The Kim Young-Ran Act:
A Renewed Focus On Eradicating Corruption in Korea
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In response to the increasing public discontent regarding corruption, on March 3, 2015, the Korean National Assembly passed the Act on the Prevention of Improper Solicitation and Receipt of Money and Goods, more commonly known as the “Kim Young-Ran Act” (hereinafter the “Act”), to be effective as of September 2016. ?Some are hopeful that the Act will spearhead an entirely new offensive against Korea’s longstanding fight against corruption and bribery; others, however, remain speculative and are questioning the legality and practicality of this new law.? Nevertheless, companies and affected individuals must become familiar with the details of the Act and begin preparing and educating their respective organizations to ensure compliance with this new and potentially controversial legislation.
The primary objective of the Act is to penalize various acts of corruption that the currently existing laws and/or regulations are unable to penalize by (1) expanding the categories of acts that may be punished; (2) broadening the definition of “public official” to extend the reach of the Act into the certain private sectors; (3) prohibiting the conduct of improper solicitation without the explicit involvement of monetary goods; and (4) ensuring corporate accountability by introducing vicarious liability provisions. |
How is the Act different from Current Anti-Bribery Laws in Korea? |
| I. Current Anti-Bribery Laws |
| The Korean Criminal Code (“KCC”) serves as the foundational law addressing domestic bribery, which can be further differentiated as “public official bribery” and “private commercial bribery”. ?“Public official bribery” is primarily governed by Articles 129 to 133 of the KCC, which criminalizes the act of giving and receiving a bribe in relation with the official’s duty. ?Meanwhile, “private commercial bribery” is governed by Article 357 of the KCC, which prohibits the act of giving and receiving an economic benefit in exchange for an improper request to a person who is entrusted with conducting the business of another person, in relation with such person’s duties. ?Even if the recipient of a bribe is not a public official, a recipient, who is an employee of a “state-owned” or “state-controlled” entity, may still be deemed as a public official and be found guilty of “public official bribery” under various special laws including the Act Concerning Aggravated Punishment of Specific Crimes and the Act on Administration of Public Entities. |
| II. Key Aspects of the Act |
The Act contains many new initiatives and possible changes to the current legal landscape.? The aspects that may be more applicable to companies operating in Korea are as follows: |
| A. |
Removal of “Duty Relation” Requirement |
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Prior to the new Act, an act of bribery was criminal only when monetary interests were provided in relation to one’s official duties (hereinafter “Duty Relation” requirement).? However, one of the most notable aspects of the Act is that it criminalizes the mere act of exchanging monetary interests without the need to establish the “Duty Relation” requirement. ?More specifically, Article 8 of the Act forbids “public officials” from receiving, demanding, or promising monetary interest(s) of more than KRW 1 million (approx. USD 910), irrespective of whether the monetary interest was related to his/her official duties.? If found in violation of Article 8, both the giver and recipient of the relevant amount may face up to three years’ imprisonment or a criminal fine not exceeding KRW 30 million (approx. USD 27,300) per Article 22 of the Act.?
Article 8 was a response to various public officials evading punishment due to the lack of solid evidence establishing the relationship between the bribe and the official’s public duty. ?Now, by getting rid of the “Duty Relation” requirement, Article 8 significantly broadens the potential for prosecution.
Meanwhile, the Act still maintains certain exceptions under Article 8(3) for those circumstances where providing a monetary interest will not be deemed criminal.? Some of these exceptions include (1) where giving a gift or other economic benefit under the circumstances is consistent with social customs or curtseys; or (2) when a benefit is given because of a personal relationship between the public official and the giver such as a repayment of debt. |
| B. |
Broadening the Scope of “Public Official” |
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Before the enactment of the Act, pursuant to the various special laws abovementioned, a recipient in the public sector may be found guilty of “public official bribery”. ?The new Act has adopted an even broader concept of the term “public official” to now include not only persons in the public sector, but also those in the certain private sectors, including teachers of private schools as well as employees of media entities such as newspaper or broadcasting companies. |
| C. |
Inclusion of Vicarious Liability |
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Another change of critical importance to companies operating within Korea is the inclusion of an explicit vicarious liability provision. The KCC, which is the foundational law addressing acts of bribery in Korea, contains no vicarious liability provisions. Therefore, it was impossible to hold corporate entities liable for the violations of their employees under the KCC. However, now under Article 24 of the Act, when a representative, agent, or other employee working for an employer such as a legal entity, organization, or individual violates the Act in connection with the employer’s business, the employer will be subject to the same criminal or administrative fine as the employee.
