South Korea’s financial authority has launched an investigation into an embezzlement worth 56.2 billion won ($43.4 million) at BNK Kyongnam Bank Co., marking the second-largest amount after a 69.7 billion won incident at Woori Bank last year that involved 69.7 billion won.

The Financial Supervisory Service (FSS) on Wednesday confirmed the embezzlement of 56.2 billion won at BNK Kyongnam Bank after conducting an on-site inspection upon receiving a report of embezzlement of project financing (PF) loans on July 21.

The amount initially reported by the bank was 7.79 billion won, but the on-site examination identified an additional 48.4 billion won.

The bank has filed a criminal accusation against the employee suspected of being involved in the embezzlement. The employee’s whereabouts is unknown, according to the bank.

The FSS examination revealed that the suspected employee had embezzled bank funds over a period of six years by stealing parts of the repayment principal of non-performing PF loans or by obtaining loans through falsified documents.

The employee has also allegedly misappropriated PF loan repayments to settle another PF loan he was responsible for. The financial authority is currently conducting further investigations into alleged embezzlement at other PF businesses managed by the same employee.

Following the FSS’s announcement, law enforcement conducted raids on the same day at around 10 relevant premises, including the employee’s residence, office, and the real estate investment department at BNK Kyongnam Bank.

The financial authority cited likely failures in the bank’s internal controls and has been monitoring PF loans at the relevant branch as well as the bank’s headquarters, while calling for monitoring of PF loans at other banks.

By Moon Jae-yong, Myung Ji-ye, and Chang Iou-chung

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