The Financial Services Commission announced that the government approved a revision bill for the Enforcement Decree of the Special Act on the Prevention of Loss Caused by Telecommunications-based Financial Fraud and Refund for Loss (“the Act” hereinafter) at the cabinet meeting held on November 4. The revision intends to strengthen the responsibility of financial companies in the prevention of loss caused by financial frauds or vishing (voice phising) scams.
Under the revised rule, specialized credit finance businesses (excluding the ones specialized in new tech financing) and consumer credit businesses that have KRW50 billion or more in assets will be newly subject to the customer due diligence (CDD) duty in their handling of loan services. This is a follow-up to the comprehensive measures for strengthening anti-vishing efforts introduced in March this year.
In order to prevent loss caused by vishing scams and facilitate a quick recovery of the lost money, the Act prescribes rules on account freeze and restoration of lost money for victims, which have thus far been applied mainly to the account-issuing financial institutions, such as banks, savings banks, and mutual finance businesses.
However, since there are cases where stolen personal information is being used by scammers to take out loans, the need to expand the application of CDD obligation to loan businesses, such as specialized credit finance businesses and consumer credit businesses, is growing in order to more effectively counter and prevent vishing scams.
Therefore, pursuant to the revised rule, specialized credit finance businesses (excluding the ones specialized in new tech financing) and consumer credit businesses that have KRW50 billion or more in assets will need to conduct CDD in their handling of loan services (via telephone, mobile phone, face-to-face, video call, etc.). When found to be in violation of the CDD obligation, it may be possible to impose an administrative fine of up to KRW10 million and require compensation to victims.
The revised Enforcement Decree will take effect six months after promulgation.
* Please refer to the attached PDF for details.