Contributed By Bae, Kim & Lee LLC
The Korean criminal justice system does not classify criminal offences into distinct categories, such as “misdemeanours” or “felonies.” However, the Korean legal system recognises and provides for differences for “intentional” criminal misconduct and “negligent” actions.
In order to establish a crime, the competent authorities must prove (i) the satisfaction of statutory requirements for the particular crime, including the requisite intent or negligence component, as applicable; (ii) the absence of any exculpatory circumstances, such as self-defence, evacuation during an emergency and consent; and (iii) the legal culpability on the part of the perpetrator (minors under the age of 14, mentally disabled persons and those who misunderstood the law may lack legal culpability).
An attempt to commit an offence may be subject to criminal punishment where relevant statutory penal provisions exist. For example, Korean criminal laws provide for the prosecution of attempted offences in a number of white-collar crimes, including fraud and embezzlement.
Under the Korean Criminal Procedures Act (KCPA), different statutes of limitations apply for each particular criminal offence, depending on the maximum sentence that may be imposed for the relevant crime. For most white-collar crimes, the applicable statute of limitations is between 5 and 15 years.
The statute of limitations begins to run upon the completion of a criminal act, or when all the elements of the crime are met. The statute of limitations does not run during a continuing offence, where the effect on the relevant legal interests is ongoing. If the perpetrator flees to a foreign country and/or remains abroad for the purpose of evading criminal prosecution and punishment, the statute of limitations does not run until the person returns to Korea.
Under the Korean Criminal Code (KCC), foreigners who commit crimes involving Korean currency or securities may be subject to criminal prosecution even if such crimes are committed outside of Korea.
Under the Monopoly Regulation and Fair Trade Act (MRFTA), illegal activities that result in a direct, significant and reasonably foreseeable effect on the Korean market, or a cartel agreement resulting in a restraint in competition in the Korean market, may be subject to prosecution and sanctions.
The Foreign Bribery Prevention in International Business Transactions Act (FBPA), a legislation enacted pursuant to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, criminalises bribery of foreign public officials.
Under Korean laws, only natural person(s) can be subject to criminal prosecution and punishment, unless there is a specific statutory provision (“joint penal provisions”) providing for the imposition of corporate criminal liability for the relevant offence. Among others, the MRFTA, the FBPA and the Act on the Prohibition of Improper Request and Provision/Receipt of Money and Valuables (the “Anti-Graft Act”) contain joint penal provisions.
The Korean Supreme Court has also ruled that in the context of a merger or an acquisition, a corporate entity may not be held liable for the offences committed prior to the merger or acquisition, although this has not been codified into law.
Victims of property crimes (eg, fraud, embezzlement or criminal breach of fiduciary duty) generally seek recovery of losses through civil claims filed in Korean civil courts. Although there are statutory grounds for a criminal trial or appellate court to assess monetary damages on the perpetrators, typically such criminal courts refrain from issuing monetary damages where there is a dispute regarding the amount of loss. Since this is the case in most white-collar criminal cases, there has been limited use of the criminal courts in seeking monetary recovery.
While there have been discussions regarding enacting class actions in fair trade law cases and other crimes affecting a large number of consumers or citizens, Korea currently permits class actions only in the context of certain securities law violations.
New legislation forming an independent investigation agency to conduct criminal investigations of crimes committed by high-ranking public officials has entered into force, and the Korean government is currently taking measures to establish the relevant agency. There are also ongoing discussions regarding how to allocate the investigative powers between the police and the public prosecutors.
A number of trials that were commenced in the aftermath of the former President Geun-hye Park’s impeachment are ongoing. Along with the former President, her confidante and a number of public officials, several executives of Korean conglomerates have been indicted on corruption charges. In August 2019, the Korean Supreme Court issued a ruling in relation to corruption charges against the former President that would considerably expand the scope of a “conspiracy” between public officials and non-public officials in bribery cases, and at the same time lowered the burden of proof for the Prosecutors' Office with regard to the existence of “improper solicitation” in applying the relevant bribery provisions.
