FSS holds 4th Financial Consumer Protection Advisory Committee meeting; plans intensive probe of hospitals suspected of insurance fraud in second half

A bank teller window [Herald DB]
A bank teller window [Herald DB]

Commercial banks will be required to obtain external expert review when developing complex non-deposit products such as derivatives. Equity-linked securities, or ELS, sales documents will also have to include specific language on the risk of losses. The Financial Supervisory Service also plans to launch an intensive, targeted investigation into hospitals suspected of insurance fraud in the second half of this year.

The FSS said Sunday that these measures were discussed at the 4th Financial Consumer Protection Advisory Committee meeting, held Thursday.

The meeting, chaired by FSS Governor Lee Chan-jin, was attended by expert members from consumer and civic groups, academia, the financial industry and the media. The FSS decided to strengthen consumer protection measures across the entire process of selecting, selling and managing non-deposit products — including complex derivatives — offered by banks. Going forward, products with complex structures or the potential for large-scale losses must include external experts and product manufacturers in the banks' non-deposit product review committees.

Banks must also guarantee sufficient review periods for independent departments — including risk management, consumer protection and compliance units — when introducing new products. When selling externally manufactured products, banks must draw up relevant agreements to clarify their consumer protection responsibilities as the selling party.

For ELS sales, product disclosure documents must include relevant information so that consumers can clearly understand the risk of losses. Documents covering managed assets must also disclose the characteristics of products available through each subscription channel, as well as fee structures, so consumers can compare and analyze products suited to their investment goals and time horizons.

The FSS plans to concentrate its resources on combating insurance fraud in the second half of the year, following a string of insurance- and medical-related crimes — including fee kickbacks by some convalescent hospitals to attract cancer patients and insurance fraud involving obesity drugs led by medical professionals.

To crack down on medical institution-led insurance fraud, the FSS will conduct an intensive, targeted investigation into hospitals and clinics under suspicion during the second half of this year.

The investigation will focus on hospitals and clinics where insider tip-offs have provided solid evidence of wrongdoing and where multiple medical workers are suspected of organized involvement in insurance fraud. The FSS said it will mobilize its insurance fraud response unit along with the roughly 100-person investigative organizations of insurance companies, and will coordinate with relevant authorities as needed.

To prevent fraudulent online payments, the FSS plans to upgrade its fraud detection system, tighten authentication procedures and push payment gateway operators to strengthen their security capabilities. It will release standard operational guidelines for preventing and responding to fraudulent payments in the second half of the year.

The FSS held its 3rd Financial Consumer Advisory Committee meeting in June, where it discussed financial investment education measures tailored to different life stages as a way to prevent excessive leveraged investment.


hyuk@heraldcorp.com