Internet-based Shopping Mall Engaged in Illegal Discounts of Credit Card Sales

The word `card-kkang` is defined as illegal activities to evade taxes and profiteer by discounting credit card sales. A total of 33 people were charged with involving in such activities and giving a tacit consent. Among them, 23 were arrested. A man opened a bogus shopping mall on the Internet to ask credit card companies for payment instead of clubs and bars in return for a certain rate of the amount in the credit card sales slip. Clubs and bars can evade taxes this way.

The Suwon District Prosecutor`s Office said Wednesday that 25 organized gangsters have been doing such illegal activities. All of them were arrested and indicted on charges of violating laws on credit and loans.

In addition, three of those who work at a large credit card company were arrested for neglecting their duty and profiteering, the prosecution said.

Moon, a 45-year-old man, established 14 bogus shopping mall on the Internet from August 2001 to June 2002, paid a discounted amount of money to clubs and bars for credit card sales, and demanded credit card companies for payment. He took 2.8 billion won in commission for 71.6 billion won written in the card slips on 56,000 counts without actual sales.

Park, president of a payment agency, made a contract with Moon and others to help clubs and bars do 150 billion won of `card-kkang` on 120,000 counts during the same period and took 3 billion won.

Cho, who works for a credit card company, was found to have received 200 million won from Park in January last year for favors.

They made card companies to pay money to `card-kkang` dealers for credit card sales slips after approving them through a payment agency and subtracting 3.5-5 percent of commission, according to the prosecution.

Moreover, payment agencies took 2.3-2.8 percent of commission, much higher rates than the average 1.6-0.8 percent by taking advantage of the fact that credit card companies cannot be sure if Internet shopping malls actually exist and therefore cannot make a direct contract.

“Cyber card-kkang dealers have taken 12-15 percent of commission while that of credit card companies is only 3.3-3.5 percent,” said the prosecution. “It is surprising that a senior official of a credit card company, who has to control illegal use of cards, were engaged in such activities. This suggests moral hazard of credit card companies, which have been intent on expanding the business.”

bibulus@donga.com