Though South Korea boasts one of the lowest crime rates in the world, it has been nicknamed the “Republic of Deception” due to the unique machinations employed by Korean scammers. Their scams are multifaceted and constantly evolving, making this type of crime difficult to categorize or solve in the short term. With the Netflix documentary In the Name of God: A Holy Betrayal gaining global recognition, the importance of citizens remaining vigilant against fraud has been highlighted, particularly that perpetrated by pseudo-religious organizations. It is commonly believed that most cases of fraud originate from financial motives and a sense of emptiness in life, but what lies beyond them? Who are the scammers and who are being scammed? How can Korean citizens stay constantly vigilant through thick and thin?

Koreans pride themselves on “K-chi-an,” a slang term used to describe Korean public safety. Indeed, a recent report by Numbeo claimed that Korea has the 17th highest safety index out of 144 nations. Koreans find others sufficiently trustworthy to leave their laptops alone at a café, where they are vulnerable to potential theft, and women are mostly able to walk alleyways alone at night. Yet, somehow Korea also reportedly has the highest crime rate for fraud in the Organization for Economic Cooperation and Development (OECD). With sophisticated psychological scams run over the phone and a large number of pseudo-religious cults, fraud is part of everyday Korean life. “Koreans just know when someone’s from a cult,” said Jung Hyunsoo, a student at Yonsei University (YU). “If they approach you with a ‘survey’ and then start talking about God and ‘training your mind,’ you know you have to run.” Is Korea’s nickname of the “Republic of Deception” justified in any way? For the November issue, The Granite Tower (GT) explores fraud within Korean society.

Is Korea Really the Republic of Deception?

While there exist several arguments that attempt to explain why Korea has the highest rate of fraud, the claim that Korea has a relatively high rate of fraud is still contested. Some attribute this phenomenon to a widespread culture of deceit; according to the 2023 Prosperity Index released by the British think tank Legatum, South Korea ranked 107th out of the 167 countries analyzed for their social capital or trust among members of society. Furthermore, when asked “Would you be okay with going to prison for one year in exchange for one billion South Korean Won (KRW)?”, 55 percent of Korean high school students answered in the affirmative, which, to those who blame Korean culture for the country’s high rate of fraud, is an indicator of a low collective sense of moral conscience.

However, some argue that there is no concrete evidence for the above and that other factors have led to a faulty conclusion of both the rate of fraud reported and the so-called culture of duplicity. As reported Daum’s The Fact, Korea’s legal environment is one that readily allows victims to sue others for fraud, which naturally inflates the reported numbers of these crimes. In an interview with Professor Seo Joon-bae (Public Administration, National Police University), he claimed that the increase in fraud is a “global trend” with the emergence of smartphones, which criminals began utilizing as a tool for their deceptive schemes. Korea’s advanced finance-related technologies such as fintech also serve as another useful route for potential fraud. As The Fact reports, most other developed countries handle complaints in civil court; for example, in the United States (U.S.), the police do not act on complaints made against swindlers, while Japanese police also do not process complaints regarding individual debt. On the other hand, Korean police do act on reports of fraud, and many of these cases are taken to court, increasing the total number of reported cases.

So, if the actual degree of fraud in Korea is still up for debate, why is discussing fraud still an important task? While the fact that Korea ranks number one in fraud may be contested, it is still evident that the most common type of crime in Korea is fraud; this is proven true in the 2023 Quarterly Crime Trend Report released by the Korean National Police Agency (NPA). In addition, there are increasingly sophisticated scams that are unique to Korea that foreigners, or even native Koreans, may not be aware of because they continue to evolve over time. Moreover, because fraud relies on psychological manipulation, which causes damage that is not as immediately tangible as violent crime, it is often considered, unfairly, a trivial form of crime with lighter repercussions. However, due to the unique nature of the manipulation involved, fraud can cause a degree of harm to victims that is comparable to other kinds of crimes.

Technology-Based Phishing Crimes

According to the KNPA, the total estimated amount of financial damage from cyber fraud over the last five years is a staggering 1 trillion KRW. One of the most prominent types of technology-based fraud is voice phishing, which is known to have originated in Taiwan in the 1990s before spreading to nearby countries such as Japan and Korea. The first case of voice phishing in Korea occurred in 2006, and even though the reported rate decreased during the coronavirus disease (COVID-19) pandemic period of 2020 and 2021, it increased again to the usual levels in 2022 and still remains at an average of approximately 30,000 cases each year. Phones have become a must-have item in the 21st century, and voice phishing scams have risen along with this trend. According to the 2022 Statistics Korea report on voice phishing, the cumulative financial damage caused by all cases of voice phishing from 2006 to 2021 amounted to almost four trillion KRW. Although voice phishing is one of the most common forms of fraud in Korea, leading to widespread reporting and prevention education, the number of victims has not dramatically decreased even to this day. Instead, the methods of voice phishing have become more complicated and diverse in order to fool the public in innovative ways, resulting in an increase in the number of victims.