One thing to note is that vicarious liability is not a strict liability under the Act, and if the employer has discharged its duties of adequate care and supervision to prevent the offense, the employer may be exempt from the above mentioned vicarious liability penalties. As a result, we expect that the new vicarious liability provision will expose companies to a much greater risk of potential legal liabilities as well as place additional pressure on companies to strengthen educational programs to ensure compliance with the Act.
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| D. |
Prohibiting Improper Solicitation |
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Also prior to the Act, there were no laws penalizing the act of solicitation itself without any involvement of a monetary interest.? However, in a drastic expansion of the former Korean laws, Article 5 of the Act prohibits the mere act of improper solicitation of a “public official”, either directly or through a third-party intermediary, regardless of any exchange of monetary interest.
Per Article 23 of the Act, a soliciting party in violation of the Act will now face an administrative fine of up to KRW 20 million (approx. USD 18,200) when one directly solicits a “public official” for the advantage of another party; or up to KRW 10 million (approx. USD 9,100) when one indirectly solicits a “public official” through a third-party intermediary. ?Furthermore, the solicited “public official” may also be subject to imprisonment for up to two years or a criminal fine not exceeding KRW 20 million when he/she is found to have acted improperly in accordance with the solicitation. |
How Should Businesses Prepare for the New Changes? |
The Act had been heatedly debated for nearly four years over concerns regarding its legality and potential unconstitutionality.? Yet the National Assembly’s decision on March 3, 2015 does not mean that these concerns have been resolved.? Issues regarding the vagueness of the Act’s provisions, possible excessiveness in applicable scope, and potential infringement of people’s rights and private autonomy still persist. ?In fact, within mere days of the National Assembly decision to pass the Act, the Korean Bar Association has filed a suit in the Korean Constitutional Court challenging the constitutionality of the Act.?
Despite the above concerns, one thing is clear: there will be an increased focus on abolishing corruption in Korea and efforts to implement and enforce this new Act will continue undeterred. Moreover, with the adoption of the vicarious liability provision, there will be greater pressure upon companies to secure the compliance of their employees.? Thus, companies operating in Korea will have to take actions to mitigate the risks of violating the Act. ?They should not hesitate to receive assessment and assistance from legal professionals, especially in light of the potentially vague and/or novel initiatives found within this Act.
Companies need to establish a robust corporate compliance program as well as revise the ones already established, if any, to meet the high standard of conduct required by the new Act.? Such compliance program should include training sessions to familiarize employees with the Act’s contents and stress the importance of the employees’ compliance with the Act.? Companies should also implement a comprehensive Code of Conduct with clear guidelines and corresponding sanctions and penalties for those who violate the Act. ?These efforts will be able to reduce the risk of employee violations.? Also in the event that an employee provides a monetary interest or improperly solicits a “public official” notwithstanding the organization’s best efforts, a properly implemented and robust compliance program will serve as tangible evidence of the due care and proper supervision by the organization and may consequently reduce the possibility of vicarious liability.?
The risks of violations and associated costs and potential penalties as well as the reputational damage of defending an investigation are real.? What must not be forgotten is that preventing violation of Korea’s anti-corruption law will become increasingly crucial. ?Therefore companies operating in Korea should be proactive by seeking legal advice as to whether any actions which were considered conventional practices in the past may now be seen as illegal. |
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