South Korea’s Financial Supervisory Service (FSS) has launched enforcement proceedings against six domestic payment gateway (PG) companies following the discovery of their involvement in illegal gambling, drug-related transactions, and other criminal schemes. The regulator revealed that the firms allegedly provided essential financial infrastructure—such as virtual accounts and payment processing—to criminal networks operating under the guise of legitimate businesses.

The findings were based on the agency’s routine analysis of monthly transaction data from electronic payment providers. Utilizing in-house monitoring tools, the FSS flagged irregularities indicating possible involvement in criminal activity, prompting on-site investigations at the six PG companies.

Digital Payment Platforms Accused of Abetting Organized Crime

According to the FSS, several PG companies knowingly supported entities engaged in illegal activities, ranging from illicit gambling to phishing scams and drug distribution. In some cases, companies were accused of directly colluding with criminal organizations in return for substantial commissions.

As reported by Newsis, one of the firms, identified only as Company A, was found to have partnered with criminal outfits that ran illegal gambling and voice phishing operations disguised as online stores. The firm offered virtual accounts through which victims’ funds and gambling proceeds were funneled. To avoid detection, Company A also managed these illicit operations internally and reported shell companies in damage control efforts when issues arose, helping criminals maintain access to payment services.

In another case, the CEO of Company B allegedly created fictitious entities and manipulated credit card transaction data to simulate sales at 23 different companies, including one owned by an associate. These inflated figures were then used to obtain loans from a peer-to-peer lending platform, misappropriating funds under false pretenses. Prosecutors have since requested a 30-year prison term and a fine of ₩40.8 billion for the individual.

Meanwhile, Company C entered into agreements with a fraudulent investment organization masquerading as a legitimate distributor. This partnership enabled criminal actors to receive victim payments through virtual accounts provided by the PG firm.

South Korean Authorities Reinforce Oversight and Legal Reform

Following these revelations, the FSS has escalated the matter to prosecuting authorities, initiating criminal investigations and pledging to impose stiff sanctions on any firms found to be in breach of the Electronic Financial Transactions Act.

“The PG companies became direct participants in crimes including fraud and embezzlement,” the FSS stated, emphasizing the severity of the violations. A spokesperson added, “We will strengthen our cooperation with law enforcement agencies. We will ensure that PG companies involved in crimes such as illegal gambling and voice phishing are punished accordingly.”

As part of its response strategy, the FSS announced several forthcoming regulatory reforms. These include enhancements to its data-driven surveillance systems, more frequent thematic inspections of PG operators, and legislative proposals to close existing regulatory loopholes exploited by financial enablers of illegal operations.

Authorities noted that illegal gambling in South Korea has become increasingly sophisticated, leveraging digital tools and the nation’s payments infrastructure to operate covertly. The FSS aims to reinforce ongoing surveillance mechanisms to swiftly detect and act upon suspect activity in virtual account transactions.

A central concern for regulators has been the apparent targeting of vulnerable demographics, including minors. In some instances, teenagers as young as 12 were allegedly reached through illegal gambling platforms. Officials have also arrested individuals accused of creating and selling illicit gambling websites to various operators.

Despite stringent gambling laws in South Korea, including the near-total ban on local participation in casino gaming—with the sole exception of Kangwon Land’s High1 Resort—these enforcement actions underscore the ongoing threat posed by underground gambling markets and the importance of dismantling their support structures within the legitimate financial sector.