Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Financial authorities to strengthen internal control in card, credit companies
Financial Supervisory Service (FSS) Governor Lee Bok-hyun, second from right, speaks during a meeting with heads of accounting firms in Seoul on Nov. 6. Yonhap
By Anna J. Park
FSS to implement revamped internal control rules for credit firms
Financial authorities have begun an overhaul of internal control regulations in the consumer credit sector, with implementation expected next year. The move follows strengthened internal controls in the banking sector.
According to the Financial Supervisory Service (FSS) on Tuesday, a set of improved internal control guidelines for the credit-related sector will be announced later this month. They will start being incorporated into each firm's internal bylaws next January.
The move comes as the FSS realized the need to strengthen internal control regulations in the industry, given that card companies are usually extensively involved with marketing initiatives of other companies. This approximate relationship between card companies and partnered marketing firms opens opportunities to collude illegally for illicit personal financial gains.
The FSS uncovered an embezzlement case by employees of Lotte Card in August. Lotte Card employees allegedly conspired with companies to siphon 10.5 billion won ($8 million) into their pockets under the guise of a cooperative agreement deal between the firms. The case is being sent to the prosecution for further investigation.
As the embezzlement incident raised concerns about the inadequacies and vulnerabilities of internal controls in consumer credit companies, the FSS plans to revamp the industry's internal control guidelines and push forward with revision of the Specialized Credit Finance Business Act.
Whereas the country's banking, insurance and capital market laws contain provisions that allow direct punishment of employees violating the law, the specialized credit business act does not include such clauses. This loophole in the legal framework leaves the financial authorities with no legal grounds to punish employees of card companies who turn out to have engaged in embezzlement or misappropriation.
"The FSS plans to implement the new set of internal control guidelines later this month, which will be reflected in each company's bylaws starting January next year. In particular, the financial authorities deem it necessary to develop industry-specific internal control for capital companies' auto finance and real estate project financing businesses, which involve high risk factors," an official from the FSS pointed out.