Banking blind spot? 6 in 10 financial incidents go unnoticed for over a year.

In 2015, a customer walked into one of Korea’s major banks with a set of tax invoices and walked out with a loan. The invoices were fake. For the next nine years and four months, the bank had no idea. It found out only in December 2024, and only because someone outside the bank tipped it off.

That case was no outlier.

Korea’s five major banks failed to detect six out of every 10 cases of financial misconduct, including fraud and embezzlement, for more than a year, with some going unnoticed for nearly a decade, according to an analysis of Financial Supervisory Service data covering the three-and-a-half years through June 2026 obtained by Rep. Park Hong-bae of the ruling Democratic Party on Wednesday.

In another case, a customer used a fake housing contract involving jeonse, or lump-sum deposit, to fraudulently obtain a loan in 2018. The bank did not discover the deception until November last year, seven years and seven months later, during an investigation and trial.

Of the 277 financial incidents, banks took more than a year to detect 169 cases, or 61 percent.

Twenty-seven cases, or 9.7 percent, took more than five years to detect, and three, or 1.1 percent, went undetected for more than a decade. Only 101 cases, or 36.5 percent, were caught within a year.

Fraud was the most common type of incident, accounting for 108 cases, or 39 percent.

Embezzlement and misappropriation followed with 47 cases, or 17 percent, while breach of trust accounted for 25 cases, or 9 percent. Violations of the real-name financial transaction system made up 23 cases, or 8.3 percent, and private lending accounted for 22 cases, or 7.9 percent.

Even incidents uncovered through banks’ own monitoring systems took an average of about two years to detect.

Those that came to light through outside sources took longer.

Cases uncovered through tips, media reports or customer complaints took an average of about two years and nine months to detect. Those discovered through investigations, trials or audits by financial authorities took about three years and eight months.

Those periods were about 1.4 times and 1.8 times longer, respectively, than cases detected internally.

The figures point to limits in banks’ internal monitoring systems and suggest that some incidents could have gone undetected even longer without outside intervention.

Delays continued even after banks became aware of the incidents.

Banks took more than 30 days to make an initial report to financial authorities in 33 cases, or 11.9 percent. Fourteen cases, or 5 percent, were not reported for more than a year.

Current banking regulations require financial incidents involving at least 300 million won ($225,000) to be reported to authorities by the following day. Incidents worth at least 1 billion won must be publicly disclosed within 15 days.

“Delayed detection of financial incidents, followed by delays in reporting them to authorities, reveals serious weaknesses in banks’ internal control systems,” Rep. Park said. “The Act on Corporate Governance of Financial Companies, which requires financial companies to establish internal control standards, has been in effect for 10 years. It is time for a comprehensive review of whether those controls are actually working effectively in practice.”

The lawmaker also called for stronger oversight by financial regulators.

“Financial authorities also need to strengthen their systems, management and supervision so that banks can detect incidents early, report them quickly and carry out follow-up measures in a transparent and systematic manner,” Park said.

BY PARK HYUN-JU [[email protected]]