White-Collar Crime 2023 Comparisons

The Korean criminal justice system does not classify criminal offences into distinct categories, such as “misdemeanours” or “felonies”. Instead, the Korean legal system distinguishes between “intentional” criminal misconduct and “negligent” actions.

To establish a crime, the competent authorities must:

• meet the statutory requirements for the specific crime, including its intent or negligence component as appropriate;
• prove the absence of exculpatory circumstances, such as self defence, emergency evacuation or consent; and
• determine the legal culpability of the perpetrator – minors under the age of 14, mentally disabled persons and those who misinterpreted the law might be exempt from legal culpability.

Attempts to commit crimes may be subject to criminal punishment if relevant statutory penal provisions exist. For example, Korean criminal laws allow for the prosecution of attempts in several white-collar crimes, including fraud and embezzlement.

Under the Korean Criminal Procedures Act, statutes of limitations differ for each specific criminal offence, determined by the maximum sentence that can be imposed for the respective crime. For many white-collar crimes, the statute of limitations typically falls between five and 15 years.

The statute of limitations begins to run once a criminal act is completed or when all elements of the crime are satisfied. The statute of limitations does not run during a continuing offence, wherein the effect on the relevant legal interests continues. In addition, if the perpetrator flees to another country or stays abroad with the intent of evading criminal prosecution, the statute of limitations does not run until the person returns to Korea.

Under the Korean Criminal Code (KCC), foreigners who engage in crimes related to Korean currency or securities may be subject to criminal prosecution even if the crimes are committed outside of Korea.

According to the Monopoly Regulation and Fair Trade Act (MRFTA), illegal activities that result in a direct, significant and reasonably foreseeable effect on the Korean market may be subject to prosecution and sanctions, as may a cartel agreement resulting in a restraint in competition in the Korean market.

Lastly, the Foreign Bribery Prevention in International Business Transactions Act (FBPA), which was enacted pursuant to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, criminalises the act of bribing foreign public officials.

Under Korean laws, only natural persons are subject to criminal prosecution and punishment. However, exceptions exist where specific statutory provisions (“joint penal provisions”) allow for the imposition of corporate criminal liability for certain offences. These provisions notably include those found in the MRFTA, the FBPA and the Act on the Prohibition of Improper Request and Provision/Receipt of Money and Valuables (the “Anti-Graft Act”).

Furthermore, the Korean Supreme Court has ruled that a corporate entity, in the context of a merger or an acquisition, may not be held liable for offences committed prior to the merger or acquisition, although this stance has not yet been codified into law.

In Korea, victims of property crimes such as fraud, embezzlement or criminal breach of fiduciary duty generally seek recovery of losses through civil claims filed in Korean civil courts. While there are statutory provisions allowing criminal trials or appellate courts to assess monetary damages on the perpetrators, these criminal courts often refrain from awarding monetary damages when there is a dispute regarding the amount of loss. As this scenario is common in most white-collar criminal cases, there has been limited reliance on criminal courts for monetary recovery.

There have been discussions about enacting class actions for cases under fair trade law and other crimes that affect a large number of consumers or citizens. However, as of now, Korea only permits class actions in the context of certain securities law violations.

The Corruption Investigation Office for High-ranking Officials was established in January 2021 and given the authority to probe into crimes committed by high-ranking public officials, including judges and prosecutors.

In the same month, significant shifts occurred in the Korean criminal investigation and enforcement system. New amendments to the Code of Criminal Procedure and the Prosecutors’ Office Act came into force, altering the dynamic between the police and the prosecutors' office. While prosecutors retain the ultimate authority to file an indictment to commence formal criminal justice process, they no longer have the power to oversee a police investigation before the police decide to transfer the case to the prosecutors or to close such investigation.

Under these changes, the police can decide not to transfer the case to the prosecutors if they conclude that no crime took place. The prosecutors’ investigative power is now confined to alleged offences committed by police officers and six specific types of “serious crimes”, which include corruption, financial crimes and election-related offences.

