Only 3% Fail to Submit Supporting Documents... Concerns Over Excessive Authority of Real Estate Transaction Analysis Institute

Government to Promote Establishment of 'Real Estate Transaction Analysis Institute' Within the Year
Likely to Grant Access to Personal Financial and Tax Information
Good Intentions but Overregulation and Transaction Slowdown Inevitable

Minister of Land, Infrastructure and Transport Kim Hyun-mi is responding to questions from lawmakers at the full meeting of the National Assembly Land, Infrastructure and Transport Committee on the morning of the 31st of last month. (Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] Concerns are growing that the 'Real Estate Transaction Analysis Institute (tentative name, hereafter Analysis Institute),' which the government is planning to establish within this year, will become an excessively regulatory and enforcement agency. Currently, under the 'Real Estate Market Illegal Activity Response Team' system, only about 3 out of 100 suspicious illegal cases are difficult to verify, yet the government plans to create an organization with nearly 100 personnel and grant it authority to access personal information, which is being criticized as excessive.

According to the Ministry of Land, Infrastructure and Transport on the 4th, from December last year to February this year, a total of 1,705 cases of high-priced housing transactions over 900 million won reported were investigated and classified as suspicious transactions. Among these, only 811 transactions, less than half, were notified to relevant authorities such as the Financial Services Commission, National Tax Service, and Police Agency for additional investigation including financial and tax information. Of these transactions, 97% of the parties involved submitted related explanatory materials, and only 3% refused to provide materials during the authorities' additional investigation process. This means that transactions requiring the government to directly investigate financial and tax information due to lack of explanatory materials were only around 20 cases. Based on all suspicious transactions, the proportion of transactions actually requiring investigation is only about 1.2%.

The government argues that since it is currently difficult to confirm facts and proceed with punishment if suspicious parties refuse to submit materials, the Analysis Institute must be established. They plan to create a special law to set up the Analysis Institute and grant it authority to quickly access financial transaction and tax information. A Ministry of Land, Infrastructure and Transport official explained, "If a suspect in an illegal transaction refuses to submit explanatory materials and resists, it is difficult to prove the charges," adding, "If the gains from illegal acts exceed fines, there may be incentives to refuse to provide explanations." Once the Analysis Institute gains authority to access account and tax information, the government will be able to directly investigate and verify facts even if the suspicious parties do not submit explanatory materials.

However, the industry criticizes that since only about 3% refuse to submit explanatory materials and the government can already detect illegal activities through the National Tax Service and Financial Services Commission, creating a separate organization with authority to access personal information is excessive. They argue that the current scale can be sufficiently handled within the existing Response Team. The special judicial police attached to the Ministry of Land, Infrastructure and Transport's Response Team currently have authority to apply for warrants and conduct forced investigations such as searches and seizures on suspicious cases. Additionally, a fine of 30 million won is imposed if explanatory materials are refused.

In particular, since the government amended the Real Estate Transaction Reporting Act to mandate submission of a funding plan when purchasing a house in regulated areas such as all of Seoul from as early as the end of this month, most suspicious transactions can be initially filtered through this. This means there is a system in place to detect illegal and irregular transactions without necessarily establishing a supervisory organization.

There are also significant concerns that the ambiguous criteria for suspicious illegal transactions could inadvertently suppress general individuals' transactions. Although the government stated it would only investigate suspicious acts such as transactions with prices significantly different from market value, excessive cash transactions, and large borrowings, it has not disclosed specific criteria. This raises the possibility of side effects where public officials could collect unlimited personal information of ordinary people based on their judgment.

Professor Seo Jin-hyung of Gyeongin Women's University (President of the Korean Real Estate Society) said, "Even though illegal actors and those refusing to submit materials are a minority, creating an organization that can look into all personal transaction details means viewing citizens as potential lawbreakers or evaders," adding, "Granting information access authority while naming it the Analysis Institute is just a packaging to reduce public resistance."

In response, a Ministry of Land, Infrastructure and Transport official said, "Institutions like the Financial Intelligence Unit or Capital Market Investigation Team also only disclose general principles regarding suspicious acts and rarely reveal detailed criteria," adding, "However, since there is significant opposition to expanding the Analysis Institute's authority, we are considering restricting it to receiving explanatory materials as before and only requesting information from related agencies if materials are not submitted."

This content was produced with the assistance of AI translation services.