The governmental agencies authorised to take enforcement action against white-collar offences include:
The NPA and the PO are the main governmental authorities entrusted with the investigation, prosecution and enforcement of white-collar offences. In addition, the NTS may perform certain police functions in investigating tax crimes, while the KCS is entrusted with investigation of crimes related to customs duty. The FSS, the FSC and the SFC work with the PO to investigate financial or securities offences. The KFTC is authorised to investigate cartel activities or other fair trade law violations.
While the Korean authorities may impose administrative penalties regarding certain white-collar offences, there is no mechanism for the civil enforcement of white-collar offences.
Various government authorities have special units dedicated to investigating complex white-collar crimes. For example, the PO has prosecutors specialising in the investigation of securities law violations, tax fraud, trade secrets violations and fair trade law violations (including cartel investigations). The NPA has established, and currently operates, a number of special police units dedicated to the investigation of particular white-collar crimes.
A criminal complaint by a victim or a petition by a third party may trigger white-collar investigations. There is also an increasing trend of whistle-blowing by insiders with inside information in recent years. In addition, several civic groups and labour unions have been active in filing criminal referrals requesting criminal investigations against a number of politicians or large corporate entities.
With regard to cartel investigations, leniency applications to the KFTC by a colluding party often tip off the KFTC into beginning a probe.
The financial authorities’ review and analysis of trading records may also prompt an investigation.
The Korean investigative authorities may employ a number of means to commence, continue and/or conclude their investigations.
Request for Information
The investigative authorities may commence or conduct their investigations into white-collar offences with a request for information, but in many other cases, the investigative authorities opt to proceed with dawn raids prior to making any information requests to the relevant individuals or corporate entities.
The Korean investigative authorities – including the PO, the NPA, the KFTC, the KCS and the NTS – frequently employ dawn raids to gather information. While any criminal investigation would require a court-issued warrant to conduct a search and seizure, the KFTC and NTS are permitted to conduct on-site investigations to gather relevant information without a warrant.
There are few limitations on what information may be gathered by investigative authorities through dawn raids, who are permitted to gather hard copies of documents, recorded communications, emails and/or other electronically stored information (ESI). In addition, the investigative team may request voluntary submission of certain information.
It is noteworthy that under Korean laws, there is no concept of US-style "privilege", and all materials and communications, including legal advice from outside counsel, may be requested and obtained by the investigators during dawn raids.
The investigative authorities may request interviews with any person who may have information relevant to its investigation. While the investigative authorities may request the attendance or testimony of employees, executives or a third party with relevant information, there is no obligation for the requested party to comply with such request. However, refusal to participate in a voluntary interview may be used as a ground for seeking an arrest warrant in the event that the requested person becomes a suspect during the course of an investigation.
In Korea, there is no legal requirement to conduct any internal investigation in connection with any suspected criminal misconduct. However, in practice, proactive steps to prevent the occurrence of any misconduct and deter recurrences are recognised by the investigative authorities and the courts, and may serve as a significant factor in terms of the scope and manner of investigation, as well as the final sentence.
Korea has entered into bilateral treaties providing for mutual assistance in criminal matters (MLATs) with approximately 30 countries, including the USA, Australia, France, Canada, Russia, China, Hong Kong, Japan, Mexico, Brazil, India, Indonesia, Peru, Argentina and Spain. In addition to the MLATs, Korean investigative authorities have co-operated with foreign agencies through memoranda of understanding or based on a principle of reciprocity. International co-operation between corresponding agencies has grown in recent years, especially with regard to investigations of cartel activities.
In connection with international co-operation, privacy and other laws that provide for the maintenance of secrecy and confidentiality in certain financial transactions may serve as grounds to prevent the investigative authorities’ provision of information requested by foreign authorities.
Separately, Korea has entered into a number of extradition treaties (the “Extradition Treaty”) with 33 countries, including the USA, Australia, France, Canada, China, Hong Kong, Japan, Mexico, Brazil, India, Indonesia, Peru, Argentina and Spain. In most Extradition Treaties, offences “which are punishable under the laws of both Contracting Parties” – including white-collar offences, as well as offences “relating to taxation of foreign exchange control” – are included as “extraditable offences” if imprisonment for a certain period is prescribed in the statutory provisions prohibiting the relevant offences.
