‘Illegal private financing’ rampant due to high interest rates, Financial Supervisory Service strengthens management and supervision

Financial Supervisory Service plans to introduce AI in earnest into the ‘illegal financial advertising surveillance system’
Utilizes Google AI language model 'Bart' to automate identification of illegal advertisements
As related problems intensify due to high interest rates, President Yoon declares “war on illegal private finance”

Financial authorities are introducing artificial intelligence (AI) technology to monitor illegal private finance advertisements. On the 4th, the Financial Supervisory Service announced a plan to ‘advance the illegal financial advertising monitoring system’ and announced that it would fully operate the AI-based illegal financial advertising monitoring system. As ordinary people are being pushed out of institutional loans one after another due to prolonged high interest rates, they have revealed their determination to eradicate illegal private lending that is rampant in earnest.

Introducing AI to expand the scope of supervision

The Financial Supervisory Service has so far adopted a surveillance system that filters keywords based on advertising text. If an AI-based surveillance system is introduced in earnest in the future, the scope of illegality judgment can be further expanded by utilizing optical character recognition (OCR) technology. Illegal content and phone numbers expressed in the form of images in illegal financial advertisements are automatically converted into text, and the scope of surveillance is expanded to include images as well as posts that were previously subject to illegality determination.

Additionally, the Financial Supervisory Service decided to use the AI ​​language model ‘BERT’ developed by Google to detect illegal advertisements. The plan is to train a natural language processing (NLP) model on 2021 cases of illegal financial advertising posts that have been accumulated since 6 to automatically determine whether images and posts expressed in advertisements are illegal. The targets of discrimination are six types of illegal advertisements, including △illegal loans, △work loans, △bank account sales, △personal credit information sales, △mobile phone small payments, and △credit card cashing.

There is expected to be a change in the speed of screening for illegal financial advertisements. The existing review process was conducted by reconnecting to the website address where the illegal advertisement was located, conducting a separate review, collecting supporting materials separately, and sending an electronic official document. In the future, the Financial Supervisory Service and the Korea Communications Standards Commission plan to automate the entire process, including requests to block illegal financial advertisements and notification of deliberation results, to improve work efficiency.

Demand for illegal private financing emerged along with high interest rates

As the high interest rate situation continues, the damage caused by illegal private loans targeting the common people is increasing. This is because loan companies, which are considered the ‘last line of defense’ in institutional finance, are unable to conduct normal lending operations due to a sharp increase in procurement costs. They complain that they cannot handle loan products lower than the current legal maximum interest rate (20% per annum) due to profitability issues. In the end, the demand of ordinary people who need urgent money inevitably flows into illegal private financing.

Recognizing this as an ‘opportunity’, illegal private finance companies are aggressively recruiting customers. The number of requests for action, such as deletion of illegal advertising posts, that occurred between January and September last year was 1, a 9% increase from last year (1). It is known that they went beyond simply encouraging Gori to take out illegal private loans and used vicious techniques such as collecting nude photos of victims, blackmailing them, and threatening to kill them.

As the damage caused by illegal private loan sharks increased, President Yoon Seok-yeol publicly declared a ‘war on illegal private lending,’ and each institution began full-scale management and supervision. The Financial Supervisory Service plans to conduct on-site inspections of 5 loan companies, including 5 money loan companies and 10 purchase receivable collection companies, by the end of this month. The introduction of AI technology is also interpreted as part of the effort to ‘eradicate illegal private finance.’