A Stationery Store Stole 5 Billion Won Over 10 Years... Supreme Court Rules Payment Device Management Company Also Responsible

"Obligation to Protect Customers and Possibility to Develop Fraud Cancellation Prevention Technology"
Only 30% Responsibility on Payment Device Companies... Negligence in Managing Damaged Printing Shops Also at Fault

A Supreme Court ruling has been finalized confirming that a credit card POS management company must compensate a stationery store for losses related to a multi-billion won theft case exploiting 'fraudulent cancellation of credit card payments.' ▶Refer to Asia Economy's March 5, 2022 article 'Stealing 5 Billion Won Worth from One Stationery Store Over 10 Years "No One Knew" [Seocho-dong Legal Story]'

The photo is unrelated to the article content. [Image source=Pixabay]

According to the legal community on the 24th, the Supreme Court Civil Division 1 (Presiding Justice Park Jeong-hwa) recently upheld the appellate court's partial ruling ordering K Company, a POS management firm, to pay 1.5 billion won to H Stationery, a large stationery store located in Seocho-gu, Seoul, in a 5 billion won damages claim lawsuit filed by H Stationery against K Company.

Yang, who was both a customer of H Stationery and operated the POS company, discovered in 2010 that by using a specific program, he could secretly cancel credit card payment approvals after transactions. Using this method, Yang stole stationery goods worth 5 billion won over about 10 years through 1,400 incidents at H Stationery. He squandered the proceeds from reselling the stolen goods on living expenses and entertainment. Yang was caught and sentenced to five years in prison in 2020 for fraud.

H Stationery filed a civil lawsuit claiming that K Company, responsible for managing the POS system including credit card approval inquiries, should also bear liability for damages. K Company argued, "This was an unprecedented incident exploiting a technical blind spot. With current technology, it is impossible to prevent crimes using Yang's method."

The first trial court ruled against the plaintiff, stating, "There is no evidence that K Company abetted the crime or violated its duty to protect customers, and the POS system's vulnerabilities cannot be completely fixed technically."

In fact, the Financial Supervisory Service in 2020 proposed measures such as assigning a unique 15-digit number to terminals to address the technical loopholes exploited in this case, but this method was difficult for small and medium-sized companies managing 30% of all POS systems in Korea to implement.

H Stationery appealed, and the appellate court reversed the decision. The court stated, "K Company has an obligation to create a secure service system to protect customers," and "Developing new software to resolve technical vulnerabilities is not impossible."

However, the court recognized that "there were many days when the amount of fraudulent credit card cancellations exceeded 10 million won, and if H Stationery had managed sales meticulously, the crime could have been detected earlier, but negligence increased the damages," thus limiting K Company's compensation responsibility to 30% of the total damages.

K Company appealed to the Supreme Court, but the Supreme Court agreed with the appellate court's judgment, finalizing the ruling as is.

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