Fines up to 5 times fraudulent amount for social service voucher abuse

Providers that fraudulently claim social service vouchers to pocket illicit gains will face fines of up to five times the improperly claimed amount under proposed regulatory changes.

Providers caught committing the same violation within five years will also have their registration canceled starting from the second offense.

The Ministry of Health and Welfare said Friday it will accept public comment on proposed amendments to the enforcement decree and enforcement rules of the Act on the Use of and Support for Social Services through Oct. 21.

Under the revised enforcement decree, fines will be calculated by applying a tiered multiplier to the total amount improperly claimed or passed on to users, with the multiplier varying according to the length of the business suspension imposed.

A suspension of up to 10 days will carry a fine of twice the total fraudulent amount. Suspensions of more than 10 days and up to 30 days will draw a fine of three times the amount; more than 30 days and up to 50 days, four times; and suspensions exceeding 50 days — reserved for the most serious violations — five times the total fraudulent amount.

However, the fine is capped at 30 million won ($21,700) to ensure it does not exceed the statutory ceiling.

The enforcement rules governing administrative sanctions have also been tightened.

To curb habitual fraud, the lookback period for counting repeat violations has been significantly extended — from two years to five. Providers caught committing the same violation within that five-year window will face aggravated penalties.

Under the current rules, a first offense of fraudulent billing in violation of compliance requirements results in only a warning if the fraudulent billing rate is below 2 percent. The revised rules will trigger an immediate business suspension from the first offense, with the penalty determined by both the amount and the rate of fraudulent billing.

The number of suspension days — ranging from 10 to a maximum of 90 — will be determined by cross-referencing the monthly average fraudulent amount during the investigation period against the ratio of fraudulent claims to total revenue.

When the fraudulent billing rate reaches 5 percent or more, three additional suspension days will be added for each percentage point above that threshold, though the overall suspension ceiling remains six months.

Rules on deregistration for repeat offenders have been strengthened as well. Previously, a provider had to be caught three times for the same violation before losing its registration. Under the revised rules, a second offense of fraudulent billing within five years of the first sanction will result in immediate registration cancellation.

The amended enforcement decree and rules are set to take effect one month after promulgation.