Task force meeting targets third-party interference

Prohibited acts to be codified in law

Eight cases referred for investigation; government logo misuse, forged guarantee documents uncovered

An illustration of an illegal policy-fund broker. [Image generated using ChatGPT]
An illustration of an illegal policy-fund broker. [Image generated using ChatGPT]

South Korea's Ministry of SMEs and Startups is pushing to enshrine criminal penalties for illegal policy-fund brokers directly in law, as part of a broader effort to stamp out illicit third-party interference in government small-business financing.

The ministry held the sixth meeting of its "Task Force on Resolving Third-Party Improper Interference" in Seoul on Thursday, chaired by First Vice Minister Noh Yong-seok, and unveiled detailed plans for the legislative push.

According to the ministry, its illegal broker reporting center, which has operated since Jan. 1, received 482 reports through June 19. Of those, 412 cases — 85.5 percent — were handled through administrative measures such as official warning letters issued by policy finance institutions, while eight cases, or 1.7 percent, were referred to investigative authorities on grounds of illegality. One case was reported to the Financial Supervisory Service, and 27 cases remain under investigation.

The ministry paid a total of 2.2 million won ($1,430) in whistleblower rewards for six of the eight cases referred for investigation, and said it would consider additional rewards depending on the outcome of those investigations.

The ministry also disclosed details of the referred cases. They include an instance in which a broker used government and public institution logos without authorization to advertise access to policy funds, collected deposits and retainers from clients, then disappeared; and a case in which loan agreements and credit guarantee certificates were forged to appear as if issued by a legitimate policy finance institution, deceiving victims.

To eradicate such misconduct, the ministry is pursuing amendments to relevant laws. The move is significant because it would lift enforcement of illegal policy-fund brokering out of administrative guidelines and individual institutional responses and into a formal legal framework. Repeated abuses — including fraudulent consulting, excessive success-fee demands and impersonation of government agencies — have gone largely unchecked due to the absence of clear statutory penalties.

Under the planned amendments, specific acts would be explicitly prohibited by law: inducing the preparation or submission of false documents, misleading businesses through false or exaggerated advertising, and demanding or accepting fees above the permitted advisory-fee ceiling. The ministry plans to introduce penal provisions allowing imprisonment or fines for violations.

In addition, the ministry would be granted authority to summon individuals and demand document submissions to conduct its own investigations into suspected improper interference, along with a legal basis to refer uncooperative parties to investigative authorities.

Whistleblower protections would also be strengthened. The amendments would codify identity protection and prohibitions on retaliation against reporters, and establish a statutory basis for paying whistleblower rewards and operating the reporting center.

Ahead of the legislative changes, the ministry plans to run a month-long intensive reporting campaign starting June 29. During the period, it will publicize reporting channels through outdoor advertising and promotional videos.

Businesses that voluntarily report improper third-party involvement during the policy-fund application process within the intensive period will be exempt from participation bans and contract terminations — even if they were active or significant participants in the misconduct. Whistleblower rewards will also be raised from 400,000 won to 600,000 won per case.

"We will swiftly establish the legal foundation needed to eradicate third-party improper interference and strengthen cooperation among relevant agencies even before the legislation takes effect," First Vice Minister Noh said. "We will do our utmost to encourage reporting through the intensive campaign period and prevent harm to small and medium-sized enterprises and small business owners."


boo@heraldcorp.com