In May 2022, the Korean National Assembly, controlled by the then-ruling party, passed contentious bills that further limit prosecutors’ investigative powers to corruption and economic crimes only. While restricting the prosecutors from conducting criminal investigations on many crimes, this legislation fails to properly address which government agency will assume the “relinquished” criminal investigative powers previously held by the prosecutors. Due to this ambiguity, a constitutional challenge has been filed against the legislation, and the Korean Constitutional Court is expected to assess the validity and constitutionality of these new laws in the near future.

The governmental agencies authorised to take enforcement action against white-collar offences include:

• the National Police Agency (NPA);
• the Prosecutors’ Office (PO);
• the Korea Fair Trade Commission (KFTC);
• the National Tax Service (NTS);
• the Korea Customs Services (KCS);
• the Financial Supervisory Service (FSS);
• the Financial Services Commission (FSC); and
• the Securities and Futures Commission (SFC).

The NPA and the PO are the main governmental authorities tasked with the investigation, prosecution and enforcement of white-collar offences. In addition, the NTS has a role in investigating tax crimes, and the KCS handles investigations related to customs duty offences. When it comes to financial or securities offences, the FSS, the FSC and the SFC work with the PO. The KFTC, meanwhile, is authorised to investigate cartel activities or other fair trade law violations.

While administrative penalties can be imposed by Korean authorities for 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 instance, 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. Similarly, the NPA has established and currently operates a number of special police units dedicated to investigating particular types of white-collar crimes.

A criminal complaint by a victim or a petition from a third party can set off a white-collar investigation. Over recent years, there has been a noticeable rise in whistle-blowing by insiders with specific information. In addition, several civic groups and labour unions have taken an active stance in filing criminal referrals, requesting criminal investigations against politicians and large corporate entities.

Concerning cartel investigations specifically, leniency applications to the KFTC by one of the colluding parties often serve as the tipping point, prompting the KFTC to initiate a probe.

Upon their review and analysis of trading records, the financial authorities may also instigate an investigation.

The Korean investigative authorities may employ the following 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. However, in many situations, the investigative authorities prefer dawn raids prior to making any information requests to the relevant individuals or corporate entities.

Dawn Raids

Korean investigative authorities – including the PO, the NPA, the KFTC, the KCS and the NTS – often resort to dawn raids to gather evidence. A court-issued warrant is typically required for search and seizure in criminal investigations, but there are exceptions: the KFTC and the NTS are permitted to conduct on-site investigations without a warrant.

The scope of information collected during dawn raids is broad. Authorities can seize hard copies of documents, recorded communications, emails and/or other electronically stored information. In addition, the investigative team may seek the voluntary submission of certain information.

It is noteworthy that, under Korean law, there is no concept of US-style “privilege”; all materials and communications (including legal advice from outside counsel) may be requested and obtained by the investigators during dawn raids.

Interviews

The investigative authorities may ask for interviews with any person believed to possess relevant information. While the investigative authorities can ask for the participation or testimony of employees, executives or third parties, there is no obligation for the requested party to comply with such request. Nonetheless, refusal to participate in a voluntary interview can be grounds for an arrest warrant should the requested person become a suspect during the course of the investigation.

In Korea, there is no legal requirement for internal investigation regarding suspected criminal activities, but taking proactive steps to prevent and deter misconduct is recognised by investigative authorities and the courts. These steps can significantly influence the scope and approach of an investigation, as well as the final sentencing.

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. Beyond these MLATs, Korean investigative authorities also collaborate with foreign counterparts using memoranda of understanding or the principle of reciprocity. Such international collaboration has grown in recent years, particularly in cartel activity investigations.

However, in connection with international co-operation, certain privacy laws and other laws that provide for the maintenance of secrecy and confidentiality in specific financial transactions can impede the provision of information requested by foreign authorities.

Separately, Korea has entered into extradition treaties 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 are “extraditable” if they are “punishable under the laws of both Contracting Parties” – including white-collar offences and those “relating to taxation of foreign exchange control” – as long as a specific imprisonment period is prescribed in the statutory provisions addressing these offences.

Traditionally, the PO held exclusive authority to decide whether to file criminal charges against any individual or corporate entity, regardless of which Korean governmental agency commenced the relevant criminal investigation. While no formal rule or guideline governs such decision, the PO considers various factors, such as the gravity of the charges, harm caused, intent, other potential suspects and events following the commission of the crime.

