Money transfer app has officials on their guard

The Central District Prosecutors’ Office imposed a travel ban on the head of a mobile application company on Saturday over suspicions that he created a smartphone app capable of transferring money from people’s accounts without permission.

The investigation began when about 100 people reported last Wednesday that 19,800 won ($18.31) in each of their bank accounts had been transferred without their consent to the app company. The unauthorized financial transactions were made through bank accounts from 15 different major local banks, including Woori Bank and Nonghyup.

The company charges registered customers a fee in exchange for information related to chauffeur services. However, those who had their bank accounts compromised said that they never registered for the app service.

On Saturday, prosecutors raided the office of the company, located in Wonju, Gangwon, and confiscated relevant internal documents and transaction records. Investigators said the suspected firm appears to have been a ghost company and added that it capitalized on lax electronic transfer service rules when it came to small sums of money.

When a company applies for an automatic transfer service to Korea Financial Telecommunications and Clearings Institute, all it needs is customer ID numbers and bank account information. It neither requires the name of the customer nor any verification process, thereby assuming that the enrolled company has already obtained permission.

“There is no way to detect such a scam if they obtained people’s information from unlawful access,” said an official from the Korea Financial Telecommunications and Clearings Institute, who requested anonymity.

The prosecution suspects the company got hold of an array of personal information illegally and submitted the data to the state-run financial authority to withdraw account holders’ funds.

After receiving complaints from the bank account holders, the Korea Financial Telecommunications and Clearings Institute blocked any financial transactions from being made from the company and compensated the money that had been transferred.

The financial authorities are looking to strengthen regulations to prevent further incidents.

“We already have measures that require companies to put down deposits when registering for the service. But we believe that a more thorough review is needed,” the official said.

Even if a company pays a sufficient deposit in advance, it does not guarantee that the company’s application for an automatic money transfer is genuine. The financial authority is currently working to come up with a measure that would force smaller companies to go through a tougher registration process, requiring more specific information about customers.

But others worry that a strengthened process will only lead to inconveniences. Amid the aftermath of a massive personal information leak involving three credit card companies, investigators vowed to verify the circumstances surrounding the app scam.

The prosecution asked a division that specializes in dealing with high-tech crimes to handle the case. The forces have already confiscated the personal data the company used.

BY JEONG HYO-SIK [ejpark@joongang.co.kr]