[Exclusive] FSC also acknowledges conflict of interest, putting brakes on FIU chief's bid to lead Sh Suhyup Bank

[Financial News] The Financial Services Commission (FSC) acknowledged the possibility of a conflict of interest related to Lee Hyung-ju, head of the Financial Intelligence Unit (FIU), and his bid to become head of Sh Suhyup Bank. It issued an official position that, if Lee becomes the bank’s head, he will in principle be barred for a certain period under the Public Service Ethics Act from handling matters related to FIU fines that he personally approved. Work related to Suhyup Bank’s acquisition of a securities firm will also be restricted. ▶See page 12 of our October 19 issue.On the 3rd, the FSC responded to a query from the office of Song Eon-seok, a People Power Party member of the National Policy Committee of the National Assembly of the Republic of Korea, asking whether Lee could handle FIU fine-related litigation if appointed head of Suhyup Bank. The FSC said, “Matters related to fines imposed by the FIU on Suhyup Bank are included among the matters subject to restrictions on handling under Article 17, Paragraph 2 of the Public Service Ethics Act.”
Last March, Lee, as head of the FIU, personally approved a 1 billion won fine imposed on Suhyup Bank for violating its customer due diligence obligations. Suhyup Bank paid the fine in full last April, but is currently considering a lawsuit challenging the penalty. According to the FSC’s response, if the lawsuit the bank is now considering goes ahead, Lee would have difficulty directly handling related matters even if he is appointed head of Suhyup Bank.
The FSC effectively acknowledged that Lee’s ability to perform his duties could also be constrained in connection with Suhyup Bank’s planned acquisition of a securities firm. In response to a query asking whether Lee could handle the acquisition if he became head of the bank, the FSC said, “After retirement, one cannot handle matters one directly handled while in office,” adding, “For two years after retirement, one cannot handle matters specified in Article 17, Paragraph 2 of the Public Service Ethics Act, including licensing and approvals that the FSC handles in relation to Suhyup Bank.”
The acquisition of a securities firm requires official FSC approval. There are concerns that key management decisions at Suhyup Bank, which is pursuing the acquisition of Sangsangin Investment & Securities Co., Ltd. to strengthen its nonbanking business, could be disrupted if the bank’s head cannot directly participate in related matters.
The FSC added, “If the necessity and fairness of handling the matter are recognized, it may be handled exceptionally with approval from the Public Service Ethics Committee.”
Asked whether Lee had been excluded from supervisory and disciplinary work related to Suhyup Bank after applying for the bank’s top job, the FSC said, “There have been no further sanctions against Suhyup Bank since last September 1, the date Lee applied for the position.” It added, “If a conflict-of-interest situation arises in the future, we will take the necessary measures to ensure that no obligations under the Act on the Prevention of Conflict of Interest Related to Duties of Public Servants are violated.”
The Suhyup Bank CEO Recommendation Committee has yet to select a final candidate after three meetings. If it fails to reach a decision at its fourth meeting on the 11th, it may reopen applications.
Song said, “It was inappropriate to apply for the top job at a bank whose supervisory and disciplinary matters he handled as the serving head of the FIU,” adding, “It is not advisable to apply to become head of Suhyup Bank when handling related matters will remain restricted even after retirement.”
[email protected] Seo Ji-yoon Reporter