9,117 duplicate IP applications flagged from January to October

760 suspected broker-linked cases blocked at application stage

Joint reporting period with police to run through Dec. 8

Legislation to criminalize broker interference under review

An illustration of illegal policy fund brokers. [Image generated using ChatGPT]
An illustration of illegal policy fund brokers. [Image generated using ChatGPT]

The Ministry of SMEs and Startups has blocked 322.6 billion won ($241 million) worth of policy fund applications this year on suspicion of illegal broker involvement, the ministry said Thursday. The government is stepping up efforts to stamp out such interference, including launching a joint reporting campaign with the Korean National Police Agency and pursuing legislation to punish illegal brokers.

The ministry held the seventh meeting of its Third-Party Improper Interference TF at the Seoul Creative Economy Innovation Center on Thursday, chaired by First Vice Minister Noh Yong-seok. Representatives from the Korean National Police Agency, the Korea SMEs and Startups Agency, the Korea Federation of Small and Medium Business, Korea Technology Finance Corporation and the Korea Credit Guarantee Federation attended.

According to the ministry, a shared IP verification system operated by four policy finance institutions flagged 9,117 duplicate applications submitted from the same IP address between January and late October. Of those, 760 cases totaling 322.6 billion won were identified as suspected illegal broker interference and blocked at the application stage following phone verification and on-site inspections.

The ministry also said it would standardize how each institution handles policy fund applications submitted from the same IP address. The move follows criticism raised in the National Assembly that the four policy finance institutions each use different procedures to check whether a shared-IP application involves illegal broker activity.

The ministry plans to harmonize the varying IP-blocking methods, verification procedures and IP management standards across institutions. It will also upgrade the shared IP verification system to ensure the revised standards are applied consistently in the field.

Reporting and investigation of illegal brokers will be strengthened as well. A total of 723 complaints were filed with the illegal broker reporting center between January and late October, of which 14 were referred for investigation and two were forwarded to prosecutors.

The ministry will run a concentrated reporting period targeting third-party improper interference from Nov. 11 through Dec. 8. The Korean National Police Agency will join the existing four policy finance institutions for the first time, stepping up inspections and enforcement against illegal brokers.

The ministry also plans to raise reward payments for tipsters, expand immunity for voluntary self-reporters and strengthen coordination among agencies to ensure that complaints lead to actual investigations.

The Korean National Police Agency noted that accepting fees, consulting charges or a share of a loan from small and medium-sized enterprises or small business owners as a condition of securing financing may constitute a violation of the Lending Business Act and other laws. During the concentrated reporting period, authorities will focus on determining whether such conduct breaks the law.

The government's push to tighten oversight reflects concerns that illegal broker involvement in the policy fund application process places an undue burden on small businesses and self-employed operators that need the funds. With duplicate same-IP applications now being flagged at scale, establishing clear and consistent screening criteria to distinguish legitimate applications from suspected improper interference is expected to become increasingly important.

Legislation to eradicate third-party improper interference is also being pursued. Amendments to the Small and Medium Enterprises Promotion Act and the Small Business Protection and Support Act, currently under review in the National Assembly, would introduce definitions and prohibitions on improper interference, establish penalties, codify investigation authority and referral procedures, and strengthen the reward system for reporting.

"Relevant agencies are working together to advance a range of policy measures to address third-party improper interference, and we are also pushing to establish the necessary legal framework," First Vice Minister Noh said. "We will further strengthen coordination among agencies to ensure that improper interference has no foothold in the field, and we will continue to develop and implement policies to prevent harm to small and medium-sized enterprises and small business owners."


boo@heraldcorp.com