Traditionally, the PO has had exclusive authority in deciding whether to pursue criminal charges against any specific individual or corporate entity, regardless of which Korean governmental agency commenced the relevant criminal investigation. While there is no established rule or guideline governing such decision, the PO would take into consideration various factors, including the severity of charges, injury caused, motive, other suspects to be charged and events after the commission of a crime.
More recently, there are ongoing discussions regarding enabling the police to make final decisions regarding disposition of certain criminal cases, thus trying to modify the prosecutorial powers.
While the PO has complete discretion in whether to file a formal indictment against a suspect individual or company, there is no alternative mechanism to finally resolve a criminal investigation without a trial. That is, under the existing legal regime, Korean laws do not recognise a deferred prosecution or non-prosecution agreement.
Korean laws do not formally allow plea bargaining or plea agreements. However, in practice, whether a suspect voluntarily acknowledges charges could influence the level of punishment requested by the investigative authorities, as well as the final sentence by the court.
As explained in 1.4 Corporate Liability and Personal Liability, under Korean laws, corporate entities may not be subject to criminal prosecution unless there are specific “joint penal provisions” providing for the imposition of criminal fines against corporate entities. However, there is no joint penal provision for corporate fraud.
Under the MRFTA, a company may be subject to a criminal fine of up to KRW200 million in the event that any of its executive(s) or employee(s) are found to have violated MRFTA provisions regarding cartel activities or other unfair activities disrupting the market.
Under the FBPA, if a company’s executive(s) or employee(s) are found to have promised or provided a bribe to a foreign government official in connection with such official’s duties, the company may be subject to a criminal fine up to the greater of KRW1 billion or twice the total profits in the event that profits exceed KRW500 million.
Under the Anti-Graft Act, a company may be subject to a criminal fine of up to KRW30 million in the event that any of its executive(s) or employee(s) were found to have offered, promised or provided benefits in excess of (i) KRW1 million in a single instance or (ii) KRW3 million per year in aggregate to a domestic government official, regardless of whether such bribery was in relation to the relevant official’s duties.
A number of statutes – including the Anti-Graft Act, the KCC, the FBPA, and the Act on Anti-Corruption and Establishment of the Civil Rights Commission (the “Anti-Corruption Act”) – regulate bribery and influence-peddling offences in Korea.
The KCC provides for two different bases of criminal liability associated with bribery: (i) the bribery of public officials (“official bribery”) and (ii) the bribery of employees of private companies (“commercial bribery”).
Under the relevant statutory provisions, to establish a charge of official bribery, the prosecutors must establish the following:
A public official is defined as any employee of a government entity such as a government agency, ministry or armed services. In addition to employees of government agencies or ministries, certain employees of state-owned or controlled enterprises, as well as government-owned or controlled academic institutions, should also be viewed as “public officials” with regard to the bribery issue.
The court would consider the following factors to determine whether benefits were provided “in connection with public officials’ duties”:
While the public official who received a bribe could be subject to life imprisonment depending on the amount of the received bribe, the provider of improper benefits may be subject to imprisonment for a term of up to five years, or a criminal fine of up to KRW20 million.
Commercial bribery: KCC and the Specific Crimes Act
Under the commercial bribery provision, the KCC prohibits the provision of economic benefits to a person who is entrusted with conducting the business of another person, if such benefits are related to an improper request made in connection with the duties of the recipient. A provider of a commercial bribe may be subject to imprisonment for a term of up to two years, or a criminal fine of up to KRW5 million.
Under the Act Concerning Aggravated Punishment of Specific Crimes (the “Specific Crimes Act”), the offering and taking of economic benefits by an officer or an employee of a financial institution in connection with the performance of his or her duties is prohibited. Under the Specific Crimes Act, while the official or employee of a financial institution who received a bribe could be subject to life imprisonment depending on the amount of the bribe received, the provider of such benefits may be subject to imprisonment for a term of up to five years or a criminal fine of up to KRW30 million.
Under the FBPA, any person who intentionally offers, promises, or pays a bribe to a foreign public official in order to obtain improper advantages in connection with international commercial transactions may be subject to criminal punishment. A foreign national engaged in the bribery of a foreign public official within Korea may also be subject to punishment under the FBPA.
