Agencies unveil moves to prevent export fraudIn a move to prevent another fraud scandal at home appliance maker Moneual, the government has announced a package of measures, including strengthening on-site inspections of exporters’ assembly lines and overhauling the trade insurance system.
Officials from the Ministry of Strategy and Finance, Ministry of Trade, Industry and Energy, Financial Services Commission, Korea Customs Service, and Financial Supervisory Service (FSS) on Thursday pledged to overhaul the credit screening system for exporters and intensify supervision on authorities in charge of guaranteeing loans.
Moneual, a highly regarded mid-size company, once was the nation’s top producer of robot vacuum cleaners and promoted as a “hidden champion” by the government. In October 2013, Moneual CEO Park Hong-seok abruptly announced bankruptcy and requested court receivership.
It was soon revealed Park received loans from private and state-run banks by fabricating accounting and export records, and the loans were guaranteed by government-run trade insurance institutions, which were accused of accepting bribes and lax screening of real financial statements.
According to a bankruptcy ruling in December, the Moneual CEO pocketed 667.2 billion won ($612 million) in loans from export bonds worth more than 3 trillion won by fabricating documents 3,330 times from 2008 to 2014.
A slew of high-ranking government officials have been arrested on suspicion of receiving bribes, including Cho Kye-ryoong, former president at Korea Trade Insurance Corporation (K-sure). According to the prosecution, Park spent about 860 million won on bribes by stuffing cash in cigarette packs, tissue boxes and wine cases.
At Thursday’s briefing, officials said the government will first revise the trade insurance act to enable the FSS, the nation’s top financial watchdog, to directly inspect the loan guarantee system at K-sure at the request of the trade minister.
K-sure has been under the supervision of the trade ministry and the Board of Audit and Inspection.
To prevent bribery, authorities said they would review prior inspections by the FSS and lay off any implicated official regardless of the amount.
The new measures also make it mandatory for inspectors at state-run banks, such as the Export-Import Bank of Korea, to do site visits before approving loans.
Officials said the government also will scrutinize every export contract worth more than $1 million before guaranteeing loans issued by banks to exporters to determine whether or not the owners fabricated the size of the contract or profits.
According to the prosecution, Moneual CEO Park inflated the price of his product, the so-called Home Theatre PC, a device that combines a television and a DVD player that is rarely sold in Korea.
In a sales record document submitted to the banks for loans, Park said the Home Theatre PC cost about 2.5 million won when it actually cost 8,000 won, according to the prosecution.
In terms of guaranteeing export loans, K-sure will share responsibility for inspecting loan guarantee documents with banks.
So far, the state-run corporation took full responsibility for guaranteeing the loans.
On exporters that record suspiciously high earnings or a credit line of more than $10 million the government will launch special monitoring inspections twice a year.
Before accepting bonds from exporters, the government will require banks to strengthen the screening of documents submitted to them, such as contracts, lists of goods and bills of landing. BY KIM HEE-JIN [firstname.lastname@example.org]
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