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Anti-Corruption System in Korea

Eun Jae ParkYulchon LLC

March 2, 2015

I. Anti-Corruption Agencies

II. Anti-Corruption regarding Domestic Public Officials, etc. 1. Bribery of Domestic Public Officials, etc.

2. Aggravated Punishment of Bribery

3. Scope of Bribery/Expansion of Scope

4. Bribery vs. “Bribery through Breach of Fiduciary Duty”

III. Anti-Corruption regarding Foreign Public Officials, etc. (Act on Combating Bribery of Foreign Public Officials in International Business Transactions)

1. Background of Legislation

2. Difference between the Anti-Bribery Act and other Acts regarding Bribery of Domestic Public Officials, etc.

3. Scope of ‘Foreign Public Officials, etc.’

4. Criminal Liability of Offerer, etc.

5. Dual Punishment and Waiver of Punishment

IV.“Kim Young-ran Bill,” Political Hot Potato in KoreaWhat is the issue of Kim Young-ran Bill?

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Table of Contents

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Anti- Corruption Agencies

4Court

Anti-Corruption AgenciesPolice

Criminal Investigation

Korea Financial Intelligence Unit (KoFIU)

Identifying illegal or suspicious financial trans-action Providing information to criminal Investiga-tion Agencies (No Investigation)

Board of Audit and In-spection (BAI)

Administrative Investigation (strong) against Public Offi-cials

Anti-Corruption & Civil Rights Commission

(ACRC)Acquiring Corruption InformationAdministrative Investigation (weak) against Public Officials

Prosecutors’ OfficeCriminal Investigation

Indictment

Anti-Corruption regarding Do-mestic Public Officials, etc.

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Bribery of Domestic Public Officials, etc.

Public Officials, etc.

Crime Applicable Laws Relevant Illegal Acts Punishment

Domestic public officials/ Arbitrators 

Bribery Article 129(1) of the Criminal Act

To receive, agree to receive, express intent to receive a bribe (demand)

Imprisonment (up to five (5) years)

Third party bribery (delivery and taking)

Article 130 of the Criminal Act

To make, demand or agree to make a bribe given to a third party

Illegal Brokerage Commission

Article 3 of the Act on the Aggravated Punishment of Specific Crimes

To receive, demand or agree to receive money or valuables as a brokerage commission for the public officials’ work

Imprisonment (up to five (5) years) or fine {up to KRW 10 million (10,000 USD)}

Illegal Brokerage Commission

Article 111 of the Attorney-at-Law Act

To receive, demand or agree to receive money or valuables as a brokerage commission for the public officials’ work

Imprisonment (up to five (5) years) or fine (up to KRW 10 million)

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Aggravated Punishment of Bribery

• Pursuant to Article 2 of the Act on the Aggravated Punishment, etc. of Specific Crimes (the “Aggravated Punishment Act”), ‘any person who commits crimes as prescribed in Articles 129, 130 or 132 of the Criminal Act’ shall be punished according to the amount of bribe received.

Aggravated Punishment (Article 2 of the Aggravated Punishment Act)

• KRW 100 million (1 million USD) or more: Imprisonment for lifetime or for not less than ten years

• KRW 50 million (0.5million USD)or more: Imprisonment for not less than seven years

• KRW 30 million (0.3million USD) or more : Imprisonment for not less than five years

Concurrent imposition of fine which is not less than two times but not more than five times the amount of bribe received

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Scope of Bribery: to whom? (Criminal Act)

Public Offi-cials

• Public officials are in charge of affairs of the State or local governments and the status of public officials is in principle, determined in accordance with the State Public Officials Act and the Local Public Officials Act.

Arbitrators • Arbitrators are in charge of arbitration issues based on the laws. However, simple and private mediators are not arbitrators in term of the bribe takers.

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Scope of Bribery: to whom? ※ Public Officials under the State Public Officials Act (Article 2)

Public officials in career service: Public officials appointed based on their performance and general qualifications, whose status is guaranteed, and who are expected to spend their entire lives (referring to a specified period where public

officials are appointed for such period of service) as public officials

1. Public officials in general service – Public officials who are in charge of technical or research affairs, or general administration

2. Public officials in special service – Judges, public prosecutors, foreign service officials, police officers, fire-fighting officers, educational public officials, members of armed forces, military service officials, research officers of the Constitutional Court and employees of the National Intelligence Service, and public officials in charge of affairs in special fields, as designated by other Acts as public officials in special service

Public officials in non-career service: Public officials other than those in career service

1. Public officials in political servicea. Public officials who are appointed by election, or whose appointment requires approval of the National Assembly b. Public officials in charge of affairs regarding sophisticated policy decision-making or of assisting such affairs, who are

designated by the Acts or Presidential Decree (limited to Presidential Decree concerning the organization of the Office of the President, and Office of the Chief of National Security) as public officials in political service

2. Public officials in extraordinary civil service – Public officials who are designated by the Act and subordinate statues as public officials in extraordinary civil service to perform such assistance duties as secretarial officer or secretary, or to perform any specified duties

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Scope of Bribery: to whom?

