Since the beginning of this year, there have been multiple incidents in mainland China where bank employees have embezzled customer funds and deceived depositors. Some banks, after compensating customers in advance, have been in a prolonged tug-of-war with insurance companies over claims related to “employee fidelity insurance.”
According to a report by “First Finance” on May 14, a recent case revealed that after a bank employee embezzled customer funds, the bank and the insurance company were entangled in a 7-year dispute over the “employee fidelity insurance,” eventually resulting in a compensation of over 3.28 million yuan. These types of cases typically involve disputes between banks and employees regarding the division of responsibility for customer losses, as well as whether insurance companies should compensate the bank.
The so-called “employee fidelity insurance” usually refers to the insurance company assuming compensation responsibility under the insurance contract when the employer suffers economic losses due to the dishonest behavior of an employee.
The aforementioned case took place at the Datong Road branch of China Citic Bank in Lanzhou. Court documents revealed that from September 2018 to April 2019, the customer manager of this branch, Lu, took advantage of some elderly customers who were not familiar with electronic product operations and had poor eyesight, deceiving them under the guise of assisting in online banking operations to input their passwords. About 3.9374 million yuan from 14 customers earmarked for purchasing financial products was redirected to an account controlled by Lu for repaying high-interest loans, stock trading, and personal consumption.
In May 2019, during an internal audit, China Citic Bank’s Lanzhou branch discovered that the financial funds of many elderly customers did not enter the designated financial product accounts but were directed to the same private bank card number. In June 2019, the bank involved fired Lu and reported the case, following which the affected customers gradually reported to the police.
Court documents revealed that after the embezzlement, Lu squandered the stolen money. After the incident, he returned over 75,000 yuan, and the Lanzhou branch of China Citic Bank refunded the remaining amount to the 14 customers. In March 2024, Lu was sentenced to eleven years in prison. The bank used its own funds to advance over 3.86 million yuan to the 14 customers.
“First Finance” reported that the bank subsequently applied for a claim under “employee fidelity insurance,” but was initially rejected by the insurance company. The first, second, and subsequent appeals were all unfavorable to the bank, with a turning point in the case only emerging after the appeals process. The entire process from the incident to the compensation being received took seven years.
Another case involved the China Citic Bank Tangshan branch. From 2014 to 2021, during his employment at the Xinhua Road branch of China Citic Bank in Tangshan, Han used his position to gain the trust of two depositors, falsely claiming to help them purchase bank financial products, and then transferred the funds from their accounts to his personal account or the bank card he used.
In an attempt to cover the financial gap, Han also arranged for the two depositors to lend each other money to conceal the truth. In this case, Han embezzled nearly 36.48 million yuan from the two depositors. As of the time of the incident in September 2021, over 9.4587 million yuan had not been returned. In September and December 2021, the Tangshan branch of China Citic Bank advanced a total of 10.556 million yuan to the two customers and eventually received a compensation of 8.225 million yuan from the insurance company.
The report mentioned that this year, several banks have been exposed for employee fund embezzlement and defrauding depositors, involving not only small and medium-sized banks but also local branches of state-owned major banks in Jilin, Inner Mongolia, Henan, and other regions.
“First Finance” also mentioned that branches of China Citic Bank in Changsha and Tangshan have previously been involved in disputes over “employee fidelity insurance” claims, with the compensation process similarly full of twists and turns. Other banks have also faced similar claims cases, including rural credit cooperatives in Dongliao County, Hunchun Rural Commercial Bank, and Jiaohe Rural Commercial Bank in Jilin.
Experts cited by “First Finance” analyzed that in such claim disputes, contentious points usually include how to determine the employee’s “dishonest behavior,” whether a criminal conviction is a necessary prerequisite for a claim, whether the funds paid by the bank to customers in advance can be considered their own losses, and whether the bank acted intentionally or had gross negligence.
Lawyers told “First Finance” that in such cases, the determination of responsibility typically hinges on whether the employee’s actions can be classified as job-related and whether there were internal management loopholes in the bank. Banks often find it challenging to completely absolve themselves if employees exploit their bank identity, systems, or business processes for such behavior. It is not uncommon for banks to compensate customers in advance and then seek reimbursement from the implicated employees in these cases.