South Korean Regulator to Punish Payment Gateway Firms Over ‘Illegal Casino Links’

The South Korean Financial Supervisory Service has accused six payment gateway providers of allowing illegal casino operators to use their services.

The South Korean media outlet Newsis reported that the unnamed PG companies stand accused of letting gambling networks, voice phishing fraudsters, and drug dealers use their platforms with impunity.

The FSS has warned that the PG operators could face “severe punishment” for failing to police their platforms.

The regulator says it identified the firms during routine analysis of PG and e-pay platform transaction data.

South Korean law requires PG and e-pay firms to submit e-pay account and transaction data to the FSS every month.

Payment Gateway Firms Face ‘Strict’ Punishment

The FSS uses software to review PG data for suspicious-looking account activity. The regulator says it followed up on its concerns with on-site inspections at all six PG companies.

The regulator said that as part of an attempt to increase sales revenues, the PG firms “provided electronic accounts to criminal organizations that committed illegal gambling, drugs, and voice phishing.”

As such, they became “direct participants in crimes including fraud and embezzlement,” the FSS explained.

The regulator said one of the PG firms provided accounts to criminal organizations. These organizations operated voice phishing and illegal gambling sites that masqueraded as e-commerce platforms, the FSS believes.

The criminals then allegedly used these accounts to embezzle victims’ money and collect funds from bettors. PG firms collected “a large amount of commission” in the process, the regulator added.

Regulator to Step Up Scrutiny of Payment Gateways

Another firm allegedly used shell companies to manipulate sales revenue data, making the company appear more successful.

The FSS has handed some of the cases over to prosecutors, who could seek jail terms of up to 30 years.

The regulator said it would respond by improving its monitoring system. It said that in the future, the system would be able to detect suspicious-looking activity faster on PG and e-pay platforms.

It also said it would step up its scrutiny of PG providers with more on-site inspections. A FSS spokesperson told reporters: “We will strengthen our cooperation with law enforcement agencies. We will ensure that PG companies involved in crimes such as illegal gambling and voice phishing are punished accordingly.”

The FSS concluded that it would also ask the government to reform legislation to help it crack down harder on offenders.

Most forms of betting remain illegal in South Korea, with the exception of three racecourses, official sports pool betting, and the High1 casino in Gangwon Province.

The latter is the only casino in the nation with the right to admit domestic passport holders.