Regulator probing Kookmin Bank for suspected slush funds

The financial regulator is investigating Kookmin Bank, South Korea's major lender, on suspicion that its Tokyo branch has been involved in running secretive funds for the bank's management, regulatory sources said Sunday.

The Financial Supervisory Service (FSS) has apparently found traces of evidence that the branch manager in Kookmin Bank, Tokyo, pocketed large sums of fees from approving loans off the books, FSS officials with knowledge on the matter said, asking not to be named.

The FSS discovered that a part of the commissions, worth more than 2 billion won ($1.87 million), might have been transferred to a domestic account, they said.

The regulator has been trying to track down the account, while focusing on finding out whether the money was sent to the bank's management.

The FSS suspects the management played a part in the illegal transaction because it found documents showing that some board members of KB Financial Group Inc., the country's second-largest banking group, called for the Tokyo branch manager to be promoted.

Kookmin Bank is the flagship unit of KB Financial Group.

The Financial Services Agency in Japan has also notified the FSS of such irregularities and possible money laundering, according to the FSS.

The FSS, however, officially declined to comment on the issue, saying that it is an ongoing investigation.

Currently, 11 Korean banks operate a total of 145 branches and offices overseas. (Yonhap News)