Jakarta Globe – Bloomberg, Seonjin Cha, January 21, 2014
South Korea’s biggest theft of personal information on credit-card holders prompted dozens of top executives at financial firms including KB Financial Group to offer to quit this week as a regulatory probe widened.
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| Some 106 million cardholders’ information is at risk in what would be South Korea’s largest card-data theft. (Bloomberg Photo) |
South Korea’s biggest theft of personal information on credit-card holders prompted dozens of top executives at financial firms including KB Financial Group to offer to quit this week as a regulatory probe widened.
Lee Kun Ho,
chief executive officer of Korea’s largest bank, was among 27 executives who
sent resignation letters to KB Financial CEO Lim Young Rok, an official at the
Seoul-based company said yesterday, asking not to be named in accordance with
company policy. Nine officials at Lotte Card Co. also offered to quit, that
company said in an e-mailed statement.
The
breaches triggered regulatory and criminal probes this month in a country where
credit cards are used for more than half of total consumer spending. South
Korean prosecutors have indicted three people on suspicion of stealing names,
social-security numbers and card data tied to millions of customers of Lotte
Card, KB Kookmin Card Co., and Nonghyup Bank.
“The
incidents will probably hurt the firms’ brand value and lead them to incur
one-time costs such as fines and compensation,” said Michael Na, a Seoul-based
analyst at Nomura Holdings Inc. “It will spur regulators’ demands that
financial companies protect consumers, which isn’t necessarily positive for
earnings.”
While
there’s no evidence that the leaked information has been misused, the card
companies will fully compensate victims for any damage, Financial Services
Commission Chairman Shin Je Yoon told reporters yesterday, according to an
e-mailed statement. The regulator will consider revising rules to seek stricter
punishment including fines, he said.
One of the
people charged was a software engineer who was working for the three firms from
May 2012 to December 2013 and who copied client information onto a USB device
before selling it to loan companies, the prosecutors’ service said on Jan. 8.
A total of
106 million pieces of information were transferred, the Financial Supervisory
Service said in a Jan. 19 statement. About 20 million card holders at Lotte
Card and Nonghyup Bank and 40 million at KB Kookmin Card were affected, the FSS
said. The estimate may include overlaps for multiple card holders or former
customers.
The three
card companies aren’t publicly traded. Shares of KB Financial rose 0.5 percent
to 39,250 won at 11:20 a.m. in Seoul. The benchmark Kospi index rose 0.5
percent. Lotte Shopping Co., the nation’s biggest department store operator and
owner of Lotte Card, fell 0.1 percent to 380,500 won.
The FSS
said on Jan. 19 that it began probing operations at Kookmin Bank, the nation’s
largest lender, in relation to information breaches at the card unit. It
ordered 14 other financial firms to examine possible data theft, without
disclosing the names of the institutions.
The agency
also started inspecting local units of Citigroup and Standard Chartered on Jan.
17 after prosecutors last month found that their customer information was
leaked.
South
Korean card users aren’t alone in having their information compromised. Target
Corp., the US’s second-largest discount retailer, said in December that credit-
and debit-card data for as many as 40 million people who shopped in its stores
before Christmas may have been taken. Earlier this month, the Minneapolis-based
company said the thieves also got access to the names, phone numbers and home
and e-mail addresses of as many as 70 million people.
KB Kookmin
chief Shim Jae Oh was among the executives who sent resignation letters. Lim
hasn’t decided whether to accept the offers, the KB official said. Nonghyup
Bank card division chief Sohn Kyoung Ik resigned, the Seoul-based lender said
in a statement yesterday.
The three
card companies issued statements yesterday expressing regret for the breaches
and their CEOs bowed in apology at a briefing broadcast on the YTN cable news
network.
“We feel
deeply guilty and ashamed for losing clients’ trust following this accident,”
KB Kookmin Card’s Shim said at the briefing. “We’ll take all legal and moral
responsibility,” although there haven’t been any reported cases of the
information being abused, Shim said.
The FSC’s
Shin said last week that his agency will hold top managers responsible for such
incidents and will take stern action to avoid a repetition of the data theft,
calling it a “severe crime that shakes the foundation of the financial
industry.”
The
watchdog formed a task force on Jan. 17 to find ways to ensure financial
institutions properly protect personal data.
South
Koreans held a total of 115 million credit cards as of June, in a country with
a population of 50 million. People participating in the economy own 4.4 cards
each on average, according to the Credit Finance Association, a lobby group for
credit card issuers and leasing companies. Credit cards accounted for 66
percent of consumer spending, up from 14 percent in 2000, the latest
association data show.
Bloomberg
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