Under the FBPA, the provider of a bribe may be subject to imprisonment for a term of up to five years and a criminal fine of up to the greater of KRW20 million or twice the total profits obtained through the bribe in the event that profits exceed KRW10 million. In addition, the company may concurrently have a criminal fine imposed of up to the greater of KRW1 billion or twice the total profits in the event that profits exceed KRW500 million.
Under the Anti-Graft Act, any individual who offers, promises or provides anything of value in excess of (i) KRW1 million in a single instance or (ii) KRW3 million per year in aggregate may be subject to imprisonment for a term of up to three years or a criminal fine of up to KRW30 million. The company may also be subject to a criminal fine of up to KRW30 million in such case.
There is no legal obligation for a company to prevent bribery and influence peddling, or to establish and maintain a compliance programme.
However, in practice, proactive steps to prevent the occurrence of any misconduct and deter recurrence through the establishment of internal controls and compliance programmes are recognised by the investigative authorities and the courts, and may serve as a significant factor in terms of the scope and manner of the investigation as well as the final sentence. The existence of a robust compliance system can be used as evidence of due care and supervision of the company to prevent any criminal misconduct, and may be used to exonerate the company in certain cases.
The applicable regulations restricting insider dealing, market abuse and criminal banking law are set forth in the Financial Investment Services and Capital Markets Act (FISCMA), which regulates financial investment businesses in general. The FISCMA sets forth penal provisions for violations of insider trading restrictions, pricing rules and other improper trading activities such as market manipulation and unfair trading.
The FISCMA generally prohibits the use of material non-public information by specified insiders – including major shareholders, officers and employees – in the trading of the subject company’s securities, in addition to the disclosure of such information to outside third parties for their use. More specifically, the prohibition includes the use of material non-public information (i) in relation to the sale or trading of securities of a publicly listed company, (ii) in relation to the initiation or discontinuance of a tender offer for the company’s stock or other securities, or (iii) in relation to the acquisition or disposition of the company’s stock or other securities related to such stock in bulk.
These prohibitions include the use of material non-public information by a tender offeror and a prospective acquirer or seller of subject securities, and their respective executives and shareholders.
In addition, the FISCMA was amended in July 2015 to prohibit certain activities that are deemed to result in disturbances to “market order.” These amendments regulate market activities that result in such disturbances, which in effect expands the scope of the prohibition on insider trading by including the use of indirectly obtained (second-hand) material non-public information or obtained using improper means, such as hacking.
In relation to violations of the prohibition on insider trading, the perpetrator may be subject to imprisonment between one year and a life sentence, depending on the amount of profits or avoided losses, and a criminal fine assessed based on the following formula:
The FISCMA prohibits the seeking of profits through the manipulation of supply and demand, and, ultimately, prices of securities or exchange-traded derivatives through means intended to mislead others.
Such means include wash-trades, price collusion, creating a false impression that prices will rise, spreading of false rumours, making false or misleading representations, engaging in price stabilisation prior to the expiry of the restricted period during a public offering, engaging in market making prior to the expiry of six months following a public listing, or taking actions to profit from price fluctuations. Both an “intent” and “purpose” element must be met to establish market manipulation.
If convicted of market manipulation, the perpetrator may be subject to imprisonment between one year and a life sentence, depending on the amount of profits or avoided losses, and a criminal fine assessed based on the following formula:
Whereas the FISCMA seeks to prohibit improper activities in the trading of publicly listed securities through measures such as the restrictions on insider trading and market manipulation, it also restricts “unfair trading” in relation to the trading of non-listed securities, such as in the context of a private placement (although “unfair trading” may also apply to publicly listed securities).
Unfair trading is defined as the trading of securities or financial investment instruments characterised by (i) the presence of unfair means, a scheme or trickery; (ii) a false description or representation of a material fact or omission of a material fact necessary to prevent others from being misled; or (iii) the usage of inaccurate market prices to attract demand for trading or make any other transaction, each in relation to financial investment instruments. In addition, the dissemination of false rumours, use of deceptive schemes, use of threats or attempts to cause fluctuations in prices in relation to a trade in financial investment securities is also prohibited.
