South Korea’s crackdown on fraudulent credit card transactions is exposing a persistent challenge for tax authorities and financial regulators: businesses that disguise their identities to conceal revenue and facilitate illicit payments.
For U.S. payment networks, financial institutions and investors monitoring compliance risks in Asian markets, the figures underscore the importance of transaction monitoring and coordination between tax and financial enforcement agencies. South Korea identified 15,714 fraudulent credit card merchant accounts from 2017 through August 2026, even as annual detections declined for four consecutive years.
The figures, submitted by the National Tax Service to Kang Min-kook, a lawmaker with the ruling People Power Party, show that detections fell from 1,637 in 2021 to 1,383 in 2022, 1,316 in 2023, 1,255 in 2024 and 1,207 in 2025. Authorities identified another 713 cases through August 2026, according to data released on October 13.
At the same time, public reporting has become a more important source of enforcement leads. The share of detected cases originating from public tips rose from 33.4% in 2023 to 33.5% in 2024, 37.1% in 2025 and 37.7% in the first eight months of 2026.
From 2017 through August 2026, authorities received 16,136 reports of suspected fraudulent merchant accounts. Of those, 4,995, or 31%, resulted in confirmed detections. Informants received a combined 500 million won in rewards during the period.
The effectiveness of those reports has improved in recent years. The share leading to detections increased from 22.4% in 2024 to 32.1% in 2025 and 36.9% in January-August 2026. Of 729 reports filed during the first eight months of this year, 269 resulted in detections.
Retail businesses accounted for the largest share of detected cases, with 6,205, or 39.5% of the total. Restaurants represented 4,584 cases, or 29.2%, while bars and other drinking establishments accounted for 786, or 5%. Other industries made up 4,139 cases, or 26.3%.
Fraudulent merchant accounts operate by routing credit card payments through terminals registered under another business’s name. The practice can allow operators to hide sales, evade taxes or avoid tax collection. It can also provide payment channels for card-cashing schemes, illegal prostitution and gambling.
Investigators have uncovered businesses operating in the same building under identical or similar names, splitting revenue across fraudulent accounts to conceal the scale of their sales. Other operators have registered merchant accounts under the names of relatives or acquaintances to distribute reported revenue. In separate cases, people used credit cards belonging to family members or friends to obtain cash through transactions disguised as legitimate purchases.
Kang said the decline in annual detections raised concerns about the National Tax Service’s enforcement efforts, despite the growing contribution of public reports. He warned that tax evasion through fraudulent merchant accounts can erode government revenue, undermine tax fairness and put legitimate businesses at a competitive disadvantage.
He called on the National Tax Service to establish real-time information-sharing arrangements with financial regulators to improve the detection of illegal financial transactions.
For businesses and investors, the figures highlight the broader compliance risks created when payment systems are used to obscure the identity of merchants or the origin of revenue. Stronger data sharing and transaction monitoring could help authorities identify suspicious activity earlier. But the sustained decline in detections also leaves an important question unanswered: whether fraudulent activity is becoming less prevalent or enforcement is failing to keep pace.
