Daegu Bank accused of creating over 1,600 fake securities accounts

Finance

Published: 13 Oct. 2023, 18:59

Daegu Bank accused of creating over 1,600 fake securities accounts

Forged bank account application on which the names of the applicant and account owner do not match [KOREA FINANCIAL SUPERVISORY SERVICE]

Daegu Bank created more than 1,600 fake securities accounts over the past two years, the Financial Supervisory Service (FSS) said Thursday.

The bank created the securities accounts by connecting them to customers' accounts from Aug. 2021 through July 2023.

Headquartered in Daegu, the bank is pushing to become a commercial bank.

Seven employees at the bank deliberately changed the contact information of some customers to prevent them from being informed that the securities accounts were created, as well as about their terms and conditions.

The financial regulator attributed the creation of 1,662 fake accounts to the bank's ambition to raise its noninterest profit.

It blamed the bank for having no internal control system to prevent illegal and unfair practices that may occur in the process of creating securities accounts.

For instance, the bank can print out documents that customers electronically signed. The bank can also revise contact information like customers' cell phone numbers when creating securities accounts, an exception that isn't applied when creating other types of accounts.

Forged bank account open form with different securities companies' names. The text in the upper red box says the form is for Kiwoon Asset Management, and the red box below shows that the form is for Hi Investment＆Securities. [KOREA FINANCIAL SUPERVISORY SERVICE]

The bank also failed to make proper follow-up inspections and measures, according to the FSS.

After discovering this mishap in April, the bank sent official letters to its branches asking to reinforce internal control mechanisms to prevent recurrences. No specific guidelines were attached to the letter.

Daegu Bank launched its internal inspection in July after a complaint was filed a month earlier. It reported the inspection results in August.

The FSS said it would expand inspections on regional banks due to a series of financial irregularities at regional banks.

During a parliamentary inspection Wednesday, Financial Services Commission Chairman Kim Joo-hyun said that DGB Daegu Bank's creation of fake accounts will be considered when reviewing its suitability to become a commercial bank.

BY KIM NAM-JUN, LEE SOO-JUNG [lee.soojung1@joongang.co.kr]