Second false-claim violation to trigger license cancellation; fines up to 5 times fraudulent amount

Detected fraud surged from 7.3 billion won to 47.8 billion won in four years; AI detection system to be upgraded

A user makes a payment with a social service electronic voucher. [Korea Social Security Information Service]
A user makes a payment with a social service electronic voucher. [Korea Social Security Information Service]

South Korea plans to verify the locations of both users and service providers at the time of payment to prevent fraud in its social service electronic voucher system.

Penalties will also be tightened: providers caught submitting false claims twice will face license cancellation, and fines of up to five times the fraudulently claimed amount will be imposed.

The Ministry of Health and Welfare announced the measures Thursday as part of a plan to strengthen fraud management in the social service electronic voucher system.

Under the plan, the ministry will overhaul the payment process to block fraud before it occurs. When an electronic voucher payment is made, the locations of both the user and the service provider will be verified with their consent.

To that end, the ministry will upgrade the electronic voucher payment application and develop the necessary systems by next year, after which location verification will be rolled out in stages to allow for gradual adoption in the field.

The ministry also plans to expand the use of payment methods that require explicit user approval at the start and end of each service session — such as QR-code and biometric payments — to structurally eliminate fraud that can arise from card-based transactions.

The range of payment review categories for electronic vouchers will also be broadened.

Until September, payment checks during long-term hospitalization were limited to the disability activity support program, but since September the checks have been extended to cover all 13 electronic voucher programs.

A provider's fraud management standards will be added as an indicator in the social service quality assessment to improve the effectiveness of oversight.

In areas with high rates of fraud, the ministry plans to conduct comprehensive training for all providers in the region and will offer tailored training for newly registered providers.

The fraud detection system will be upgraded. The ministry will enhance the Fraud Detection System's AI model and overall capabilities by 2027 to improve detection accuracy.

Starting in July 2027, the system will share suspicious payment records with local governments on an ongoing basis, and field investigations using the system will be expanded across regions.

To enable faster on-site investigations, the ministry will increase the operating budget for regional centers of the Korea Social Security Information Service and expand the number of field investigators.

The Ministry of Health and Welfare, local governments, the Korea Social Security Information Service and the National Pension Service plan to form a joint fraud inspection team to conduct regular, intensive checks.

Post-violation penalties will also be strengthened. Relevant laws will be amended to allow immediate license cancellation upon a second false-claim violation, and fines of up to five times the fraudulent amount will become applicable.

The lookback period used to determine whether a provider is a repeat offender will be extended from two years to five.

The ministry will also improve the system for recovering fraudulently claimed funds and managing unpaid amounts, with periodic oversight from the point a recovery order is issued through to final collection. Providers that fail to pay will be subject to additional surcharges on the outstanding balance.

The social service electronic voucher system, introduced in 2007, is one of South Korea's primary social service delivery mechanisms. As its use has grown, so has the incidence of fraud.

According to the ministry, detected fraud rose from 7.3 billion won ($5.45 million) in 2021 to 47.8 billion won last year, while the number of cases jumped from 250,000 to 940,000.

The ministry oversees electronic voucher fraud management overall, with the Korea Social Security Information Service handling payment reviews and field investigations, and local governments managing follow-up after cases are identified and investigated.

"Active government intervention in fraud management is necessary to protect the benefit rights of social service users and to improve the fiscal sustainability of welfare spending," Minister of Health and Welfare Jeong Eun-kyeong said. "We will faithfully implement the plan we have established and continue working to minimize fraud."


thlee@heraldcorp.com