A group that orchestrated fraudulent contracts using Seoul Guarantee Insurance's insurance products, resulting in insurance payouts totaling over 8 billion won, has been apprehended by the police.
On November 7, the Seoul Metropolitan Police Agency's Criminal Investigation Unit announced that it had arrested 38 individuals, including Mr. A, the CEO of the borrowing company, as well as officials from the borrowing and lending companies and loan brokerage agents, on charges of violating the Special Act on Prevention of Insurance Fraud, among others. Mr. A has been taken into custody.
They exploited Seoul Guarantee Insurance's "Performance Guarantee Insurance" product to secure company loans. Although this insurance is fundamentally intended for non-financial business transactions such as goods supply contracts, Mr. A entered into monetary loan agreements and then disguised them as supply contracts, submitting false contracts to obtain the insurance.
In this process, Mr. A’s company, which could not provide substantial collateral, was able to easily borrow funds, while the lending companies secured repayment of the principal through the insurance, effectively earning annual interest rates of 10 to 12 percent in a risk-free environment.
From December 2021 to December 2022, Mr. A and his associates borrowed a total of 11 billion won from lending companies through 67 instances using this method, purchasing performance guarantee insurance products equivalent to the loan amounts. However, they failed to repay principal totaling approximately 4.5 billion won, causing the lending companies to recover their losses through insurance payouts.
Another borrowing company CEO, Mr. B, who was unable to directly obtain guarantee insurance due to low creditworthiness, enlisted 15 third-party companies to enter into fraudulent contracts using performance guarantee insurance and paid them a 10 percent commission on the loan amount. From February 2020 to July 2023, he borrowed 4 billion won using the same method, failed to repay 3.5 billion won, and caused the lending companies to cover their losses with insurance payouts.
To prevent further abuse, the police recommended that Seoul Guarantee Insurance establish a system to verify the substance of contracts during the review and screening process for insurance contracts.
A police official stated, "This case is a new type of insurance fraud that used insurance products as collateral for private loans. Through this investigation, we have clearly defined the misuse of guarantee insurance products for loan transactions as an unlawful practice."
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