A major European conglomerate has admitted that an employee took advantage of serious management failings to disappear with $103 million of the firm's cash.
In its annual report published Monday, power and robotics firm ABB (ABB) said losses from the fraud at its South Korean unit discovered last month would total $73 million. It expects to recover $30 million from insurance policies.
Managers failed to maintain sufficient segregation of duties in the treasury unit of its subsidiary in South Korea, and did not provide enough oversight of local treasury activities, ABB CEO Ulrich Spiesshofer and Chief Financial Officer Eric Elzvik said.
ABB also failed to keep the signature seals of the South Korean unit secure. As a result, the company became "bound to unauthorized financial contracts, resulting in undetected financial obligations," they said in the report.
"Management has concluded that these deficiencies in the operation of ABB's internal controls constituted a material weakness," the executives added.
Related: Major European company says employee has gone missing with $100M
Last month, the Swedish-Swiss corporation announced it had "uncovered a sophisticated criminal scheme" at its South Korean subsidiary. ABB only noticed that huge sums of money were missing after an employee disappeared.
The employee is suspected of forging documents and working with individuals outside the company to steal the money, according to ABB and South Korean police.
A police investigation is ongoing in South Korea and Hong Kong, the head of the South Korean investigative team told CNNMoney on Monday.
Last month, a local police spokesman said that the suspect was believed to have fled to Hong Kong and that they were working to bring him back to South Korea.
The embezzlement and misappropriation of funds is limited to South Korea, where ABB employs about 800 staff, the company said.
-- Sol Han contributed to this report.
