Kwon Hyang-yeop "Repeated Policy Fund Loan Scams... Urgent Need for Prevention Measures"

Korea Technology Finance Corporation's 'Lax Screening' Under National Audit Scrutiny
Exploiting Remote Loopholes with Proxy Applications and False Data Submission

Amid ongoing financial crimes targeting policy funds, concerns have been raised about the lax loan and guarantee screening processes at institutions under the Ministry of SMEs and Startups.

According to data submitted by the National Police Agency to Kwon Hyang-yeop, a member of the Democratic Party of Korea (Jeonnam Suncheon, Gwangyang, Gokseong, Gurye-eul), on the 23rd, the Anti-Corruption and Economic Crime Investigation Unit of the Southern Gyeonggi Provincial Police Agency arrested 95 members of a criminal organization in May who fraudulently obtained a total of 10 billion KRW in loans from financial institutions using the Korea Technology Finance Corporation’s (KOTEC) ‘One-Click Guarantee’ program.

Assemblyman Kwon Hyang-yeop

They recruited loan applicants, received their digital certificates, and applied on their behalf. To prepare for KOTEC consultations and on-site inspections, they created false business plans and anticipated question-and-answer sheets, which the loan applicants were instructed to memorize. Some loan applicants testified during police investigations that they only answered formal questions during KOTEC’s on-site inspections.

KOTEC was found to have inadequately verified documents, actual purchases and sales, and employee work status during the loan guarantee process.

Following the incident, KOTEC conducted a full investigation on 8,036 companies out of 10,651 companies supported by the ‘One-Click Guarantee,’ excluding 2,615 companies whose guarantees were canceled or had incidents. The investigation revealed that only 431 companies were vulnerable and required focused post-management. However, considering that most loan applicants involved in the criminal organization lacked the ability to fulfill their debt obligations, it is highly likely that they were included among the excluded canceled or incident companies.

Over the past five years, the number of guarantee incidents related to the One-Click Guarantee has increased annually. Interest arrears were the most frequent at 372 cases, followed by principal arrears at 248 cases, business closures at 196 cases, and credit management information registrations at 125 cases.

Rep. Kwon stated, “This case demonstrates how lax the current technology guarantee screening system is,” and pointed out, “The fact that the criminal group was able to create anticipated question sheets was possible because they had identified KOTEC’s standardized question patterns.”

He added, “Issues such as policy fund loan fraud and false guarantees are common problems not only at KOTEC but also at all public institutions supporting policy funds for small and medium enterprises and small business owners, including the Small and Medium Business Corporation and the Small Enterprise and Market Service. It is urgent to conduct targeted full investigations into false document submissions and financial misconduct organizations, as well as to enhance systems to preemptively block criminal signs.”

Rep. Kwon also said, “While expanding online policy fund support to enable SMEs and small business owners to conveniently receive loans and guarantees is desirable, efforts by policy financial institutions to eradicate financial crimes targeting policy funds through thorough verification procedures must continue.”

This content was produced with the assistance of AI translation services.