Korea’s financial watchdog will launch an audit into Woori Bank because it is suspected of holding hundreds of “borrowed name” accounts for CJ Group, the subject of ongoing investigations into tax evasion and slush fund creation

2013-05-31 16:57

Regulator to look into Woori for CJ accounts

By Kim Tae-jong

The nation’s financial watchdog will launch an audit into Woori Bank because it is suspected of holding hundreds of “borrowed name” accounts for CJ Group, the subject of ongoing investigations into tax evasion and slush fund creation.

The bank is suspected of abetting the group’s wrongdoings, if proven to be true, this will be another setback, coming right after the Board of Audit and Inspection (BAI) blamed it for having poor management practices.“We can’t confirm our plan for an audit in detail at the moment,” an official from the Financial Supervisory Service (FSS) said. “But it’s true that we will look into Woori Bank next week in relation to accounts under false names for CJ Group.”

The audit came after the FSS was recently notified by the prosecution that CJ Group had set up a number of borrowed name accounts in leading financial institutes including Woori and Shinhan.  This prosecution is also investigating the food and entertainment group over allegations that its chairman Lee Jay-hyun and his two siblings evaded taxes through offshore tax havens.

According to industry sources, CJ Group has several borrowed name accounts at five other banks and security firms, but FSS said it will only focus on those at Woori at the moment because it is the group’s main creditor bank.

“At the moment, we will focus on Woori,” the FSS official said. “This is going to be a sector audit, not a full-scale one.”

The FSS is expected to find out whether the bank violated the Real Name Financial Transaction Law to assist the group’s tax evasion, as it is very difficult to open hundreds of bogus name accounts without the connivance of bank officials and employees.

In 2008, Woori Bank was warned for violating the transaction law after it was implicated in several borrowed name accounts that were used by Samsung Group to create a slush fund.

Woori Bank has also been under fire after a BAI audit found it offered employees some 70 billion won in bonuses although it failed to reach management targets, and conducted so-called “parachute appointments” where Woori Financial Group’s former Chairman Lee Pal-seung’s aides were appointed as CEOs of the group’s affiliates.

Meanwhile, the Seoul Central District Prosecutors’ Office said it is investigating accounts of CJ Group held in foreign banks and security firms.

The prosecution suspects the group manipulated its stock price using insider information, disguising itself as a foreign investor.