[News Space=Reporter seungwon lee] In the financial market, trust is the foundation of financial institutions' existence. The securities industry, in particular, requires a transparent internal control system to ensure the safety of customer assets. However, the recent revelation that a Korea Investment & Securities employee embezzled hundreds of millions of won in customer deposits and used it for gambling has brought the entire securities industry under scrutiny for its perceived moral hazard.

According to the financial industry on the 5th, a male employee in his 30s working at the Gangnam branch of Korea Investment & Securities illegally transferred hundreds of millions of won from the accounts of at least 6-7 customers to his own account.

The company stated, "We are aware of the embezzlement by a branch employee and are investigating," adding that the extent of the damage is currently being assessed but is expected to run into the hundreds of millions of won. The company announced that it would interview the affected customers, assess the damages, and then proceed with compensation based on the results of the investigation. However, it has already been confirmed that most of the embezzled funds were squandered on gambling. The employee confessed to his wife and colleagues about the gambling and then disappeared, and a police investigation is ongoing.

This isn't the first time that Korea Investment & Securities employees have engaged in misconduct, making it all the more serious. In 2015, an employee at the Gangseo branch of Korea Investment & Securities received approximately 2 billion won from customers over several years and then disappeared. In 2015, an employee at NH Investment & Securities was caught embezzling 4.9 billion won of customer funds and sentenced to six years in prison in the first trial.

The amount of embezzlement and fraud committed by internal employees in the domestic financial sector recently reached 400 billion won as of 2024. In the financial investment industry (securities firms, asset management companies, etc.), the total amount was 81.5 billion won for breach of trust, 2.7 billion won for embezzlement and misappropriation, and 1.1 billion won for fraud. The recovery rate for these losses was a mere 5%, adding to the shock.

These recurring embezzlement incidents by securities firm employees go beyond mere individual misconduct, exposing the laxity of internal controls across the industry. Indeed, the financial sector's embezzlement losses, which stood at 13.1 billion won in 2019, have skyrocketed to approximately 87 billion won as of July 2022. Even at savings banks and investment securities firms, fraud and misappropriation crimes frequently occur, with hundreds of millions of won embezzled 250 times over a seven-year period, or exploiting internal system flaws, such as the sole signature of an employee.

Even overseas, internal employee crimes can lead to a decline in a financial institution's credibility, a downgrade in its credit rating, legal action, and massive losses. While major global investment banks are adopting advanced internal control measures, including regular internal audits, robust external audits, and strengthened real-time monitoring systems, the Korean securities industry continues to face criticism for its lukewarm response to incidents.

Securities industry experts pointed out that, "Strong measures to prevent recurrence, such as increasing the intensity of actual punishment, protecting whistleblowers, strengthening the real-time verification process of customer assets, and introducing regular ethics training for employees, are urgently needed." They also said, "Financial companies must face the harsh reality that even minor internal incidents directly lead to 'loss of trust → customer defection → sharp decline in stock prices,' and once again reflect on the fact that 'stolen trust' threatens the very existence of financial companies."