Housing loan scams hit IBK, Woori Bank

Woori Bank's headquarters, left, and Industrial Bank of Korea's headquarters in Seoul / Korea Times file

A series of commercial property scams at major lenders has put banks on alert for similar fraud schemes involving external parties, industry officials said Tuesday.

Industrial Bank of Korea (IBK) on Monday disclosed a financial fraud case involving 4.78 billion won ($3.11 million) linked to a commercial property presales scam.

According to a regulatory filing, the incident took place between May and December 2024 and was uncovered after investigative authorities requested related documents. The scam involved borrowers misleading the lender about property values and presales prices to secure loans larger than they would have qualified for.

The bank said it has yet to determine the expected amount of losses.

"The fraud involved borrowers obtaining larger loans by inflating property prices above their appraised values. The case is currently under investigation," an IBK official said.

The disclosure came a week after Woori Bank reported a separate financial incident involving 4.01 billion won caused by fraudulent documents submitted by an external party.

The incident occurred in August 2024 and was also linked to a discounted commercial property presales scheme, according to the bank's regulatory filing.

"We will make every effort to recover the funds, as the loan is backed by commercial property collateral," a Woori official said, adding that the bank is conducting further investigations and considering filing criminal complaints against those involved.

Industry officials said these back-to-back cases highlight a shift in the nature of financial accidents in the banking sector, with fraud committed by external parties emerging as a growing source of risk.

While stricter internal controls have helped curb insider-related misconduct such as embezzlement, fraud involving falsified documents remains difficult for financial institutions to detect in advance.

"Banks have strengthened internal controls to prevent employee misconduct, but fraud schemes involving external parties and falsified documents remain difficult to detect," a banking industry official said.