Shinhan Securities headquarters in Yeouido, Seoul / Courtesy of Shinhan Securities

Shinhan Securities and Woori Bank implemented fortified internal control measures in a long-overdue effort to appease the authorities and the public over intense criticism of a slew of questionable business practices and employee misconduct, market watchers said Thursday.

Many say the ongoing wave of financial irregularities warrants the prompt and full implementation of strengthened accountability measures for financial firm CEOs and executives, as enforced by the revised law on "accountability charts." These charts clearly outline the major roles and responsibilities of management.

Nevertheless, large financial entities will be able to remain unscathed by the revision for the time being, since firms with assets exceeding 5 trillion won ($3.7 billion) are granted a one-year grace period following its implementation on July 3.

According to the industry, the financial investment entity of Shinhan Financial Group established an emergency risk response team to enhance oversight of decision-making processes at every level.

The rushed move followed the firm's falsely registered swap transactions from August to early this month, a part of an attempted cover-up of a 130 billion won loss in futures trading around the Aug. 5 market freefall.

Central to the issue was that the entity's profit-taking activity — while technically not illegal — exceeded its mandate as a liquidity provider (LP) in the exchange-traded funds (ETFs) market.

The fraudulent activity was uncovered during a quarterly settlement of the company's accounting last month and has since been reported to the Financial Supervisory Service (FSS).

The financial watchdog dispatched a team of inspectors to the firm's headquarters, Monday, and sent requests for in-house reviews to 26 local brokerages and asset management companies.

The 130 billion won figure significantly exceeds the total losses incurred by local brokerages over the past seven years.

According to Rep. Kang Min-kuk of the National Assembly's National Policy Committee, securities firms reported a total of 111.3 billion won in malpractice-related losses, including employee embezzlement and misuse of corporate funds, across 47 incidents from 2018 to August of this year.

The latest development deals a heavy blow to the Shinhan subsidiary's reputation, undermining its efforts to lead organizational reforms aimed at better aligning with the government's push for strengthened internal controls. The firm has yet to shed a negative brand image from its deep involvement in the Lime fund redemption fiasco in 2020.

The firm established a compliance department last year to enhance risk management. It was the first among industry leaders to seek the assistance of a consulting firm in drafting the accountability chart.

Last year, a Shinhan Securities employee was found to have embezzled 1 billion won during the establishment of a special purpose company.

Meanwhile, the bank subsidiary of Woori Financial Group said Tuesday that a total of 14 bank employees will begin master's degrees programs next year in fields including compliance, risk management, and information security at graduate schools.

Woori Bank extended 35 billion won in improperly granted loans to the relative of former group chair Son Tae-seung. Several bank employees have embezzled a combined total of tens of billions of won over the past few years.

Prosecutors raided Son's home, Friday. A former high-level Woori Bank official was indicted with physical detention, Tuesday, for allegedly enabling the expedited approval of the loan process. He faces charges of receiving bribes.