Public officials in career service: Public officials appointed based on their performance and general qualifications, whose status is guaranteed, and who are expected to spend their entire lives (referring to a specified period where public

officials are appointed for such period of service) as public officials

1. Public officials in general service – Public officials who are in charge of technical or research affairs, or general administration

2. Public officials in special service – Educational public officials of public universities and junior colleges, educational expert staff working for the superintendent of education, autonomous police officers, local fire-fighting officers, and public officials in charge of affairs in special field, as designated by other Acts as public officials in special service

Public officials in non-career service: Public officials other than those in career service

1. Public officials in political servicea. Public officials who are appointed by election, or whose appointment requires approval of the National Assembly b. Public officials in charge of affairs regarding sophisticated policy decision-making or of assisting such affairs, who are

designated by the Acts or municipal ordinances as public officials in political service

2. Public officials in extraordinary civil service – Public officials who are designated by the Act and subordinate statues as public officials in extraordinary civil service to perform such assistance duties as secretarial officer or secretary, or to perform any specified duties

※ Public Officials under the Local Public Officials Act (Article 2)

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Expansion of Scope of Bribery

• Article 4 of the Aggravated Punishment Act prescribes that executives and employees of some government-managed corporations or institutions shall be deemed to be the public officials in applying Articles 129 through 132 of the Criminal Act.

Executives and Employees

45 institutions such as the Bank of Korea, Korea Development Bank, Industrial Bank of Korea, Ko-rea Mint Corp., Export-Import Bank of Korea

Executives

Nine institutions such as the Korean Broadcasting System (KBS), Local Agricultural Cooperative Federation, Local Livestock Cooperative Federation, etc.

• Articles 5 through 7 of the Aggravated Punishment on the Specific Economic Crimes Act have pe-nal provisions on the case where ‘executives or employees of financial institutions’ are engaged in the act equivalent to the bribery under the Criminal Act in connection with their duties

• As financial institutions are established in accordance with the special Acts and subordinate statues and their business or affairs have public nature, they have material effect on the State’s economic policy and national economy. Therefore, the executives and employees must observe the strict integrity policy applicable to public officials when they perform their duties.

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Expansion of Scope of Bribery

• In addition to the Aggravated Punishment Act, many of other Acts have the provisions which expand the scope of bribery

Type Applicable Act

A person who is not a public official and serves as an executive or employee of a public corporation or quasi-government institution, member of the management committee, or member of the executive recommendation committee

Article 53 of the Act on the Management of Public Institutions and Articles 129 through 132 of the Criminal Act

Executive and employees of a public corporation and public organization Article 83 of the Local Pubic Enterprises Act and Articles 129 through 132 of the Criminal Act

Executives and employees of National Health Insurance Corporation Article 28 of the National Health Insurance Act and Articles 129 through 132 of the Criminal Act

Chairperson of a promotion committee, executives of an association and the representative (referring to the executives in case of a corporation) and employees of a specialized manager of rearrangement project, and his/her entrusted manager

Article 84 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents and Articles 129 through 132 of the Criminal Act

Executives and employees of the National Information Society Agency and the Internet and Security Agency who engage in the business affairs entrusted by the Minister of Knowledge Economy or the Korea Communications Commission pursuant to Article 65(2) and (3) of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc.

