South Korea Blocks 760 Broker-Suspected Policy Loan Applications

What counts as improper involvement

The ministry defines the problem as consulting firms going beyond advice and filing assistance to commit illegal acts such as preparing false documents. Reported tactics include excessive fees, forced insurance sales and impersonating government agencies. Policy funds are meant to be applied for directly by the business owner. This year's budget totals 7.7933 trillion won, including 4.4313 trillion won for small and medium-sized firms and 3.3620 trillion won for small merchants.

Same-IP filings tend to appear when a broker prepares and submits many companies' applications from one place. The Korea SMEs and Startups Agency launched an IP verification system in April last year, the Korea Technology Finance Corporation followed in May, and the Small Enterprise and Market Service began in January this year.

Gaps in enforcement

An analysis released on October 14 by lawmaker Kwon Hyang-yeop found 2,429 applications worth 13.172 trillion won came from 744 shared IPs this year, and 903 of them, about 178.4 billion won, received funding. The Small Enterprise and Market Service confirmed proxy filing in 149 of 347 same-IP cases but lacked evidence of improper involvement and took no action. Kwon noted that not every shared-IP application can be assumed to involve a broker.

The broker reporting center received 723 reports from January through October. The ministry requested investigations in 14 cases, and two went to prosecutors, a referral rate of 1.9%.

A concentrated reporting period runs from November 11 to December 8, with the National Police Agency joining the four existing policy finance institutions for the first time. The police said that collecting fees or consulting charges under any name in exchange for arranging a loan can violate the Money Lending Business Act. The ministry also plans to widen reporting rewards and immunity for those who come forward voluntarily.