South Korea’s Financial Supervisory Service (FSS) has started an upgrade of its system, getting ready for a major shift in how victims of financial fraud involving virtual assets can get their money back. On August 6, the FSS announced the Financial Fraud Damage Refund System Improvement Project as South Korea prepares to make virtual assets part of the assets people can reclaim refunds for under an updated law. The revised Telecommunications Fraud Victim Refund Act was amended on March 31 and will start taking effect on October 1.
The system upgrade aims to fix weak points in the current refund process, which was built mainly for handling Korean won. Until now, it struggled with cases where criminals turned stolen funds into virtual assets or committed the fraud using virtual assets in the first place. With the changes, the FSS will now be able to calculate refunds for virtual assets, considering what type of asset, how much was involved, and its Korean won value at the moment payment is suspended.
FSS Begins System Overhaul Ahead of October 1 Changes
The FSS is reworking its refund calculation system as South Korea gets ready to increase the types of assets that victims can get refunds on. The new version of the Telecommunications Fraud Victim Refund Act widens the definition so that virtual assets count as victim assets, and refunds will cover them. These rules are set to take effect on October 1.
Right now, when someone falls victim to financial fraud, they ask their bank for relief. The bank then contacts the FSS to start the debt extinguishment process. The FSS figures out how much refund the victim should get, reports the numbers back to the bank, and the bank pays out the refund. Because the current system handles losses denominated in Korean won, it cannot process cases involving digital assets. Where stolen funds are moved into virtual assets, the system cannot calculate what should be returned.
The FSS is therefore changing the calculation method to include the type and amount of virtual assets involved. It’ll also use a damage refund ratio and convert the value of these virtual assets into Korean won at the moment the stolen funds are frozen. This shift is meant to make the refund process work for both traditional money and virtual assets.
How the FSS Will Trace Funds Across Merged Accounts
A big part of the upgrade is the system’s upcoming ability to handle complicated transactions, where fraud money from multiple victims gets shuffled between different accounts. Often, fraudulent funds don’t just sit in one place, they get split into several accounts, then sometimes recombined into one.
In a lot of cases, money from several victims gets merged together after passing through various accounts. That makes it harder for investigators to figure out exactly how much of the leftover funds belongs to each person. Adding virtual assets into the equation just makes the calculation more complicated, since the old system really only worked for Korean won.
According to the FSS’s Request for Proposal, the agency is “completely overhauling the calculation logic” so they can figure out fair refunds by looking carefully at complex, crisscrossing flows of money. How refunds are calculated will change, too. Right now, every time an employee reviews an application, the system does the calculations in real time. The new plan is to run these calculations in advance. That way, staff can just retrieve the results, which should save everyone a lot of processing time.
The FSS also wants to add information about virtual assets to the electronic notifications sent to victims, including KakaoTalk messages. These will provide refund details like which virtual asset was involved, how much the victim gets back, and the amount in Korean won when the funds were frozen. The new system will share information back and forth with the current one to make that possible.
This upgrade project will run roughly three months, from September to November, and has a budget of 118.53 million won. Even though the new law takes effect on October 1, the technical work will continue until the end of November. The FSS explained that this project timeline should leave enough room to adjust or fix anything if problems turn up once the system is live.
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