More recently, there have been ongoing discussions about enabling the police to make final decisions on the disposition of specific criminal cases to adjust the scope of prosecutorial powers.

While the PO has complete discretion to decide on filing an indictment against a suspect or company, there is no alternative way to conclusively settle a criminal investigation outside of a trial. That is, under the existing legal regime, Korean laws do not recognise a deferred prosecution agreement or a non-prosecution agreement.

Korean laws do not explicitly permit plea bargaining or plea agreements but, in practice, a suspect’s voluntary acknowledgment of charges can influence both the punishment sought by the investigative authorities and the court’s final sentence.

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, no joint penal provision exists for corporate fraud.

Under the MRFTA, a company may be subject to a criminal fine of up to KRW200 million if any of its executives or employees are found to have violated MRFTA provisions related to cartel activities or other unfair market practices.

Under the FBPA, if a company’s executives or employees promise or provide a bribe to a foreign government official in connection with such official’s duties, the company may be subject to a criminal fine of either KRW1 billion or twice the total profits if those profits exceed KRW500 million, whichever is higher.

Under the Anti-Graft Act, a company may be subject to a criminal fine of up to KRW30 million if any of its executives or employees offer, promise or provide benefits in excess of KRW1 million in a single instance or in excess of 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.

Several statutes in Korea regulate bribery and influence peddling offences, including the Anti-Graft Act, the KCC, the FBPA and the Act on Anti-Corruption and Establishment of the Civil Rights Commission.

The KCC

The KCC provides for two distinct bases of criminal liability associated with bribery:

• the bribery of public officials (“official bribery”); and
• the bribery of employees of private companies (“commercial bribery”).

Official bribery

Under the relevant statutory provisions, the prosecutors must prove the following in order to establish official bribery:

• an economic benefit has been given to a public official in connection with their official duties; and
• the benefits conferred go beyond the bounds of what is customary or what is usually given as a matter of social courtesy.

A public official is defined as any employee of a government entity such as a government agency, ministry or the armed services. Certain employees of state-owned or controlled enterprises, as well as government-owned or controlled academic institutions, may also be viewed as “public officials” with regard to bribery.

The court would consider the following factors to determine whether benefits were provided “in connection with public officials’ duties”:

• the scope of the official’s actual duties;
• the historical relationship between the official and the giver;
• the amount or value of the benefits provided; and
• the circumstances surrounding the provision of benefits.

Public officials who accept bribes may face life imprisonment based on the amount of the bribe, while the provider of such improper benefits may face up to five years of imprisonment or a criminal fine of up to KRW20 million.

Commercial bribery: the 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 face up to two years of imprisonment 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 their duties is prohibited. Under this act, the official or employee of a financial institution who accepts bribes may face life imprisonment based on the amount of the bribe, while the provider of such benefits may face up to five years of imprisonment or a criminal fine of up to KRW30 million.

The FBPA

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. Even foreign nationals engaged in the bribery of a foreign public official within Korea may be subject to punishment under the FBPA.

Under the FBPA, the provider of a bribe may face up to five years of imprisonment and a criminal fine of up to either KRW20 million or twice the total profits obtained through the bribe if those profits exceed KRW10 million, whichever is higher. In addition, the company may concurrently incur a criminal fine of up to KRW1 billion or twice the total profits if those profits exceed KRW500 million, whichever is higher.

Anti-Graft Act

Under the Anti-Graft Act, any individual who offers, promises or provides anything of value in excess of KRW1 million in a single instance or KRW3 million per year in aggregate may face up to three years of imprisonment or a criminal fine of up to KRW30 million. The company may incur a criminal fine of up to KRW30 million.

Conflict of Interest Prevention Act (CIPA)

The CIPA became effective in May 2022, and is aimed at preventing conflicts of interest in the public sector. Under the CIPA, public officials and officers/employees of public corporations may face up to seven years of imprisonment or may be subject to a criminal fine of up to KRW70 million if they obtain personal gains through the use of official secret or non-public insider information acquired during the course of performing their work.

There is no legal obligation for a company to prevent bribery and influence peddling, nor to establish and maintain a compliance programme.

However, in practice, proactive steps to prevent misconduct and deter recurrence through the establishment of internal controls and compliance programmes are recognised by the investigative authorities and the courts. These may significantly influence 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 to prevent criminal misconduct and may, in certain cases, exonerate the company.

