Financial firms brace for broader tax scrutiny after surprise probes into Hana, Meritz

Meritz Securities headquarters in Seoul / Newsis

Korea’s financial industry is bracing for wider tax scrutiny after the National Tax Service (NTS) launched a string of surprise investigations into Hana Financial Group and Meritz Securities, according to officials, Monday, fueling concerns that regulatory pressure on the sector is escalating.

Over the weekend, tax authorities opened an unscheduled probe into Meritz Securities after reportedly detecting possible signs of tax evasion. Officials from the agency’s infamous Investigation Bureau 4 raided the company’s Seoul headquarters to secure accounting records and materials tied to the inquiry.

Widely known in corporate circles as the “grim reaper,” Bureau 4 is the agency’s elite special investigations unit, tasked with pursuing major corporations and high-income individuals suspected of serious offenses such as tax evasion. Its probes are rare and often carry the threat of steep penalties or criminal prosecution.

Meritz Securities has earned a reputation for its aggressiveness in investment banking and real estate project financing, but that rapid growth has also been accompanied by recurring questions over internal controls.

In 2024, the company came under scrutiny from the Financial Supervisory Service over allegations that it leveraged its dominant position in project financing loan rollovers to charge excessive fees. Separately, a former executive was sentenced to prison in January after being convicted in a lower court of orchestrating more than 100 billion won ($72 million) in illegal loans from another institution, disguised as real estate investment for a family-owned business.

“As we have not yet confirmed the specific details of the tax investigation, we are unable to provide an official position at this time,” a Meritz Securities official said.

The Meritz probe comes just three days after tax authorities launched a separate non-routine investigation into Hana Financial Group and Hana Bank.

“It is true that an investigation is underway, but we do not yet know its specific nature,” a Hana official said. “Regardless, we remain committed to cooperating fully.”

The NTS maintained its usual stance, saying it could not comment on matters involving individual taxpayers or ongoing audits.

The back-to-back investigations have fueled speculation that tax authorities may be sharpening their focus on the broader financial industry, with market participants watching closely to see whether scrutiny of tax compliance and internal governance risks will intensify across the sector.

“Special tax investigations are uncommon,” one industry official said. “With major financial institutions now facing consecutive probes, the industry is closely watching whether this signals broader regulatory tightening.”

The tougher enforcement climate comes as the government increasingly stresses the public responsibilities of financial institutions and the need for sweeping structural reform.

At a Cabinet meeting on May 6, President Lee Jae Myung criticized what he described as the erosion of finance’s public role.

“Inclusive finance is one of the core responsibilities of financial institutions,” he said. “Because the licensing system effectively blocks new entrants, aren’t these institutions in a way operating as monopolies? Finance is supposed to serve a public function, but that public character has grown far too weak.”

Lee escalated his rhetoric further on Tuesday, taking to social media to describe parts of the sector as engaging in “primitive predatory finance.”

Similarly, on May 3, Kim Yong-beom, presidential chief of staff for policy, criticized the exclusion of lower- and middle-credit borrowers in a Facebook post.

“Korea’s financial system today resembles a massive fortress,” Kim wrote. “Inside, high-credit borrowers comfortably enjoy low interest rates, while outside its walls, financially excluded citizens are left behind.”