If convicted of unfair trading practices, the perpetrator may be subject to imprisonment between one year and a life sentence, depending on the amount of profits or avoided losses, and a criminal fine assessed based on the following formula:
Korean tax laws provide for the criminal punishment of intentional tax offences such as tax evasion, failure to issue a tax invoice or issuance of a fraudulent tax invoice, title lending, failure to comply with an order to pay accrued taxes and failure to withhold taxes. Of the foregoing, tax evasion and the failure to issue a tax invoice or issuance of a fraudulent tax invoice are the most common tax offences.
Tax evasion refers to the act of refusing to pay taxes or obtaining a tax refund/credit by fraud or other unlawful means, such as preparing false documents, destroying financial books and records, concealing assets, and fabricating or concealing certain income, profit, acts or transactions. The punishment for tax evasion varies by the amount of unpaid taxes and ranges from imprisonment for up to a life sentence and/or a criminal fine of up to double or quintuple the amount of unpaid taxes.
The failure to issue a tax invoice or the issuance of a false tax invoice is punishable by imprisonment for up to 30 years, depending on the involved tax amount, and/or a criminal fine of up to double to quintuple the total amount of the relevant VAT, depending on the amount of the value of products/services to which the tax invoice at issue relates.
While there is no legal obligation to prevent tax evasion, a company may be subject to a criminal fine in the event that an individual executive or employee is found guilty of a tax offence and the company cannot establish that it has exercised due care and supervision to prevent the occurrence of such misconduct.
It should be noted that a criminal indictment to commence court proceedings is permitted only after the tax authorities make a criminal referral of the offence to the responsible prosecutor(s) with jurisdictional authority over the matter.
Under the Act on External Audit of Joint-Stock Companies and Others (the “External Audit Act”), among others, joint stock companies and limited liability companies meeting any of the following conditions are required to be audited by an external auditor on an annual basis and are required to prepare and keep corporate books with effective internal controls:
Any person who falsifies a balance sheet or audit report (actively or by omitting certain required information) may face imprisonment of up to ten years or life imprisonment (depending on the amount of the affected number in the balance sheet), and/or a criminal fine of up to double or quintuple the amount of profits or avoided losses. A company may be subject to a criminal fine in the event that an individual executive or employee is found guilty of violating financial record-keeping laws and the company cannot establish that it has exercised due care and supervision to prevent the occurrence of such misconduct.
In the case of a company listed on any Korean stock exchange, a person who misrepresented or omitted certain material information may be subject to imprisonment for up to five years or a criminal fine of up to KRW200 million. A company may be subject to a criminal fine in the event that an individual executive or employee is found guilty of violating financial record-keeping laws and the company cannot establish that it has exercised due care and supervision to prevent the occurrence of such misconduct.
The MRFTA forbids “any” explicit or implicit agreement by and among competitors to restrict competition in a relevant market. More specifically, agreements to achieve the following objectives are prohibited:
The MRFTA provides for both administrative and criminal sanctions. The KFTC may impose an administrative fine of up to 10% of the relevant sales, and if the sales amount cannot be determined, an amount of up to KRW2 billion. Relevant sales refers to the sales amount of relevant products or services, or an equivalent amount, of the corporate perpetrators during the violation period in a specific business sector. Corporate perpetrators may also be subject to a cease-and-desist order and other appropriate administrative corrective orders. There are no civil sanctions that may be pursued by the government.
In terms of criminal sanctions, the responsible individuals may be subject to imprisonment for up to three years or a criminal fine of up to KRW200 million. At the same time, companies may be subject to a criminal fine of up to KRW200 million.
Under the Framework Act on Consumers, the Korean government may issue an order to recall, destroy, repair, or replace the defective product, or refrain from manufacturing, importing and/or selling the defective product. If a company fails to obey such order, the relevant executive or employee may be subject to imprisonment for up to three years or a criminal fine of up to KRW50 million. A company may also be subject to a criminal fine of up to KRW50 million if the company cannot establish that it has exercised due care and supervision to prevent the occurrence of such misconduct.
