gettyimagesbank

The frequent embezzlement cases involving employees in the banking industry are often part of larger schemes engineered by senior banking figures with co-conspirators, according to sources, Wednesday.

Central to the repeated offense of moral hazard concerns is the institutional failure of banks in upholding internal lending protocols, as illustrated by the inadequacy of cross-checking accountability of employees at every level.

Low- and entry-level employees say the preventive practices aren't sufficient due to unscrutinized assignments of personnel whereby a holder of a position is rarely moved in a regular reshuffle, thus creating room for irregularities.

Also at play is the top-down corporate culture whereby senior figures' evaluations of their lower peers hold great sway to the extent that juniors choose to stay silent for the sake of their job security.

Observers say the longstanding corrupt practices are expected to remain in place, as incentivized by the criminal proceeds outweighing the penalties that are limited to a dozen years in prison even in cases where the amount embezzled exceeds 5 billion won.

Whether the revised law seeking to strengthen penalties on the CEO of an entity in question remains to be seen.

"How a low-level bank employee was able to approve loans repeatedly for months is mind-boggling to many," former Seoul National University economist Lee In-ho said.

He was referring to the recently uncovered embezzlement of 10 billion won ($7.1 million) by a Woori Bank employee in Gimhae, South Gyeongsang Province.

The employee forged documents to approve corporate loans of less than 1 billion won with three-month maturities or shorter from July last year until recently. The employee chose short-term corporate loan products that are rarely subject to stringent scrutiny by the head office, unlike home mortgages.

Woori was made aware of the incident following internal monitoring. But Lee said such incidents highlight the underlying problems that went on for years.

"It should have never happened. It's that simple," Lee said.

Similarly, an online community of financial services firms had comments both critical of and ridiculing the repeated offenses.

"You can embezzle money and make sure nobody notices of it if you put your mind to it. It doesn't mean you should. You just don't," read a comment on the community.

"The bank employee was sentenced to only 15 years despite the embezzled amount surpassing 70 billion won. This is how the joke was made on ways to make billions of won in salary by serving a prison term for embezzlement," another wrote.

Meanwhile, Financial Supervisory Service Governor Lee Bok-hyun stressed on June 19 that financial firm CEOs will face stern punishment as a consequence of employee misconduct at regional branches. The comment was made after he held a meeting with bank CEOs.