Kookmin Bank and other banks have expanded private banking businesses to catch up with Citibank Korea. They believe that in the future the top 20 percent of their customers will contribute as much as 80 percent of most banks’ earnings.
But Regulators are worried that bank officials could be tempted to misuse funds in private banking accounts. With regulators increasing their scrutiny of private banking operations, banks are now controlling the pace of the expansion of private banking businesses.
Financial regulators are poised to soon sanction several violators. After a series of allegations that they misused the deposits of some wealthy customers for fund manipulation and money laundering, the Financial Supervisory Service (FSS) is now conducting a broad investigation of the sector they began in the second half of last year. The FSS has initiated its investigation into private banking services after Japanese regulators found that Citibank Japan relocated their PB deposits abroad in violation of a variety of laws.
Citibank Japan breached laws on the real name account system and the anti-money laundering. After Citibank Japan was censured, Citibank Korea was prohibited from selling the wealth management products of “Citigroup Private Bank,’’ which targeted customers whose deposits exceeded 1 billion won.
