The South Korean government is overhauling regulations to prevent a new type of jeonse fraud in which perpetrators use association bank accounts that appear to be personal accounts to receive and embezzle lease deposits from multiple tenants.
The Real Estate Supervision Task Force under the Office for Government Policy Coordination held a "Real Estate Illegal Activity Response Council" meeting at the Government Complex Seoul on Wednesday, with relevant agencies including the Ministry of Land, Infrastructure and Transport (MOLIT), the Financial Services Commission (FSC), the National Tax Service, and the National Police Agency in attendance. Participants shared the status of ongoing investigations into real estate misconduct, future plans, and discussed cooperation measures.
At the meeting, the FSC and the Financial Supervisory Service (FSS) reported recent cases of jeonse fraud exploiting association accounts that appear to be personal accounts. Specifically, a licensed real estate broker, identified as A, is suspected of being entrusted with property management by landlord B, then creating a voluntary association under the same name as B and using the association's account to receive and embezzle approximately 800 million won in jeonse deposits from tenants.
The FSS plans to require banks in June to add the word "group" next to the name of voluntary associations when opening accounts, so that counterparties can recognize that the recipient is an association during fund transfers. The agency will also instruct banks to exercise heightened caution against fraud when associations apply to open accounts.
Separately, the National Police Agency reported that during its special crackdown on real estate crimes (March 16 to October 31), it had arrested 11 suspects for violating the Housing Act and the Resident Registration Act by fraudulently obtaining apartment subscription eligibility to secure housing, and referred them to prosecutors without detention.
Cases included individuals who falsely registered as supporting elderly parents to qualify for special-supply apartment subscriptions, or who filed false residency reports at the homes of relatives different from their actual residences in order to obtain housing.
The government plans to take strong measures against confirmed cases of fraudulent subscription, including criminal penalties (up to three years in prison or fines of up to 30 million won), contract cancellation (recovery of the housing), forfeiture of down payments (10% of the sale price), and restrictions on subscription eligibility.
"We will continue to strengthen the pan-government response system to prevent damage to genuine homebuyers and tenants and to establish a sound real estate transaction order," said Kim Yong-soo, the Second Vice Minister of the Office for Government Policy Coordination.