The Financial Investment Services and Capital Markets Act (FISCMA) regulates financial investment businesses in general, and outlines the regulations restricting insider dealing and market abuse, and overseeing criminal banking law. The FISCMA sets forth penal provisions for violations related to insider trading restrictions, pricing rules and other improper trading activities, such as market manipulation and unfair trading.

Insider 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 and disclosing such information to outside third parties. More specifically, the prohibition covers the use of material non-public information in relation to:

• the sale or trading of securities of a publicly listed company;
• the initiation or discontinuance of a tender offer for the company’s stock or other securities; or
• the acquisition or disposition of the company’s stock or other securities related to such stock in bulk.

This prohibition also applies to a tender offeror, 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 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 material non-public information acquired indirectly (second-hand) or through improper means, such as hacking.

In relation to violations of the prohibition on insider trading, the perpetrator may face imprisonment ranging from one year to a life sentence, depending on the amount of profits or avoided losses, and a criminal fine assessed based on the following formula:

• KRW500 million if the profits or avoided losses cannot be accurately assessed or if five times the profits or avoided losses is equivalent to KRW500 million or less; and
• an amount between three and five times the profits or avoided losses from the misconduct.

Market Manipulation

The FISCMA prohibits the seeking of profits through the manipulation of supply and demand, and, ultimately, manipulating the 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 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 “intent” and “purpose” must be proven in order to establish market manipulation.

If convicted of market manipulation, the perpetrator may face imprisonment ranging from one year to a life sentence and, depending on the amount of profits or avoided losses, a criminal fine assessed based on the following formula:

• KRW500 million if the profits or avoided losses cannot be accurately assessed or if five times the profits or avoided losses is equivalent to KRW500 million or less; and
• an amount between three and five times the profits or avoided losses from the misconduct.

Unfair Trading

While the FISCMA seeks to prohibit improper activities in trading publicly listed securities through measures such as the restrictions on insider trading and market manipulation, it also restricts “unfair trading” in relation to non-listed securities, such as private placement (“unfair trading” may also apply to publicly listed securities).

Unfair trading is defined as the trading of securities or financial investment instruments characterised by:

• the presence of unfair means, a scheme or trickery;
• a false description or representation of a material fact or omission of a material fact necessary to prevent others from being misled; or
• the usage of inaccurate market prices to attract demand for trading or to make any other transaction, each in relation to financial investment instruments.

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 are also prohibited.

If convicted of unfair trading practices, the perpetrator may face imprisonment of between one year and a life sentence and, depending on the amount of profits or avoided losses, a criminal fine assessed based on the following formula:

• KRW500 million if the profits or avoided losses cannot be accurately assessed or if three times the profits or avoided losses is equivalent to KRW500 million or less; or
• an amount between three and five times the profits or avoided losses from the misconduct.

Korean tax laws provide for the criminal punishment of intentional tax offences such as:

• tax evasion;
• failure to issue a tax invoice or the issuance of a fraudulent tax invoice;
• title lending;
• failure to comply with an order to pay accrued taxes; and
• failure to withhold taxes.

Of these, tax evasion and the failure to issue a tax invoice or the issuance of a fraudulent tax invoice are the most common tax offences.

Tax evasion refers to the act of refusing to pay taxes or securing a tax refund/credit by fraud or other unlawful means, such as producing false documents, destroying financial books and records, concealing assets, and fabricating or concealing certain income, profit, acts or transactions. The punishment for tax evasion depends on 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 tax amount involved, and/or a criminal fine of up to double or quintuple the total amount of the relevant VAT, based on the value of the products/services to which the tax invoice pertains.

While there is no legal obligation to deter tax evasion, a company may face a criminal fine if an individual executive or employee is found guilty of a tax offence and the company fails to demonstrate that it exercised due care and supervision to prevent 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, 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:

• listed companies;
• companies seeking to become a listed company during the current fiscal year or the immediately following fiscal year;
• a joint stock company whose net asset value or total turnover is KRW50 billion or more as of the end of the immediately preceding fiscal year; and
• a limited liability company whose net asset value or total turnover is KRW50 billion or more as of the end of the immediately preceding fiscal year.

