Fake "Government Notices" Targeting Shutdown Small Business Owners' Support Funds on the Rise

'Government Impersonation' Scams Target Closed Small Businesses
Demolition Companies Seek Store Demolition Support Funds
SEMAS: "Unlawful Third-Party Intervention... Investigation Under Review"

As more self-employed business owners are shutting down their stores due to the economic downturn, cases of impersonating government agencies to unlawfully interfere with policy funds are on the rise. The Small Enterprise and Market Service (SEMAS) plans to investigate the extent of the damages and request a formal investigation if necessary.

According to the government on March 13, the Ministry of SMEs and Startups and the Small Enterprise and Market Service launched the "Task Force for Solving the Issue of Unlawful Third-Party Interventions" in December last year and are currently cracking down on scams involving impersonation of government agencies. "Unlawful third-party intervention" refers to illegal brokers impersonating government agencies or forging related documents in order to obtain policy funds that are supported by government resources, thereby securing illicit gains.

A closed store in Dongdaemun-gu, Seoul, has a flyer attached that impersonates a government agency. Photo by Jaehyun Park

In particular, there is a need for caution as "government impersonation promotional materials" have been appearing in areas where the number of closed stores is increasing. On March 11, such impersonation notices were posted on closed stores throughout Dongdaemun-gu in Seoul. The notices stated, "The Small and Medium Business Administration provides up to 6 million won in closure consolation payments," and instructed recipients to contact the phone number listed at the bottom of the notice. However, the Small and Medium Business Administration mentioned in the notice ceased to exist in 2017 when it was elevated to the Ministry of SMEs and Startups.

When contacted at the listed number, a company representative claimed to be "directly operated by the Small and Medium Business Administration" and offered to visit the store to provide an estimate if the store's address was sent by text message. What this company is targeting is the policy support fund for the "Store Demolition Cost Support Program" operated by SEMAS. This system provides government support for costs related to store demolition for those planning to close or who have already closed their small businesses. The support offers up to 200,000 won per pyeong, with a maximum of 6 million won available.

It is presumed that these companies impersonating the government intend to intercept the demolition support funds. In order to receive demolition cost support, small business owners must submit application documents such as a lease contract and a building register, and later, they are required to provide settlement documents including the demolition company's work statement, electronic tax invoice, transfer confirmation, and before-and-after demolition photos. As competition among demolition companies has intensified, some are impersonating government agencies to lure closed stores. Illegal brokers who intervene in policy fund and support applications are known to induce contracts by offering to handle the application process or by promising to prepare false documents, in exchange for a fee.

When visiting the address of a company impersonating the Small and Medium Business Administration, only a closed store with an old signboard could be found. When asked again about fees, a company representative said, "Once the support funds are issued based on the demolition cost estimate, you can keep whatever is left after deducting the demolition cost," adding, "If you are suspicious, don't bother contacting us."

If a company uses a government agency logo without authorization to falsely claim credibility, it can be punished with up to 10 years in prison under current law. Additionally, using the impersonation of a government agency for illegal marketing purposes is subject to up to 10 years in prison or a fine of up to 20 million won under Article 347 of the Criminal Act for fraud.

An official from the Small Enterprise and Market Service stated, "We are aware of the issue with impersonation notices claiming to be from government agencies, and this constitutes unlawful third-party intervention," adding, "If any illegality is confirmed in the future, we will request a formal investigation."

Meanwhile, policy fund issues have led to 228 reports being filed through the Ministry of SMEs and Startups reporting center as of March 2 this year. Most were simple complaints, but cases suspected of illegality are under review for sanctions.

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