Loan fraud hits major banks, total losses near W49b

A series of loan fraud incidents carried out by outside parties has hit major South Korean commercial banks, with some institutions revising their disclosed loss figures sharply upward.

KB Kookmin Bank, Shinhan Bank, Woori Bank and Industrial Bank of Korea all filed regulatory disclosures Wednesday afternoon reporting financial incidents caused by external fraud. Combined, the four banks' losses amount to about 49 billion won ($34.6 million).

KB Kookmin Bank disclosed a fraud-related financial incident totaling 3.58 billion won. The incidents occurred between September 2023 and December 2024 and were discovered at branch level.

"A real estate developer and fictitious pre-sale applicants conspired to commit loan fraud," a KB Kookmin Bank official said, adding that investigative authorities are currently looking into the case.

Shinhan Bank put its fraud-related losses at 17.34 billion won. The bank first disclosed the incident in December last year at 2.96 billion won, raised the figure to 6.97 billion won in June and has now more than doubled it again.

"Additional losses were identified in the course of our internal probe and the police investigation," a Shinhan Bank official said. "We are actively cooperating with police and are also working to recover the loans through collateral sales and bond preservation measures."

Woori Bank also disclosed a fraud-related incident worth 9.87 billion won. The bank had initially estimated losses at about 4 billion won when it first disclosed the case in June, but the figure more than doubled during the subsequent investigation.

The incidents at Woori Bank occurred between August 2024 and April last year.

"Additional fraud cases using the same method were identified as we expanded our investigation, leading us to revise the loss amount and the period covered," a Woori Bank official said.

Industrial Bank of Korea also revised its disclosure Wednesday, raising its reported loss from 4.78 billion won — the figure it disclosed in June — to 18.22 billion won.

"Investigative authorities are currently conducting an investigation," an Industrial Bank of Korea official said. "If illegal conduct is confirmed, we will take necessary legal action, including filing criminal complaints."

The incidents are expected to weigh on the banks as they expose gaps in internal controls. However, some observers note that the banks are also victims in these cases, given that the fraud involved outsiders obtaining loans through fictitious pre-sales or repeated use of the same scheme.