Any person who falsifies a balance sheet or an audit report (either actively or by omitting certain required information) may face imprisonment of up to ten years or a life sentence (depending on the affected amount 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 face a criminal fine if an individual executive or employee is found guilty of violating financial record-keeping laws and the company fails to demonstrate that it exercised due care and supervision to prevent such misconduct.

For companies listed on any Korean stock exchange, any person found to be misrepresenting or omitting certain material information may face up to five years of imprisonment or a criminal fine of up to KRW200 million. The company may also be subject to a criminal fine if the individual executive or employee is found guilty of violating financial record-keeping laws and the company fails to demonstrate that it exercised due care and supervision to prevent such misconduct.

The MRFTA prohibits any overt or covert agreement between competitors that hampers competition in a relevant market. Specifically, agreements with the following objectives are prohibited:

• to fix, maintain or alter prices;
• to determine the terms and conditions for transactions in goods or services or for the payment of prices or compensation;
• to restrict production, shipment, transportation or transactions in goods or services;
• to restrict the territory of trade or customers;
• to hinder or restrict the establishment or expansion of facilities, or the installation of equipment necessary to manufacture products or render services;
• to restrict the types or specifications of goods at the time of production or trade;
• to decide the successful bidder or bidding price; and
• to practically restrict business in a particular sector by means of interfering or restricting the activities of other entities.

The MRFTA provides for both administrative and criminal sanctions. The KFTC may impose an administrative fine of up to 10% of the relevant sales, or up to KRW2 billion if the sales amount cannot be determined; 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 receive a cease-and-desist order and other appropriate administrative corrective orders. The government does not have provisions for civil sanctions.

For criminal sanctions, the responsible individuals may face up to three years of imprisonment 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.

The Framework Act on Consumers permits the Korean government to issue an order to recall, destroy, repair or replace the defective product, or refrain from manufacturing, importing and/or selling the defective product. Non-compliance can result in the relevant executive or employee facing up to three years of imprisonment 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 it fails to demonstrate that it exercised due care and supervision to prevent such misconduct.

Deceptive sales activities, such as failure to provide adequate notice as legally required, contractually or under the principle of good faith, constitute fraud and may be punishable by up to ten years of imprisonment 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, and is punishable by up to five years of imprisonment or a fine of up to KRW20 million.

An individual who uses misleading labelling or advertising may face up to two years of imprisonment 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 it fails to demonstrate that it exercised due care and supervision to prevent 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 (PIPA) offer general safeguards 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 (like computers) may face up to five years of imprisonment 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 by altering the input data without proper authority, may face up to ten years of imprisonment or a criminal fine of up to KRW20 million.

The Network Act bans the dissemination or transfer of malicious code or programs, and any person violating such provision may face up to seven years of imprisonment or a criminal fine of up to KRW70 million. Under the Network Act, any unauthorised access of information and communications systems, or causing disruption to information and communications systems, may be punishable by imprisonment of 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 punishable by imprisonment for up to seven years or a criminal fine of up to KRW50 million.

Under the PIPA, an individual may face up to ten years of imprisonment or a criminal fine of up to KRW100 million for causing severe disruption to the business of a public institution by changing or deleting the personal information handled by the public institution, or by 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 import or export of goods using improper currency exchange rates is prohibited, as are transactions in contravention of a suspension in foreign currency activities or other measures set by the Ministry of Economy and Finance. Violations are punishable by imprisonment up to five years or a fine of up to KRW500 million. In addition, foreign exchange transactions that are not authorised or reported, or that are authorised or reported 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 import and export of goods to and from Korea, and provides for the collection of customs duties and customs clearance procedures, in addition to providing penalties for violations thereof. The most common customs restrictions under the KCA are as follows.

Smuggling

Smuggling is an act of importing or exporting prohibited items, such as counterfeit currency or pornography, the failure to make a requisite customs declaration in relation to imported or exported goods, or importing or exporting goods other than as declared on the customs declaration.

A person who is convicted of smuggling may face up to seven years of imprisonment or a criminal fine of up to KRW70 million.

Evasion of Customs Duty (“Tariff Evasion”)

Tariff evasion includes the following:

• the act of falsely stating the customs value, or improperly determining the applicable tariff rate, in relation to imported goods;
• the falsification of import documentation; and
• 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 three times the applicable customs duties or three times the purchase price of the imported good, whichever is higher.