In addition, deceitful sales activities (eg, failure to provide adequate notice as legally required, contractually or under the principle of good faith) constitutes fraud and may be punishable by imprisonment for up to ten years or a fine of up to KRW20 million. The sale of a defective product that results in death or injury to a consumer constitutes criminal manslaughter or negligence causing injury, as applicable, and is punishable by imprisonment for up to five years or a fine of up to KRW20 million.
An individual who uses a misleading labelling or advertisement may be subject to imprisonment for up to two years or a criminal fine of up to KRW150 million, and the company employing such individual may also be subject to a criminal fine of up to KRW150 million if the company cannot establish that it has exercised due care and supervision to prevent the occurrence of such misconduct.
The KCC, the Act on the Promotion of IT Network Use and Information Protection (the “Network Act” and the Personal Information Protection Act, or PIPA) provide general protections against cybercrimes.
The KCC provides that any individual interfering with another person’s business by damaging data or entering false or improper orders into data processing equipment (eg, computers) may be subject to imprisonment for up to five years or a criminal fine of up to KRW15 million. In addition, a person who causes property loss by inputting false information or improper orders or altering input data without proper authority may be subject to imprisonment for up to ten years or a criminal fine of up to KRW20 million.
The Network Act prohibits the dissemination or transfer of malicious code or programs, and any person violating such provision may be subject to imprisonment for up to seven years or a criminal fine of up to KRW70 million. Under the Network Act, any unauthorised access into information and communications systems, or causing any disruption to information and communications systems, may be subject to imprisonment for up to five years or a criminal fine of up to KRW50 million. In addition, defamation through the use of information and communications systems using false information may be subject to imprisonment for up to seven years or a criminal fine of up to KRW50 million.
Under the PIPA, an individual may be imprisoned for up to ten years or have a criminal fine of up to KRW100 million imposed for causing severe disruption to the business of a public institution by changing or deleting the personal information handled by the public institution, or acquiring personal information handled by a third party through illegal means and providing such information to a third party for profit or illegal purposes.
Under the Foreign Exchange Transaction Act, the importation or exportation of goods using improper currency conversion rates, or transactions in contravention of a suspension in foreign currency activities or other measures taken by the Ministry of Economy and Finance, are prohibited. Violations are punishable by imprisonment for a term of up to five years, or a fine of up to KRW500 million. In addition, foreign exchange transactions that are not authorised or reported, or done so using falsified information or other improper means, are punishable by imprisonment for up to three years, or a fine of up to KRW300 million.
The Korean Customs Act (KCA) regulates the importation and exportation of goods to and from Korea, and provides for the collection of customs duties and customs clearance procedures, in addition to penal provisions for violations thereof. The most common customs restrictions under the KCA are as follows.
Smuggling is an act of importing or exporting prohibited items, such as counterfeit currency or pornography, or the failure to make a requisite customs declaration in relation to imported or exported goods, or importing or exporting goods different from that declared on the customs declaration.
A person who is convicted of smuggling may be imprisoned for up to seven years, or have a criminal fine of up to KRW70 million imposed.
Evasion of Customs Duty (“Tariff Evasion”)
Tariff evasion includes (i) the act of falsely stating the customs value, or improperly determining the applicable tariff rate, in relation to imported goods; (ii) the falsification of import documentation; and (iii) the division or subdivision of imported goods to evade customs regulations.
Such offences are punishable by imprisonment for up to three years, or a criminal fine equal to the higher of three times the applicable customs duties and the purchase price of the imported good.
Improper Import and Export
The KCA prohibits the importation or exportation of goods that lack any requisite approvals, permissions, recommendations, evidence or any other requirement, in addition to the importation of goods through improper means.
Violations of import requirements are punishable by imprisonment for up to three years or a fine of up to KRW30 million, and violations of export requirements are punishable by imprisonment for up to one year or a fine of up to KRW20 million.
In addition to the regulations set forth in the KCA, the Foreign Trade Act restricts the exportation of specified goods without the necessary approvals, or the falsification of supporting documentation, or the use of improper means to export such goods. Violations are punishable by imprisonment for up to five years or a fine equal to three times the purchase price of the exported goods.
