Nationwide Crackdown in 231 Local Governments... 1,374 Cases of On-Site Guidance Reported
[Asia Economy Reporter Lim Cheol-young] The Ministry of the Interior and Safety announced on the 13th that from March 16 to March 31, a nationwide crackdown on the illegal distribution of local love gift certificates was conducted across 231 local governments, resulting in 112 cases being investigated and penalized. There were 1,374 cases where local governments deemed the violations minor and provided on-site guidance without direct administrative or financial penalties.
For this joint crackdown, a public-private joint inspection team of 1,158 members was formed, including local government officials nationwide and employees from private consignment companies such as the Korea Minting and Security Printing Corporation, Kona I, Daegu Bank, and Gwangju Bank. The joint inspection team conducted on-site inspections targeting 210,000 affiliated stores, and during the crackdown period, each local government operated a resident reporting center to receive reports from residents. The private consignment companies actively utilized the ‘Abnormal Transaction Prevention System’ to facilitate cooperation between the public and private sectors in the crackdown.
Among the 112 violations found, fraudulent receipt and illegal currency exchange accounted for the largest number with 77 cases, followed by 14 cases of use in restricted businesses such as lottery shops, 5 cases of payment refusal, and 16 other cases that were investigated and penalized. Regarding the types of local love gift certificates used fraudulently, paper-type gift certificates were the most frequently cracked down on with 59 cases, followed by 37 cases of mobile-type and 16 cases of card-type.
Meanwhile, although there were 109 cases of violations involving pre-discount type gift certificates, only 3 cases involved cashback-type gift certificates, which return part of the payment amount as cashback, indicating that the latter is relatively safer.
Through this crackdown, 73 affiliated stores had their registrations canceled, 11 were suspended, and 28 received correction orders as administrative penalties. Additionally, fines totaling 72 million KRW are scheduled to be imposed on 13 stores, and 55.06 million KRW will be recovered from 63 stores. Some local governments, considering the severity of violations and concerns about additional offenses, have requested investigations from local police.
The Ministry of the Interior and Safety plans to implement various measures to eradicate illegal distribution of local love gift certificates based on the results of this crackdown. Considering that paper-type gift certificates, mainly used in rural areas, are relatively vulnerable to illegal distribution, the ministry will work with local governments and the Korea Minting and Security Printing Corporation to improve systems and strengthen crackdowns to prevent illegal distribution of paper-type gift certificates. In the long term, they are also considering replacing paper-type gift certificates with card-type or mobile-type gift certificates.
Furthermore, to eradicate illegal distribution of card-type and mobile-type gift certificates, the ministry plans to additionally inspect the operation status of abnormal transaction prevention systems operated by each local government and consignment company and support mutual benchmarking of best practices. Reflecting field opinions that cashback-type gift certificates have relatively lower risks of illegal distribution than pre-discount type certificates and have advantages in immediate use and inducing additional consumption, the ministry also plans to gradually transition to the cashback-type gift certificate system.
The Ministry of the Interior and Safety intends to ensure that the crackdown on local love gift certificates is not a one-time event by conducting another nationwide joint crackdown in the second half of this year and continuing biannual crackdowns thereafter. During this crackdown, many local governments raised the need to improve the criteria for imposing fines on local love gift certificate affiliated stores, and the ministry will review and improve these criteria together with local governments.
Currently, under the Enforcement Decree of the Act on the Promotion of Use of Local Love Gift Certificates, fines of 10 million KRW, 15 million KRW, and 20 million KRW are imposed on sales agencies and affiliated stores depending on the number of violations. The ministry plans to consider lowering some fine levels for cases of simple negligence and increasing fines for cases where damages and unfair profits from violations are significant.
Park Jae-min, Director of the Local Finance and Economy Office, stated, “We will thoroughly crack down on affiliated stores that exploit the purpose of local love gift certificates, which are promoted to revitalize local markets, for unfair gains,” and added, “Along with the crackdown, we plan to improve the system so that local love gift certificates can provide practical help to small business owners struggling due to COVID-19.”
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