Police have escalated to a compulsory investigation of Kakao Pay (377300.KS), which allegedly provided the personal information of approximately 40 million people to Alipay, a Chinese mobile payment service, without customer consent.
According to police on the 9th, the Anti-Corruption and Economic Crimes Investigation Unit of the Gyeonggi Nambu Provincial Police Agency conducted a two-day search and seizure on the 6th and 7th of this month at Kakao Pay's headquarters in Bundang-gu, Seongnam. The company faces allegations of violating the Credit Information Use and Protection Act and the Electronic Financial Transactions Act.
This marks the first raid on Kakao Pay since police launched their investigation in March at the request of the Financial Supervisory Service (FSS).
Police reportedly secured electronic records and other materials to examine the entire decision-making process behind Kakao Pay's provision of personal information to Alipay. After completing analysis of the seized materials, police plan to proceed with questioning witnesses and suspects.
The suspects booked so far include Kakao Pay executives, employees, and the corporate entity, though their identities and number have not been disclosed.
Kakao Pay is accused of transferring 54.2 billion pieces of personal information belonging to approximately 40 million customers to Alipay from 2018 to May 2024.
It was revealed that Kakao Pay provided information on all of its users to help build a model for calculating "NSF scores," a task Apple had outsourced to Alipay.
The NSF score is a type of per-customer score calculated to assess the likelihood that an Apple services user will have insufficient funds for payment.
The Personal Information Protection Commission imposed a fine of 5.968 billion won on Kakao Pay in January last year. The FSS also issued an institutional warning, which constitutes a severe sanction, in February, along with a penalty of 12.9076 billion won and an administrative fine of 4.8 million won.
Kakao Pay filed an administrative lawsuit against the Personal Information Protection Commission, arguing that the data transfer was part of a lawful business outsourcing arrangement, but the court ruled against the company on the 11th of last month.
"It is difficult to conclude that the data subjects were aware of, or gave specific and clear consent to, the fact that the information would be used by Apple as a type of credit evaluation indicator to assess customers' payment capacity," the court said in its ruling. Kakao Pay has reportedly appealed the decision.
"After the FSS requested the investigation, we reviewed the materials and spent a long time preparing the application for the search and seizure warrant," a police official said. "As the police investigation is unrelated to the court's ruling, we will carry out the remaining investigation, including analysis of the seized materials."