Under the Act on Regulation and Punishment of Criminal Proceeds Concealment (the “Criminal Proceeds Regulation Act”, or CPRA), an individual committing any of the following acts may be subject to imprisonment for up to five years and/or a criminal fine of up to KRW30 million:
Any attempt or conspiracy to commit any of the above acts may also be subject to criminal punishment.
Predicate offences for the concealment offences, enumerated in a schedule to the CPRA, include the following:
Aiding or abetting another to commit a crime is criminally punishable. Aiding a person already intent on committing a criminal offence by encouraging and/or rendering assistance to enable or facilitate the consummation of the offence is subject to less severe penalties than those faced by the principal culprit, whereas abetting another who initially had no intention to commit the offence is punishable to the same degree as the principal culprit.
Further, persons may be subject to joint criminal liability if they are found to have jointly committed the crime by (i) having the intent to jointly carry out the crime (ie, intent to conspire and act together) and (ii) actually carrying out the offence in joint efforts (ie, each playing a substantive role in contributing to the consummation of the offence).
The primary anti-money laundering (AML) laws in Korea include the following:
The Korea Financial Intelligence Unit (KoFIU) of the FSC plays a leading role in the enforcement and regulation of AML laws in Korea. KoFIU may conduct a comprehensive assessment of financial institutions’ compliance with AML obligations on an annual basis, and may also require financial institutions to conduct an evaluation of their own AML capabilities. In addition, the FSS conducts supervision and inspection on behalf of KoFIU, and has the power to demand sanctions against financial institutions violating AML laws and regulations.
The key sanctions for violations of AML laws and regulations are as follows:
Defences based on a lack of intention, a justifiable act or the victim’s consent may be considered as defences for certain white-collar crimes.
In order to avoid corporate criminal liability where there is an applicable joint penal provision, a company may demonstrate that it exerted due care and supervision to prevent any criminal misconduct by its executives or employees. The establishment and implementation of an effective compliance programme is a key component of such compliance defence.
The Korean criminal justice system does not recognise a de minimis exception for white-collar crimes in general. However, in practice, the prosecutor, who makes the ultimate decision on whether to proceed with a criminal indictment, does consider the amount of actual injuries caused by the relevant offence, and in cases where such amount is minimal, the offence may not be investigated with priority.
For certain tax, customs, or fair trade law violations, a criminal referral by the relevant government agency (eg, NTS, NCS or KFTC) is required prior to the PO deciding whether to file a criminal indictment in relation to the offence.
In connection with a cartel investigation, the first party to come forward to the KFTC to co-operate before or after the commencement of a formal KFTC investigation may be granted an automatic reduction of 100% of the applicable administrative fine. The second party to come forward may be granted a 50% reduction of the administrative fine. In addition, a company whose leniency application has been accepted by the KFTC will be exempt from criminal prosecution (if the KFTC refrains from making a criminal referral to the prosecutor regarding such party, the prosecutor may not investigate the offence and cannot file an indictment against such party).
An individual may seek immunity or a less severe penalty by making a self-disclosure to the investigative authorities. However, Korean laws do not provide for a general voluntary self-disclosure programme for corporate entities, and there is statutory ground to guarantee that co-operation with the investigative authorities will in fact result in a mitigated penalty. Yet, co-operation or self-disclosure should be duly considered as such corporate action could decrease the possibility of a more forceful investigation (eg, repeated dawn raids), result in the prosecutor seeking lesser sanctions and cause the court to exercise more discretion and impose less severe penalties.
In Korea, measures for whistle-blower protection are stipulated mainly under two statutes. In the public sector, the Act on the Prevention of Corruption and the Establishment and Management of Anti-Corruption and Civil Rights Commission (the “Corruption Prevention Act”) protects whistle-blowers who report corrupt practices by public institutions and officials. In the private sector, the Protection of Public Interest Reporters Act (the “Whistle-blower Protection Act”) protects whistle-blowers who report actions and conduct that are detrimental to the public health and safety, environment, consumers or fair trade practices. Both the Corruption Prevention Act and the Whistle-blower Protection Act provide for monetary incentives for whistle-blowing and protection mechanisms for whistle-blowers.
