Regulations to Prohibit and Penalize Unfair Interventions by Illegal Policy Fund Brokers to Be Established

6th Meeting of the Task Force on Resolving Unfair Intervention in Policy Funds

481 Reports Filed with Reporting Center, 8 Cases Referred for Investigation

Ministry to Investigate and Refer Cases, Establishes Penalties for Violations

The Ministry of SMEs and Startups is pursuing legislation to define, prohibit, and penalize unfair third-party interventions in order to eradicate illegal policy fund brokers.

Noh Yongseok, First Vice Minister of the Ministry of SMEs and Startups, is delivering opening remarks at the 'TF for Solving Third-Party Unfair Intervention Issues' held at the Korea Federation of Small and Medium Business on April 10. Ministry of SMEs and Startups

On June 25, the ministry held the sixth meeting of the "Third-Party Unfair Intervention Problem Resolution Task Force" (hereinafter referred to as the TF) in Seoul, chaired by First Vice Minister Noh Yongseok. The meeting was attended by four policy financial institutions, including the Korea SMEs and Startups Agency, the Small Enterprise and Market Service, the Korea Technology Finance Corporation, and the Korea Federation of Credit Guarantee Foundations, as well as the National Police Agency.

From January through June 19, the illegal broker reporting centers operated by the policy financial institutions received a total of 482 reports to prevent third-party unfair interventions. Of these, 8 cases deemed to have legal violations were referred to investigative agencies, and 1 case was reported to the Financial Supervisory Service. There are currently 27 cases under investigation to determine the presence of third-party unfair intervention.

Major cases referred for investigation include instances where government or public institution symbols (CI) were used without authorization, and brokers received contracts or advance payments on the condition of loan approval, but the loans were never processed and contact was lost. There were also cases where loan agreements and credit guarantees were forged to deceive victims into believing the documents were issued by policy financial institutions.

The Ministry of SMEs and Startups announced detailed plans for legislation that includes regulations prohibiting and penalizing unfair interventions, as well as investigation authority. The details of the legislative plan to eradicate unfair interventions are as follows: ▲ Introducing definitions and regulations prohibiting and penalizing unfair intervention acts ▲ Stipulating effective measures such as granting investigation authority and referral to investigative agencies ▲ Establishing regulations to protect whistleblowers and to encourage reporting of unfair acts.

The current legal system has limitations in punishing third-party unfair interventions. A ministry official explained, "There is no existing law that can prevent third-party unfair interventions under the current statutes. While submitting false documents can be punished as fraud, it requires resulting financial damages. The purpose of this legislation is to provide a legal basis to prevent the act itself, even if damages have not yet occurred."

The proposed bill defines unfair intervention acts and establishes penalties for violations. Previously, on June 19, Assemblyman Heo Seongmu of the Democratic Party proposed an amendment to the Act on the Promotion of Small and Medium Enterprises, which stipulates up to five years of imprisonment or a fine of up to 50 million won depending on the type of unfair intervention.

In Assemblyman Heo’s proposal, unfair intervention is defined as: ▲ Falsifying or submitting false documents for policy finance applications ▲ Instructing or arranging for applicants to create false documents ▲ Misleading or deceiving companies by implying influence over the application process, or through false or exaggerated representations or advertisements ▲ Receiving or demanding compensation or benefits exceeding the presidential decree limit for providing policy finance consulting or document preparation assistance.

In addition, the bill grants the Minister of SMEs and Startups the authority to investigate unfair interventions and provides a basis for referring cases to investigative agencies if unfair intervention is determined. It also prohibits any disadvantageous actions against whistleblowers and includes confidentiality obligations regarding their identity.

To strengthen the reporting and intake system ahead of the law’s enactment, the ministry will operate a "Third-Party Unfair Intervention Intensive Reporting Period" for one month starting June 29. During this period, if applicants for policy funds voluntarily report their involvement in third-party unfair interventions, the ministry will significantly expand exemptions, including full waivers of participation restrictions and contract cancellations even for active or major participants. The reward for reporting will also be increased from 400,000 won to 600,000 won.

Vice Minister Noh Yongseok stated, "We will swiftly establish a legal foundation to eradicate third-party unfair interventions and further strengthen cooperation among related agencies until the legislation is enacted. Through the intensive reporting period from June, we will further encourage reports of third-party unfair interventions and do our utmost to prevent damage to SMEs and small business owners."

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