Growing number of embezzlement cases poses major corporate risk

Growing number of embezzlement cases poses major corporate risk

By Kim Hyun-bin

Embezzlement has become an increasingly prominent business risk in recent months as more employees have been found stealing the company’s funds, severely damaging the company’s image and deterring potential investors. Experts also say embezzlement cases tend to increase during tough economic times, especially with recent high inflation and high interest rates depressing the value of stocks and cryptocurrencies.

During the first half of the year, large-scale embezzlement cases surfaced across all industries, with particular focus being those at Osstem Implant and Woori Bank. In any case, internal employees have been known several times to steal company funds in order to invest in stocks and crypto assets, or to use them for gambling and entertainment.

The amount of embezzlement is estimated at 221.5 billion won by Osstem Implant and 69.7 billion won ($53.5 million) by Woori Bank.

In the second half of this year, Hyundai Steel employees are suspected of setting up a paper company and embezzling about 10 billion won. They allegedly made an unfair profit by inflating the unit price of some of their businesses and paying the wrong order price. Hyundai Steel plans to conduct an internal investigation and decide whether to send the case to the police.

The number of cases of infidelity has steadily increased over the past decade. According to statistics released by the National Police Agency, he had 58,889 reported embezzlement cases in 2020, a 120% increase from 26,767 in 2011.
Some believe the increase in embezzlement cases is due to looser penalties. Under the Criminal Code, punishment for embezzlement of a company worth less than 500 million won is limited to 10 years in prison or a fine of less than 30 million won. If the amount of embezzlement exceeds 500 million won, the Law for Strengthening the Punishment of Specific Economic Crimes will be applied.

“First of all, there is the problem of individual bias, and the problem of organizations that allow such thinking. We need to put in place a legal mechanism to impose In the investment industry, embezzlement is highly likely to lead to a decline in the credibility of South Korean companies and the “Korea Discount,” a phenomenon of undervaluation in the domestic stock market.

It has been argued that the Korean market is not a reliable investment destination given that many foreign investors focus on corporate value.

Embezzlement will need to be wiped out to restore confidence in the domestic stock market, but experts say the number is likely to rise given the recent recession.

“Although not all companies have internal control mechanisms, embezzlement cases continue to rise steadily, but companies have stepped up precautionary measures through employee ethics education.

Credit/Source : KoreaTimes

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