Article 69 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. and Articles 129 through 132 of the Criminal Act

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Bribery vs. “Bribery through Breach of Fiduciary Duty”

  Bribery (Article 129(1) of the Crimi-

nal Act)

Bribery through Breach of Fiduciary Duty (Article 357(1) of the Criminal Act)

Recipient of Bribe Public officials, arbitrators, etc. Person who administers another’s private

business

Illegal Solicitation Not necessary Necessary

Penal Provisions on

Would-be Criminal

None

Expression of intent to offer bribe

Yes

Actual offering of bribe

Punishment Imprisonment (up to five (5)

years)

Imprisonment (up to five (5) years) or fine

(up to KRW 10 million)

Anti-Bribery regarding Foreign Public Officials, etc. Act on Combating Bribery of Foreign Public Officials in International Business Transactions

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Before 1997, only the U.S. Government could punish the bribe to foreign public officials in accordance with the FCPA

1U.S. Government’s request for equal

competition opportunity

1997. 12. 17. Signing the OECD Anti-Bribery Convention2

1999. 1. 4. 3Legislation of the Act on Combating Bribery of Foreign Public Officials in International Business Transaction (the “Anti-Bribery Act”)

Background of Legislation

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Important Features of the Anti-Bribery Act

• Parties that are offered bribe - Foreign public officials, etc.

• Pursuing illicit gains

• Waiver of punishment

• No punishment of bribe taking

• Due to dual punishment provision, corporation to which a bribe offerer belong may be punished

• Although there is a provision on confiscation, there is no separate pro-vision on additional collection

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• Any person holding legislative, administrative, or judicial office in a foreign country, whether appointed or elected (Subparagraph 1 of Article 2 of the Anti-Bribery Act)

Any person exercis-ing a public function for a foreign country (Subparagraph 2 of Article 2)

• Carrying out public affairs delegated by a foreign government

• Holding office in a public organization or public agency to carry out specific public affairs

• Any executive or employee of an enterprise in which a foreign government has invested in excess of 50% of its paid-in capi-tal or over which a foreign government has de facto control as regards to decision-making on important business operations and the appointment and removal of executives

Exception: Any enterprise engaging in a business in competition at arm’s length with general private business entities

• Any person acting for a public international organization (Subparagraph 3 of Article 2)

Scope of ‘Foreign Public Officials, etc.’

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Requirements (Article3(1) of the Anti-Bribery Act)

• Relevance to ‘international business transaction'

• ‘Illicit gains’

• Relevance to duties of ‘foreign public officials, etc. '

• ‘Bribe'

• Promise, offer or express intent to offer bribe

Criminal Liability of Offerer, etc.

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Circumstances Precluding Wrongfulness

• Where such payment is permitted or demanded pursuant to the statutes of the country to which the relevant foreign public official belongs.

• Where any person promises, offers, or expresses his/her intent to offer a small amount of money or any other interests to a foreign public official, who performs daily routine duties, in order to encourage the official to perform his/her duties in a fair manner.

Criminal Liability of Offerer, etc.

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Penal Provisions (Article 3(1) and (3) of the Anti-Bribery Act)

• Imprisonment for up to five (5) years or fine of up to KRW 20 million (20,000 USD)

• If criminal proceeds exceed KRW 10 million (10,000 USD),

• Where a relevant person is punished by imprisonment, a fine shall be concurrently imposed

Imprisonment for up to five(5) years or fine of up to the amount equivalent to double the criminal proceeds

Criminal Liability of Offerer, etc.

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Dual Punishment (Article 4 of the Anti-Bribery Act)

Relevant entity shall be punished by a fine of up to KRW 1 billion (where the criminal pro-ceeds exceed KRW 500 million, relevant entity shall be punished by a fine of up to an amount equivalent to double the criminal proceeds)

• The foregoing provision shall not apply to the case where the relevant entity did not neglect to take reasonable care or supervision in order to prevent offences (proviso to Article 4 of the Anti-Bribery Act)

Dual Punishment and Waiver of Punishment

“Kim Young-ran Bill,” Political Hot Potato in Korea

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What is the issue of Kim Young-ran Bill?

Official Name of Bill

Act on the Prevention of Illegal Solicitation, Giving and Receiving of Money or Valuables, etc.

Who is Kim Young-ran?

The first female Supreme Court justice and former Chairperson of ACRC (Anti-Corruption & Civil Rights Commission ) from 2011 to 2012

Key Points of Original Bill (proposed in 2011)

- Target: Public officials and their family members and their first cousins or close relatives

- Criminal punishment for one-time receipt of KRW 1 million (1,000 USD) or KRW 3 million (3,000 USD) for one year

- Regardless of “consideration”

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What is the issue of Kim Young-ran Bill?

Amended bill of the National Assembly

- Passed at the National Policy Committee on January 8, 2015 - Expansion of Applicable Parties: Including executives and employees of private

press and private schools

KBS vs. MBC or SBS

Seoul National University vs. Korea University or Yonsei University

Amended bill may apply to more than 20 million people

Criticism: All people may be criminals/Politicians’ artifice to prevent the passage of the bill

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