According to episode 27 of YTN’s “Uncut Version” which covers voice phishing and cyber fraud, NPA Economic Crime Investigation Department’s Yoo Jihoon explains that there are generally three types of phishing crimes: voice phishing, text phishing, “smishing” (a combination of text messages and phishing), and body phishing. The two most representative forms of voice phishing include loan fraud – approaching the victim with the false promise of loans with low interest rates, and institution impersonation fraud – impersonating an official institution to trick the victim into thinking they were involved in a serious case. In text phishing, the fraudster sends a “bait message” impersonating a family member or close friend, an official institution alerting the victim that someone else used their bank account, or even notifications for delivery to trick them into clicking on a link that will immediately install a virus on the device; this then grants unlimited access to the entire device, including capturing photos and recording, to the fraud criminal. Body phishing describes a criminal act in which the fraudster threatens the victim to spread nude photos or videos of the victim doing sexual acts in exchange for large sums of money.

Phishing crimes have also now evolved to develop mind tricks that best reflect current trends as well; the newest phishing scam targets people who experienced a financial loss in investment in stocks or Bitcoin. The victim will send in his or her bank account details and personal information, and as requesting and getting loans online is possible nowadays, the fraudster will use that information to get loans from the victim’s bank account and send it to the victim, explaining that it is compensation for the investment losses. As online financial transactions become more accessible, new phishing crime schemes exploiting cyber finance are increasing by the day.

Preventing the damage arising from technology-based scams requires the efforts of various sectors. In a paper from Consumer Problems Research titled “Analysis of Voice Phishing Damage Experiences and Influencing Factors,” researchers Kim Minjung and Kim Eunmi (Chungnam University) analyzed the data of 54 victims of voice phishing and 926 people who responded to the Fund Investor Survey of 2017 with claims that they were almost victimized, concluding that acquiring in-depth financial knowledge and improving the quality and quantity of education on the prevention of financial fraud are the most effective prevention measures against voice phishing. Institutions have also implemented measures to prevent voice phishing, such as multiple banks laying out the “Ten Voice Phishing Prevention Commandments.”

The Spread of Pseudo-Religious Cults

While the universal right to freedom of religion may give the impression that any religious faith is acceptable, pseudo-religious cults are fundamentally problematic in how their beliefs are used as an instrument for the exploitative psychological manipulation of their believers in exchange for, according to Professor Tark Ji-Il (Theology, Busan Presbyterian University), “money, sex, and labor” through “doctrinal gaslighting after forming a close relationship with believers”. While religious cults overseas are based on a specific religion, Korean cults tend to incorporate elements of Buddhism, Confucianism, Christianity, and shamanism. Cults are most common in Korea; The Money Today estimated that around 340,000 to 660,000 people devoted themselves to fraudulent religions as of 2022. The Fifth Christian Analysis Report of Korea released by The Korean National Association of Christian Pastors (KACP) on March 2, 2023, reported that at least 6.3 percent to 12.1 percent of the devotees of Korea’s Protestant Church are in cults and mostly exist on the margins of society.

Professor Tark stated that “many cults started in the 1930s when Japan’s imperial rule and exploitation intensified, spread nationwide during the chaos of the Korean War, and grew during the military regime, which was characterized by an authoritarian culture.” Furthermore, he explained that “the lack of an effective functional role played by established religions has contributed to the spread of pseudo-religious cults, and the social context in which various religious cultures have coexisted has rendered it difficult to prevent or control cults until the illegality of their actions came to light.”

The proliferation of pseudo-religions has become increasingly concerning in the wake of the COVID-19 pandemic. Because in-person interactions were limited during the outbreak, cult followers started recruiting online. They disseminate promotional videos and written articles that represent their beliefs on numerous platforms with the specific aim of attracting young, enthusiastic students who are well-versed in digital media. Once COVID-19 waned, followers of pseudo-religions started to appear near university campuses, a development that is widely regarded as deeply unsettling given that their target audience has shifted towards students entering adult society. A survey conducted by Dongguk Media in April 2023, which involved 100 college students in Seoul, revealed that 71.7 percent of the respondents had witnessed or experienced cult recruitment near campuses. Furthermore, 59.4 percent asserted that on-campus recruitment is escalating each year and that the stories of religious fraud are not unfounded rumors.

Furthermore, Professor Tark highlights that the method of deception employed by cults is not so different from other kinds of fraud that are widely considered problematic. “After approaching someone in a friendly manner, cults form a close relationship with them, and then initiate the temptation that they have prepared, before finally inflicting damage. In this respect, it is not different from voice phishing or jeonse (a real estate rental system in which tenants pay large lump-sum deposits) fraud.” Because of this, he adds, the world has become a place in which unprovoked kindness has come to be seen as a burden. Just like the technological advancements employed in voice phishing, Korean cult leaders are experts in “benchmarking” and “upgrading” – utilizing a preexisting religion and changing its narrative to establish their own cult. While voice phishing may employ mind tricks to convince a victim to part with a large sum of money, cults try to take authoritarian control over the believers’ lives to manipulate them completely. 

