This is the second in a monthly series contributed by executive members of the Financial Supervisory Service to address key ongoing financial issues. ― Ed.

Today almost everyone lives a financial life.

Monthly wages go straight into a bank account, from which money can be withdrawn to subscribe to an installment savings product or invest in stocks, and pay the bills.

As such, finance is closely related to our daily lives, and advances in information and communications technology have made such transactions faster and easier. 


On one hand, the Internet-connected smart devices allow an easy transfer and payment of money, while only a single credit card is needed to buy goods or services everywhere.

These benefits, however, come at a price. There has been a rise in telecommunications fraud, such as voice phishing and pharming, whose tactics are getting more sophisticated. This is a harsh reflection on the world that has made things too convenient even for fraudsters.

As of 2014, the number of victims who reported phishing scams to the Financial Supervisory Service was 18,620 with a total of 163.7 billion won in damages.

Although this might seem insignificant compared to the aggregate volume of financial transactions in Korea, the danger lies in the potential for such fraud to amplify public anxiety over financial deals and thus undermine the basic order in the financial market. It is like a tiny worm that eats into the pillars of a building, eventually leading to its collapse.

Of course, this issue is not confined to Korea. For example, the United States has trouble with identity fraud, in which stolen bank accounts are used for transfers or withdrawals. Such fraud cost 12.7 million victims a total of $16 billion in damages during 2014. According to research, such scams create a victim every two seconds, affecting 5 percent of the adult population in the U.S.

Japan also saw a big jump in telecommunications fraud-related damages, from 25.9 billion yen and 9,204 cases in 2013 to 37.6 billion yen of 11,257 cases in 2014. This phenomenon can be explained by more prompt and convenient transactions made possible all across the globe.

So what can be done to reduce the damage? If everyone goes back to the days when they have to visit a bank branch to deal with financial matters and pay cash to buy things, there might be a significant improvement, but this is neither practical nor desirable. The problem is that financial transactions have become inextricably linked with other social activities, and inconvenience would overwhelm the public, which has grown accustomed to faster and easier processes.

Nevertheless, it is now time to shift the entire social system and culture away from convenience-driven one to a more balanced one that seeks harmony between financial convenience and safety.

People should also be wise enough to put up with some inconvenience when they are required to go through a trickier process to open a new bank account, face stronger transaction security measures, have a cap on the amount of transfers or withdrawals, and follow a time-delay rule in transactions. It is essential that they try to protect themselves against financial fraud, thinking that it could befall them anytime.

To this end, one could use diverse systems and services that allow them to take safety measures at their discretion. For example, the newly adopted account designation service, which has been up and running since September 2014, keeps the amount of transfers below a certain threshold for bank accounts not pre-designated by their holders. Also, the so-called delayed transfer system will be implemented starting October this year. It is a new anti-fraud system that allows customers to delay the timing of transfers for a certain period if they want to. These regimes need to be well publicized so that consumers can take precautions against financial scams by themselves.

Nevertheless, there is obviously a limitation in such self-prevention efforts. To some extent, it is also vital to put in place systems that can be applied to the financial community across the board, whether customers choose them or not. For instance, banks in Singapore complete an inter-bank transfer the day after it is requested, and if customers would prefer an immediate transfer, they have to pay extra.

Similarly, Korea has been operating a variety of anti-fraud systems over the years, but only to a limited extent, given the public’s demand for convenience. Recently, Korean banks are taking great interest in keeping financial fraud at bay through preemptive measures. They include extending the delay time in cash withdrawals after receiving a transfer of 3 million won or more, from the current 10 minutes to 30 minutes. This is expected to make things a little slower for customers, but will help curb losses caused by financial fraud.

On April 10, the FSS announced special measures to combat voice phishing and other scams, including those aimed at improving relevant systems. These measures are largely focused on two things. First, the FSS will shut down illegitimate bank accounts, often used as a channel for moving criminal funds, in a preemptive manner, and make the most of the golden time in fraud prevention so that fraudsters cannot prey on innocent savers. Second, it will launch a nationwide campaign to raise public awareness of how to stay vigilant. The FSS will implement these measures, in concert with relevant agencies and the financial community, with a strong determination to root out financial fraud once and for all.

And to make this happen, it is now time to put the whole mind and resources of our society into finding a subtle balance between convenience and antifraud efforts.

By Park Sae-chun

The writer is a senior deputy governor of the Financial Supervisory Service. The views reflected in this article are his own. He can be reached at parksc@fss.or.kr. ― Ed.