'Mystery Shopping Is Pointless When Inspectors Read from a Script' ... Lee Chan-jin: 'I Agree There Are Problems With Undercover Inspections'

[Financial News] Financial Supervisory Service Governor Lee Chan-jin promised to reform the mystery shopping (undercover inspection) system, which has degenerated into a mere formality.
At a National Policy Committee audit at the National Assembly in Yeouido, Seoul, on the 22nd, Lee said, "There is a lot I agree with," in response to Democratic Party of Korea lawmaker Han Min-soo's criticism that mystery shopping—in-person inspections of sales practices—is ineffective at preventing mis-selling amid a sharp rise in non-face-to-face sales of financial products.
Han criticized the practice, asking, "While insisting on in-person inspections, is it right to keep conducting perfunctory undercover checks as in the past?" He added, "Wouldn't it be necessary to use artificial intelligence (AI) technology to create a more systematic support system?"
Mystery shopping (undercover inspections) conducted by the Financial Supervisory Service (FSS) is a system in which investigators pose as consumers to inspect the sales process for various financial products, including insurance. The FSS has operated the system since 2009.
According to materials presented by Han, 12 of the 13 mystery-shopping inspections conducted by the FSS over the past five years were in person. Analysts also said the system's shortcomings had been exposed, as undercover inspections failed to detect the mis-selling scandal involving equity-linked securities (ELS) linked to Hong Kong's Hang Seng China Enterprises Index (HSCEI).
Han criticized the practice, saying, "Around 100 million won is spent each year on in-person inspections, even though most financial product sales take place through non-face-to-face channels." He added, "When investigators visit a branch, the counter staff realize who they are. The same set script is read verbatim over and over—a mere formality—so both sides know what's happening, yet one points things out and the other responds." He also noted, "From 2021 through September this year, 159 cases of mis-selling were detected, yet at least 90% of the entities assessed in mystery shopping received passing scores."
He also said, "The service contract has been awarded to the same company through sole-source deals for six consecutive years, raising doubts about whether the inspection methods and evaluation quality are being objectively verified." He added, "Because evaluations focus on detecting violations and imposing penalties, counter staff also experience work-related stress."
Lee replied, "We are actually reviewing improvements to the system to prevent mis-selling more effectively," and added, "We will make the necessary preparations."

[email protected] Park Mun-su Reporter