Just as KB Financial Group’s race to choose its next chairman enters a decisive stage, tax authorities have launched a unscheduled investigation into its flagship unit, KB Kookmin Bank — a move that could add an unexpected complication to the succession process, according to industry experts, Friday.

The National Tax Service (NTS) dispatched around 30 officials from its high-profile investigation bureau 4 to the bank’s Seoul headquarters, Thursday, to secure accounting records after reportedly detecting possible signs of tax evasion. The investigation is expected to run through the end of the year.

Known in corporate circles as the NTS’ “grim reaper,” bureau 4 is an elite unit that handles major investigations into large companies and high-income individuals suspected of serious tax offenses. Its probes are relatively rare and can result in hefty tax bills, penalties or criminal charges.

The bank said it had “no comment” on the investigation, while the NTS reiterated that it does not comment on individual taxpayers or ongoing audits.

The inquiry is the latest in a string of surprise investigations by bureau 4 this year, following probes into Hana Financial Group and Meritz Securities in May and the National Agricultural Cooperative Federation, better known as NongHyup, in June.

New variable in chairman race

Its timing is particularly notable as KB Financial Group is already well into the process of choosing its next chairman, with the term of its incumbent chairman, Yang Jong-hee, expiring on Nov. 12. The group plans to cut its six-person shortlist to three by Aug. 27 and name its final pick on Sept. 11.

The shortlist includes Yang, who is seeking another term, as well as KB Kookmin Bank CEO Lee Hwan-ju. With Lee now under tax scrutiny, the investigation could emerge as a new variable in the race.

Hong Ki-yong, a business administration professor at Incheon National University who specializes in tax law, said the timing was difficult to dismiss as coincidental.

“There is no indication that KB Kookmin Bank is currently embroiled in a major criminal matter, such as massive tax evasion or embezzlement, that would typically warrant an exceptional tax investigation,” he said. “Yet the NTS chose to launch one just as KB Financial is evaluating candidates for its next chairman.”

With the candidates drawn from senior executives within the group and its affiliates, the professor said the investigation could be viewed as a form of regulatory pressure aimed at influencing the group’s governance.

Hong also linked the probe to the government’s long-delayed push to reform governance at financial groups.

Financial authorities have pledged to tighten oversight of incumbent chairmen seeking to extend their tenure, with the Financial Supervisory Service gearing up for broader reforms to strengthen the independence of chairman nomination committees and tighten board requirements. The measures, however, have repeatedly been pushed back.

Given such a situation, the professor said the investigation could also raise questions about whether regulators were looking for even minor issues that could be used to challenge the executives’ suitability for office.

“Even if the investigation turns up something relatively minor, it could still become an issue,” Hong said. “That raises the question of whether the probe could be aimed at finding grounds, however small, to challenge the eligibility of chairman candidates.”