'Corporations Targeted Only Rented Apartments'... 7 Billion Won Mortgage Loan Fraud Gang Arrested in Busan

Acquisition of Rental Company Housing Nationwide Under Corporate Names, Securing About 7 Billion KRW Loan from Financial Institutions as if No Tenants Existed

Busan Police Arrest 34 for Real Estate Transaction Disorder and Loan Fraud: 6 Detained, 2

Loan Fraud Organization Chart.

[Asia Economy Yeongnam Reporting Headquarters Reporter Kim Yong-woo] A group involved in a 7 billion KRW mortgage loan fraud targeting corporate-owned apartments nationwide has been apprehended.

A total of 34 members of a loan fraud ring who disrupted real estate transaction order by purchasing apartments or company housing leased under corporate names and embezzling approximately 7 billion KRW in loans from financial institutions by pretending there were no tenants were caught by the Busan police.

The Anti-Corruption Economic Crime Investigation Unit of the Busan Metropolitan Police Agency arrested six individuals in their 50s, including A (male), who led the crime, on charges of violating the Act on Real Name Registration of Actual Real Estate Owners (fraud). They also sent 28 others involved in roles such as loan document preparers, collateral property purchasers, representatives of ghost corporations, name trustees recruiters, and name trustees to prosecution without detention, while investigations on three others were suspended.

The group exploited the fact that when a corporation leases housing for its employees, many employees do not register their residence.

Under the current Housing Lease Protection Act (Article 3), when a corporation other than a small or medium-sized enterprise leases housing for its employees, even if the employees register their residence, they do not have opposability rights. Therefore, instead of residence registration, it is common to obtain a guarantee from a guarantee insurance company for the lease deposit.

Taking advantage of the fact that apartments leased by corporations for employee housing often lack residence registration and thus appear to have no tenants on paper, A and others searched for apartments leased under corporate names, succeeded the lease deposits, purchased the apartments at low prices, and applied for loans as if there were no tenants.

From March 13, 2019, to May 6, 2020, they obtained loans in 43 cases totaling approximately 7 billion KRW.

A divided roles within the organization, including B, who managed funds for the crime, collateral property purchasers, loan document preparers, and name trustees recruiters, systematically committing loan fraud.

Financial institutions, seeing that there were no registered residents for the properties in documents such as resident household inquiry reports, trusted this and executed the loans. A paid those lending their names 5-10% of the loan amount as compensation.

Regarding this crime, since the financial sector received collateral at the time of loan issuance, there was no actual damage even if the loan was not repaid, and the tenant (corporation) received the lease deposit from the guarantee insurance company, so no damage occurred. Therefore, the fraud was organized over a period of at least one year until it was uncovered.

Ultimately, the actual loss from the crime falls on the guarantee insurance company.

During the investigation, the police identified institutional loopholes and made efforts to improve the system.

They notified relevant agencies of improvement plans, including the need for system linkage between financial institutions and guarantee insurance companies to verify tenant existence when issuing loans, and measures to prevent crimes such as guarantee insurance companies only entering into guarantee contracts for lease deposits on properties with established leasehold rights.

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