Mandatory Identity Verification by Financial Companies for First Transactions Depositing Over 10 Million Won
A bill to fundamentally block the withdrawal of fraudulently obtained funds, titled the “Partial Amendment to the Special Act on Prevention of Telecommunications Financial Fraud and Refund of Damages,” has been proposed.
On the 8th, Representative Yang Bu-nam (Democratic Party of Korea, Gwangju Seo-gu Eul) announced that he has taken the lead in proposing a partial amendment to the “Telecommunications Fraud Damage Refund Act,” which mandates financial institutions to temporarily suspend withdrawals from accounts when funds exceeding 10 million KRW are deposited from persons with whom there is no prior transaction relationship.
According to data released by the National Police Agency, the amount lost to voice phishing crimes in 2023 was 447.2 billion KRW, and from January to May 2024, the loss amounted to 256.3 billion KRW. According to the Financial Supervisory Service, the reported amount for damage relief applications due to voice phishing was 196.5 billion KRW in 2023, of which high-value damages exceeding 10 million KRW reached 130 billion KRW, accounting for more than 66% of the total reported amount.
The purpose of this bill is to create a mechanism to prevent the recurrence of harm to citizens caused by increasingly sophisticated voice phishing crime methods targeting the general public, which change constantly.
The existing law stipulates that financial institutions should take temporary measures such as withdrawal restrictions when there are suspicious circumstances of crimes like voice phishing, based on their own inspections. Due to the nature of these self-inspections, temporary measures are often taken only after multiple withdrawals have already occurred, making it difficult to promptly prevent damage. Therefore, the amendment mandates withdrawal restrictions without relying on the financial institution’s discretion.
After such temporary measures, the financial institution proceeds with identity verification of the account holder who received the deposit, using registered phone numbers or other information, before lifting the withdrawal restrictions.
While urgent measures are needed for fraud damages exceeding 10 million KRW, the government-wide “Integrated Reporting and Response Center for Telecommunications Financial Fraud” was launched and has been operating since last year to combat voice phishing crimes. However, it has been pointed out that this is only a post-incident relief measure and has limitations in fundamentally blocking the damage.
Representative Yang Bu-nam stated, “Every year, about 500 billion KRW is lost to voice phishing crimes, causing great suffering to many citizens. To address this, I have held multiple meetings with frontline police officers and concluded that fundamentally blocking the withdrawal of deposits by criminal organizations is the most effective way to break the chain of voice phishing crimes.” He added, “Although some citizens may feel inconvenienced by identity verification for transactions exceeding 10 million KRW during the initial implementation of the law, this applies only to the first transaction, and it will fundamentally block voice phishing crimes, so I believe there will be broad public consensus.”
Meanwhile, the partial amendment to the “Special Act on Prevention of Telecommunications Financial Fraud and Refund of Damages,” led by Representative Yang Bu-nam, was co-sponsored by Representatives Lee Seong-yoon, Lee Jae-gwan, Park Hee-seung, Kang Jun-hyun, Jeong Jin-wook, Oh Se-hee, Ahn Do-geol, Kim Hyun, Lee Jae-gang, Wi Seong-rak, Ahn Gyu-baek, Mo Kyung-jong, and Min Hyung-bae.
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