Improper Import and Export

The KCA prohibits the import or export of goods that lack any requisite approvals, permissions, recommendations, evidence or any other requirement, in addition to the import 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 exporting of particular goods without the necessary approvals, the falsification of supporting documentation and 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 face up to five years of imprisonment and/or a criminal fine of up to KRW30 million:

• misrepresenting the facts regarding the acquisition or disposition of criminal proceeds;
• misrepresenting the origin of criminal proceeds; or
• concealing criminal proceeds for the purpose of encouraging specific crimes, or disguising the criminal proceeds as legitimately acquired property.

Any attempt or conspiracy to commit any of these acts may also be subject to criminal punishment.

Predicate offences for the concealment offences, enumerated in a schedule to the CPRA, include the following:

• organisation of and admission to an organised crime group;
• bribery;
• coercion;
• injury or murder of a hostage;
• larceny and robbery;
• fraud, embezzlement and criminal breach of fiduciary duty;
• unlicensed racing business and interference with racing;
• smuggling;
• manipulation of the export and import price of goods;
• receiving money or benefits under the pretext of soliciting a public official’s handling of a case;
• forgery of cheques;
• operation of speculative businesses;
• infringement of trade mark rights;
• use of material non-public information;
• manipulation of market price;
• child trafficking;
• forging or falsification of credit cards and use of such forged or falsified credit cards; and
• narcotics crime.

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 offender, whereas abetting another who initially had no intention to commit an offence is punishable to the same degree as the principal offender.

Furthermore, persons may be subject to joint criminal liability if they are found to have jointly committed the crime by having the intent to conspire and act together, and by each playing a substantive role in the act’s consummation.

The primary anti-money laundering (AML) laws in Korea include:

• the Act on Reporting and Using Specified Financial Transaction Information (the “Specified Financial Information Act”);
• the CPRA;
• the Act on Prohibition against the Financing of Terrorism and Proliferation of Weapons of Mass Destruction; and
• the Act on Special Cases Concerning Prevention of Illegal Trafficking in Narcotics.

The Korea Financial Intelligence Unit (KoFIU) of the FSC plays a leading role in the enforcement and regulation of AML laws in Korea. The KoFIU may conduct a comprehensive assessment of financial institutions’ compliance with AML obligations on an annual basis, and may also require financial institutions to evaluate their own AML capabilities. In addition, the FSS supervises and inspects 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:

• filing of a false suspicious transaction report (STR) or currency transaction report (CTR) – imprisonment for up to one year and/or a criminal fine of up to KRW10 million;
• failure to comply with internal control measures, or non-compliance with, refusal of or interference with a KoFIU order, direction or inspection – administrative fines of up to KRW100 million;
• failure to submit an STR or CTR, neglecting customer due diligence obligations or failure to meet record preservation requirements related to AML compliance – administrative fines of up to KRW30 million; and
• failure to implement a correctional order for violation or receipt of repeated warnings on three or more occasions – suspension of business in part or in entirety for up to six months.

For certain white-collar crimes, defences can be based on a lack of intention, a justifiable act or the consent of the victim.

In order to avoid corporate criminal liability under a joint penal provision, a company might show that it exercised due care and supervision to prevent 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 but, in practice, the severity of the damage caused by the alleged offence is considered by the prosecutor when deciding on an indictment. If the harm is deemed minimal, the offence may not be prioritised for investigation.

For certain violations, specifically those relating to tax, customs or fair trade law, a criminal referral from the relevant government agency (such as the NTS, NCS or KFTC) is required before the PO can decide on filing 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, either before or after the commencement of a formal KFTC investigation, can receive a 100% reduction in the applicable administrative fine. The second party to come forward might be granted a 50% reduction of the administrative fine. In addition, a company that has its leniency application approved by the KFTC will be shielded from criminal prosecution; if the KFTC decides against forwarding the case to the prosecutor, the prosecutor is then barred from launching an investigation or bringing charges against that party.

