Industrial Bank of Korea (IBK) failed to recognize a real estate loan fraud case after receiving a police search and seizure warrant detailing fake contracts, down-payment documents and a 965 million-won loan. The Incheon Metropolitan Police Agency sent the request and warrant on September 24 last year, and IBK received them on September 25, but the bank classified the matter as a financial incident only on October 2 after the Financial Supervisory Service (FSS) asked it to verify the warrant. IBK reported the case as external-party fraud on October 10, yet a second warrant received on December 10 was not forwarded to headquarters until December 17. Two internal inspections covering 16.489 billion won in related loans found no unusual findings despite reviewing linked borrowers, third-party fund flows, collateral involving multiple units and connections to affiliated companies and beneficial owners. On October 24, two weeks after reporting the case, IBK extended 1.9 billion won in facility financing secured by commercial real estate in Namyangju, Gyeonggi Province. The loan was later included in police warrants and the full amount was classified as a loss after delinquency. The reported fraud expanded from 965 million won in October 2025 to 4.785 billion won in June 2026 and 18.221 billion won in August 2026. Total disbursements reached 24.46 billion won across 12 borrowers and 14 loans; 6.239 billion won was recovered, leaving 18.221 billion won unrecovered. Loan loss provisions totaled 1.098 billion won, while the final expected loss remains undetermined. The case forms part of 136 similar incidents across banks and mutual finance institutions totaling 109.11 billion won, with IBK recording the largest amount among banks. Rep. Shin Dong-wook of the ruling People Power Party said the episode suggested IBK’s internal control system had collapsed.