Corruption Prevention Act
An individual reporting a corrupt practice may receive compensation of up to KRW3 billion if the reporting directly results in recovery, an increase in income, or a reduction in expense to a public institution, or otherwise establishes the necessary facts for such outcome. Separately, an individual may be entitled to seek a reward of up to KRW200 million if it is determined that the reporting of corruption brought material gain or prevented material loss to a public institution or otherwise promoted public interest.
The disclosure of the personal identification of a reporting person or any information leading to their discovery or effective disclosure is prohibited. A reporting person may also seek protection through the filing of an application for protective measures to the Anti-Corruption and Civil Rights Commission (ACRC). In addition, if reporting leads to any discovery of the reporting person’s own criminal conduct, the reporting person may seek an exemption from, or reduction of, penalties that would otherwise be imposed against him or her. Any action that causes personal, administrative or economic disadvantage to him or her is prohibited, and any violation may be subject to an administrative fine of up to KRW10 million. In addition, if the reporting person becomes subject to any disadvantage because of the reporting, he or she may seek restitution or corrective measures through an application to the ACRC, and anyone who refuses to take corrective measures as ordered by the ACRC could be subject to imprisonment of up to one year or a criminal fine of up to KRW10 million.
Whistle-blower Protection Act
Under the Whistle-blower Protection Act, the scope of “whistle-blowers” awarded legal protection is limited to those who report about the violation of certain statutes specifically enumerated in the Whistle-blower Protection Act. These statutes have “public interest” elements, such as corruption, cartel activities and environmental protection. Under the current regime, the Whistle-blower Protection Act may not be applicable in the case of reporting corporate fraud.
Regardless of whether all whistle-blowers are afforded legal protection, it is generally considered by well-managed companies to be good practice, as it would incentivise compliance and early discovery of misconduct that could have a serious impact on the business operations.
As in the case of reporting corruption under the Corruption Prevention Act, a whistle-blower under the Whistle-blower Protection Act may receive compensation of up to KRW3 billion if the reporting directly results in recovery, or an increase in income, or a reduction in expense to a public institution, or establishes the necessary facts for such outcome. Separately, an individual may be entitled to seek a reward of up to KRW200 million if it is determined that the whistle-blowing brought material gain or prevented material loss to a public institution or otherwise promoted public interest.
Under the Whistle-blower Protection Act, a whistle-blower may seek anonymity, as disclosure of personal information regarding a whistle-blower may be punishable by imprisonment for up to three years or a monetary penalty of up to KRW30 million. An act causing personal, administrative or economic disadvantage to a whistle-blower is strictly prohibited, and a violation is punishable by imprisonment for up to two years or a monetary penalty of up to KRW20 million. Any adverse action taken against a reporting person within two years of reporting is presumed to have been taken in retaliation.
A whistle-blower may also seek remedies by application to the ACRC if the whistle-blower suffers any:
Any person who refuses to implement the corrective measures ordered by the ACRC may be subject to imprisonment for up to three years or a criminal fine of up to KRW30 million.
Under the Constitution of the Republic of Korea, a defendant in criminal proceedings is presumed innocent until the conviction becomes final and irreversible. The Korean Supreme Court has made it clear that, generally, the burden of proof of a crime lies with the prosecutor, and not the defendant.
Under the Korean Criminal Procedures Act, to establish the criminal conduct of a defendant, the relevant facts should be proven beyond a reasonable doubt.
In determining penalties commensurate with the nature of the offence and the extent of the damage, Korean courts use certain sentencing guidelines prepared by the Sentencing Commission, an independent organisation affiliated with the Korean Supreme Court.
Currently, the sentencing guidelines are available for 20 major offences, including homicide, bribery, sexual assault, embezzlement and criminal breach of trust, larceny, fraud and election crimes. The Sentencing Commission is in the process of establishing additional sentencing guidelines for other offences and is continuing to revise or supplement existing sentencing guidelines.
Although the sentencing guidelines do not have legally binding force, in practice they are effective because a judge must record the reasoning for a sentence in the event of a departure from the sentencing guidelines.
As stated in 2.7 Deferred Prosecution and 2.8 Plea Agreements, the Korean criminal justice system does not provide for a deferred prosecution agreement, non-prosecution agreement or plea agreement, and, as such, there is no applicable guideline.