Loan Fraud Hits Major Banks: KB Kookmin, Shinhan, Woori and IBK Lose 49 Billion Won

KB Kookmin Bank has become the latest South Korean lender to confirm losses from a sophisticated property-development loan fraud scheme, disclosing damages of approximately 3.58 billion won ($2.6 million). The disclosure makes KB Kookmin the fourth major bank, alongside Shinhan Bank, Woori Bank and Industrial Bank of Korea (IBK), to acknowledge exposure to the same scam.

According to the disclosures, the fraud was carried out between September 2023 and December 2024, involving developers who colluded with fake buyers to secure loans against property projects that either did not exist as represented or were vastly overvalued. The scheme allowed perpetrators to draw down financing from multiple institutions using fabricated sales contracts and inflated collateral valuations.

The fraud came to light through internal reporting at bank branches rather than through routine audits, raising questions about the adequacy of risk controls in property-development lending. Once one institution flagged irregularities, a broader review across the sector revealed that the same network of developers and buyers had targeted several banks simultaneously.

Combined losses across the four lenders, initially estimated lower, have now been revised upward to roughly 49 billion won ($35.7 million) as investigators continue to trace the full scope of the scheme. Authorities are working to determine how many properties and individuals were involved, and whether additional financial institutions were affected.

The case adds to mounting scrutiny of South Korean banks' internal controls around real estate project financing, an area that has seen repeated fraud incidents in recent years amid a cooling property market. Regulators are expected to press lenders to tighten verification procedures for developer loans, including stricter checks on buyer authenticity and collateral appraisals.

For KB Financial Group, the disclosure is unlikely to have a material impact on overall earnings given the group's scale, but it underscores persistent vulnerabilities in loan underwriting practices across the industry. Analysts say further disclosures or revisions to the damage estimate are possible as the investigation progresses.