While individuals can pursue immunity or reduced penalties through self-disclosure to investigative authorities, Korean laws do not provide for a general voluntary self-disclosure programme for corporate entities. There is no legal guarantee that co-operation with investigative authorities will in fact result in a lighter penalty. However, co-operation or self-disclosure should be seriously considered, as such actions might:

• decrease the possibility of aggressive investigations (like multiple dawn raids);
• lead the prosecutor to ask for milder sanctions; and
• prompt the court to exercise more discretion to impose less severe penalties.

In Korea, whistle-blower protection measures are mainly stipulated under two statutes. For 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 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 mechanisms to ensure the protection of whistle-blowers.

Corruption Prevention Act

In Korea, an individual who reports corrupt practices can receive compensation of up to KRW3 billion if the reporting directly results in recovery, an income increase or an expense reduction for a public institution, or if it otherwise establishes the necessary evidence for such outcome. Separately, an individual can qualify for a reward of up to KRW200 million if it is determined that the corruption reporting either brought material gain or prevented material loss to a public institution or otherwise served the public interest.

It is strictly prohibited to disclose the identity of the reporting person or any information that could lead to their identification. A reporting person may also seek protection by filing an application for protective measures with 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 in the penalties that would otherwise be imposed against them. Any action that imposes personal, administrative or economic harm upon that person is prohibited. Breaching this provision may result in an administrative fine of up to KRW10 million.

Furthermore, if the reporting person becomes subject to any disadvantage because of the reporting, he or she may seek restitution or corrective measures by applying to the ACRC. Failure to comply with the ACRC’s corrective measures can result in 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, legal protection is extended exclusively to those who report violations of specific statutes enumerated within the Whistle-Blower Protection Act. These statutes pertain to matters of “public interest”, such as corruption, cartel activities and environmental protection. Currently, the Whistle-Blower Protection Act does not cover reports of corporate fraud.

Regardless of whether all whistle-blowers are afforded legal protection, many well-managed companies consider whistle-blowing a commendable practice. This encourages compliance and the early discovery of misconduct that could have had a serious impact on the business operations.

As in the case of reporting corruption under the Corruption Prevention Act, under the Whistle-Blower Protection Act a whistle-blower may receive compensation of up to KRW3 billion if the reporting directly results in recovery, or an income increase, or an expense reduction for a public institution, or if it otherwise establishes the necessary evidence for such outcome. Separately, an individual can qualify for a reward of up to KRW200 million if it is determined that the whistle-blowing either brought material gain or prevented material loss to a public institution or otherwise served the public interest.

Under the Whistle-Blower Protection Act, a whistle-blower may seek anonymity. Unlawful disclosure of a whistle-blower’s personal information can lead to imprisonment for up to three years or a fine of up to KRW30 million. Acts that cause personal, administrative or economic harm to a whistle-blower are strictly prohibited, with violations punishable by imprisonment for up to two years or a fine of up to KRW20 million. Any adverse action taken against a reporting person within two years of reporting is presumed to be retaliatory.

A whistle-blower may also seek remedies by applying to the ACRC if they face:

• disadvantage to personal status;
• discriminatory employment action;
• employment action against the whistle-blower’s will;
• disadvantage in a performance evaluation or in terms of salary or bonus payment;
• physical or mental harm;
• undue audit or investigation and disclosure of its results;
• disadvantageous working conditions;
• administrative disadvantages; or
• economic disadvantages.

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, every 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, the relevant facts should be proved beyond a reasonable doubt in order to establish the criminal conduct of a defendant.

To determine penalties that align with the nature and extent of an offence, Korean courts use certain sentencing guidelines crafted by the Sentencing Commission, which is an independent organisation affiliated with the Korean Supreme Court.

Currently, the sentencing guidelines cover 20 major offences, including homicide, bribery, sexual assault, embezzlement and criminal breach of trust, larceny, fraud and election crimes. The Sentencing Commission is actively developing further sentencing guidelines for other offences, and is refining or supplementing existing sentencing guidelines.

Although the sentencing guidelines are not legally binding, they are effective in practice because a judge must document the rationale for a sentence that deviates from these guidelines.

As stated in 2.7 Deferred Prosecution and 2.8 Plea Agreements, the Korean criminal justice system does not recognise deferred prosecution agreements, non-prosecution agreements or plea agreements. Consequently, no guidelines exist for such arrangements.