financial irregularities. It also cites the unstable corporate governance structure. KB Kookmin Bank does not have an owner and industry analysts note that over a period of several years, there allegedly have been many parachute appointments whenever there is a change of government administration. This, they say, has caused employees to feel somewhat less responsible or guilty about engaging in fraud and unethical practices.
“When we look at financial accidents over the past several years, most of them occurred at KB Kookmin Bank, Woori Bank and NH Nonghyup Bank,” said an industry official. “Employees tend to be less moral and loyal to the companies they’re working for because their management [without owners] tends to be more vulnerable to outside variables like politics and policy changes.”
At KB Kookmin Bank earlier this year, there was an incident where Park Dong-chang, a close associate of former KB Financial Group Chairman Euh Yoon-dae, allegedly leaked distorted information to U.S.-based Institutional Shareholder Service (ISS) so ISS would recommend that foreign shareholders not vote for outside directors who would oppose Euh. The former chairman had been trying to purchase ING Life Insurance, but some outside directors were reportedly opposed to the plan.
Industry insiders note that KB Kookmin Bank in relation to other financial institutions has been struggling from a deep-rooted culture of cliques. Kookmin Bank merged with Korea Housing Bank 12 years ago and there have been concerns about organizational disunity for more than a decade.
“Whenever top management changes every two to three years, it has been the case that the whole organization shakes up with reshuffles,” said a top official at a commercial bank. “And for those employees who have experienced such changes, it seems many of them tend to think it would be better for their own good to stand in line after someone influential or with authority rather than work hard and be accepted for his or her ability.”
Lim Gie-young, a professor at Hankook University of Foreign Studies, echoed that view, saying that establishing strong corporate governance is what is most needed at financial institutions.
“Under a strong corporate governance structure, employees wouldn’t give out illegal loans easily and take kickbacks,” Lim said. “If financial institutions do not improve their overall corporate culture and morale, then what we saw in recent months at KB Kookmin Bank will be repeated in the future.”
Some note that currently, when there is a financial crime, only the individual in charge is blamed and takes responsibility by receiving punishment, but the organization as a whole should take responsibility to prevent so-called rogue traders from committing crimes in the workplace. A rogue trader refers to an employee involved in unauthorized financial trades.
Industry insiders also warn that financial crimes can happen anywhere, anytime, by anyone at work given the example that KB Kookmin Bank employee Park was perceived as honest and exemplary by co-workers.
According to the financial institution, Park was respected by many. He and his wife were both breadwinners and able to put in a fixed amount of savings every month.
“In general, we don’t place an employee struggling from financial difficulties in a job that deals with large sums of money,” said an official from KB Kookmin Bank. “We judged there would be no problem giving Park his role in being responsible for housing bonds.”
According to Kwak Keum-joo, a psychology professor at Seoul National University, there are often cases when hard-working employees later turn out to be involved in financial crimes after failing to fully express their dislikes, unlike employees that complain on a daily basis.
In fact, Lee, head of KB Kookmin Bank’s Tokyo branch who allegedly received rebates in return for creating 2 billion won in slush funds, also was a quiet, hard-working employee.
BY LEE TAE-KYUNG, LEE EUN-JOO [email@example.com]
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