Government Funds, 'Blind Money'?…If National Treasury Subsidies Are Fraudulently Received, Subsidies Will Be Cut Off for Up to 5 Years

Government to Exclude Fraudulent Benefit Recipients and Involved Contractors from Business Operations for Up to 5 Years

[Sejong=Asia Economy Reporter Moon Chaeseok] In the future, recipients who fraudulently receive government subsidies through price inflation or false applications will be barred from receiving subsidies for up to five years. Businesses found to have fraudulently received subsidies will be prohibited from conducting subsidized projects for up to five years, and contractors involved in fraudulent receipt will also be excluded from projects.

On the 20th, the Ministry of Economy and Finance announced a draft partial amendment to the Enforcement Decree of the Act on the Management of Subsidies, which includes these provisions.

The amendment draft newly establishes a clause that imposes a subsidy payment restriction period of one to five years on recipients who have been ordered to return subsidies (including partial returns) due to fraudulent receipt.

First, if a recipient is caught even once receiving subsidies through fraudulent methods such as false applications, subsidy payments will be restricted for five years. If it is detected two or more times that subsidies were used for purposes other than those intended, the recipient will be barred from receiving subsidies for three years. If a recipient receives subsidies without meeting the payment requirements and is ordered to return the subsidies three or more times, a one-year payment restriction period will be imposed.

For subsidy recipients conducting subsidized projects (including indirect subsidy recipients), detection of fraudulent receipt will result in exclusion from project execution for up to five years. Contracting companies involved in fraudulent receipt will be prohibited from conducting projects for up to five years from the date of a final guilty verdict.

The amendment draft will undergo a legislative notice period until the 27th of next month and is scheduled to take effect from December 16.

Fraudulent receipt broadly refers to cases where subsidies are improperly received due to unfair methods or negligence. For example, inflating prices of construction costs or equipment purchases to receive excessive subsidies, or falsely registering children who do not actually attend daycare centers to obtain subsidies, are considered fraudulent receipt. Administrative errors such as system malfunctions or staff mistakes leading to subsidy overpayments are also included in the broad sense of fraudulent receipt.

Although this is essentially a crime similar to fraud or embezzlement, it is not easily visible because there is no direct victim, and among the public, it tends to be perceived more as a bad practice than a serious crime.

The scale of fraudulent receipt is also increasing. According to the Ministry of Economy and Finance, as of 2019, the number of detected cases of fraudulent receipt in government subsidy projects reached 206,152, with an amount totaling 86.26 billion won. This represents more than a fivefold increase in cases and more than a twofold increase in amount compared to the previous year.

Accordingly, the government announced a joint plan with related ministries to strengthen the management of fraudulent subsidy receipt, uniformly revising the subsidy payment restriction period, which previously varied by individual laws, to a maximum of five years, and plans to improve individual laws accordingly.

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