The number of bank account freezes at South Korean commercial banks has surged as new types of financial crimes, including investment chat room scams, spread across the country. By contrast, real-time temporary measures through Fraud Detection Systems (FDS) have declined. While voice phishing cases are decreasing, the diversification of crime types is increasing the response burden on the banking sector.
According to the financial industry on Tuesday, a total of 149,176 accounts were frozen at the five major banks — KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup — due to financial fraud reports from May last year through last month. The increase was particularly pronounced this year. From January to May this year, account freezes totaled approximately 72,000, more than double the 32,683 recorded during the same period last year.
The industry attributes the rise in account freezes to growing damage from investment chat room scams amid the recent stock market boom. In response, financial authorities last year distributed guidelines stating that investment fraud, in addition to voice phishing, falls under the Telecommunications Fraud Damage Refund Act.
Voice phishing cases, however, are actually declining. According to a government announcement last month, voice phishing cases totaled 9,353 over the seven months from October last year through April, down 35.5% from 14,461 during the same period a year earlier.
Meanwhile, real-time abnormal transaction blocking functions at banks have not been effective. The number of FDS-based temporary measures at the five major banks totaled 46,154 from January to May this year, down 21% from 58,609 during the same period last year. Temporary measures are actions that detect suspicious transactions in real time and temporarily block them.
The industry explains that there is no clear legal basis for temporary measures in cases of new types of phishing crimes, making active responses difficult. Additionally, in investment fraud cases, victims often perceive the transactions as legitimate investments, making it difficult to persuade them to halt the transactions.
In response, financial authorities plan to expand the application of guidelines from the end of this month so that financial companies can take preemptive temporary measures against new types of phishing crimes as well. The authorities are also pushing to build a joint FDS for the financial sector that would cover new phishing types.
However, concerns about legal liability have emerged in the banking sector. If a transaction that is not actually fraudulent is preemptively blocked, complaints and damage compensation issues could arise. Critics also point out that the current response is limited to financial authorities' guidelines, posing constraints in field application.