Victim Trauma From Fraud Damages

Elements of social engineering and emotional triggers are increasingly implemented in modern scams, and this means that the psychological damage that fraud victims experience is different from crimes like theft – victims place more blame on their own decision-making, such as blaming themselves for not having been more vigilant, and also suffer from immense feelings of grief. For example, jeonse fraud has led a number of victims to commit suicide. According to a report by the American Association of Retired Persons (AARP) in 2015, two-thirds of fraud victims in a 2015 Financial Industry Regulatory Authority (FINRA) survey responded feeling negative emotional consequences as a result of the fraud. Christine Kieffer, senior director at the FINRA Investor Education Foundation, added that severe anxiety, sleep and eating disorders, depression, and post-traumatic stress disorder (PTSD) were commonly found among these victims.

Stacey Wood, a psychology professor at Scripps College and co-editor of the 2022 book A Fresh Look at Fraud, a compendium of the latest research on fraud, said, “What’s different with fraud victims is that their constellation of symptoms includes negative thoughts about themselves. And so, they could be thinking, are they not smart? Is there something wrong with their cognitive abilities, their ability to judge others?” In other words, fraud is often seen as a consequence of the judgment and actions of the victim. It is important, therefore, that blame is not placed on the victim of fraud; instead, the focus should be on future prevention and the punishment of scammers. Furthermore, helping victims recover from damages should also be prioritized.

The NPA first declared 2015 the starting year of Police Victim Protection, and has been deploying police officers dedicated to protecting victims of crime at police stations across the country since then. Police officers aid victims in various aspects of recovery from damages, including psychological support, employment, and financial damage compensation. However, according to Money Today, not many victims are aware of this system and often end up thinking of ways to make up for the economic and psychological damage on their own. In Money Today’s interview, Professor Lee Woong-hyuk (Police Science, Konkuk University) stated that both financial and psychological damage should be seen as a social problem. “We need to advance our perspective on the judicial system and invest in the human and material resources and programs that the state needs in order to help victims."

Crime and Punishment

Unlike other forms of crime such as murder or robbery, fraud is regarded as one of the most difficult offenses to adjudicate. In the U.S., lifetime sentences are common, whether the crime be fraud or murder. Professor Lee Yun Ho (Department of Police, Korea Cyber University) stated in an interview with GT that the U.S. is not just unforgiving regarding insurance or investment fraud but also maintains a strict stance toward chief executive officer (CEO) fraud, the embezzlement of public funds, and accounting fraud. In contrast, criminal sentences in Korea are insufficient. This makes Korea a breeding ground for scammers, especially because “punishment for these fraud criminals is simply a slap on the wrist, even though they cause unimaginable damage to hundreds and thousands of victims,” said Professor Lee.

This difference in the legal consequences of fraud between the U.S. and Korea can be attributed to a significant difference in the sentencing laws of each country. In the U.S., the sentence is determined based on the total amount of damage, so the sentence can naturally go up to several hundred years, but the Korean sentence is determined based on the amount of single-person damage rather than the total amount of financial damage. Imagine this scenario described by Professor Lee: a criminal swindles 100 billion KRW from 1,000 different victims. The Special Economic Crimes Aggravated Punishment Act and the Special Act can sentence life imprisonment for more than five billion KRW in damages, but these rules do not apply to the actual sentence, because this is only for one victim. A fraud criminal can get away with a lifetime sentence by swindling a larger sum of money than five billion KRW from more than one person. Even more fraud criminals are not sentenced to prison at all, and prison sentences are often suspended. As a result, most financial crimes, such as investment and insurance fraud, still remain a sound business choice in Korea. Punishing criminals by sentencing them is based on the theory of rational choice, says Professor Lee. “Humans avoid making choices and actions that will result in losing money by calculating the profits and losses.”

One may argue that increasing punishment based on rational choice is not necessarily realistic because violent criminals mostly commit crimes due to high levels of psychopathy or lack of social infrastructure – but this logic is useful for solving fraud because the perpetrators of fraud are not likely to be psychopaths but rather dealers who see the potential economic benefits of fraud and go for it, especially because the legal consequences are minimal. These crimes are one of the instances in which raising the severity of capital punishment will indeed help to solve the root problem.

How can religious cults be effectively addressed? Implementing change at the individual level may appear impractical, given that leaders of these pseudo-religions employ mysticism to manipulate their followers. In an interview with Professor Kim Do Hyung (Mathematics, Dankook University) conducted by Yonhap News, it was noted that followers of these cults are unlikely to heed the advice of those around them. Therefore, a more viable solution at the national level would involve measures that do not involve forced conversion and that will be highly practical compared to the changes at the individual level. Professor Tark mentioned in an interview with Yonhap News that constructing a center for victims to request help or the government providing legal advice or religious counseling should be helpful because it could serve as an impartial public authority for victims.

In the “Republic of Deception,” the prevalence of fraud, specifically voice phishing and pseudo-religions, has become a pressing social concern desperately waiting for clear, well-thought-out solutions. By acknowledging the root of the deception in comparison to other nations, preventing fraud from being a profitable enterprise, and questioning excessive goodwill to avoid falling into the trap of scammers, citizens will be able to stay vigilant and protect themselves. With the exploration of the Korean fraud landscape, GT hopes to encourage readers to take an interest in the astute tactics of the scammers, and to stay alert through thick and thin.