A senior Financial Supervisory Service (FSS) official is being investigated in connection with a massive loan fraud case involving KT ENS, an affiliate of the country's second-largest mobile carrier KT Corp.
The official ― identified only as Kim, 50 ― allegedly helped a key suspect flee abroad when the FSS was inspecting the fraud case in January.
Kim had a close relationship with the suspect, Jeon Ju-yeop, who runs a mobile phone accessory maker, NS Soul, police said.
NS Soul is one of KT ENS's subcontractors, which allegedly fabricated sales documents to receive fraudulent loans totaling 1.83 trillion won ($1.7 billion) from banks between May 2008 and January this year. Their outstanding debts are estimated at 289 billion won, according to police.
Jeon has been identified as the central figure in the fraud case.
He fled to Hong Kong in January to avoid investigation, and later flew to New Zealand. He then fled to Vanuatu, an island nation located in the South Pacific Ocean, according to his immigration records. Police believe he is hiding there, or has moved to a different country using a fabricated passport.
"We have asked Interpol to trace Jeon," an officer from the Seoul Metropolitan Police Agency told reporters.
Kim is suspected of having informed Jeon that he was being watched by the FSS.
He allegedly called other heads of the suspected subcontractors on Jan. 29 when the FSS formally launched an investigation. Two days later, he met with them at a restaurant in southern Seoul.
According to the FSS, Kim, who heads a capital market investigation squad in the FSS, is alleged to have travelled overseas multiple times to play golf and gamble together with Jeon and other suspects.
He had allegedly received bribes, which may amount to billions of won, from the businessmen. Kim was suspended from work after his wrongdoing was discovered, the FSS said.
This latest revelation brings the ethics of FSS officials into question.
"Kim's case is extremely shameful and heartbreaking for all the FSS staff," an FSS official said, asking not to be named. "Taking appropriate measures is important, but there is one thing we should remember. This is not the case of all FSS workers. Most of them work day and night to serve the needs of people and the financial industry."
The case also adds pressure on FSS Governor Choi Soo-hyun.
Choi is already facing calls to resign to take responsibility for the recent consumer data theft cases involving banks and credit card firms, and the fraud suspicions surrounding Tongyang Group. Financial Services Commission Chairman Shin Je-yoon and Strategy and Finance Minister Hyun Oh-seok are also being pressured to resign in connection with the high-profile cases.
"The FSS has been blamed for poor monitoring of market players. Now one of its officials is being investigated for corruption allegations. What's next?" a bank official said on condition of anonymity. "The FSS should realize that it is losing trust. It should reform itself or won't be trusted by anybody."
Police said they have rounded up 15 people, including the heads of KT ENS's subcontractors, in connection with the loan fraud case. Officers will soon determine whether to seek an arrest warrant for Kim or not.