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Strengthened Criminal Investigations by Special Administrative Police


On July 15, 2020, the Financial Supervisory Service (the "FSS") Special Administrative Police (the "SAP") conducted a search of the offices of a cement company as well as the home of its CEO as part of a stock manipulation investigation.  This is the first time that the FSS's SAP has conducted an investigation of a non-financial company since its launch in July 2019. 

The SAP, which is governed by the Act on Persons Performing the Duties of Judicial Police Officials and the Scope of Their Duties, are government officials who form a type of mini-police force within an agency and is empowered to exercise investigative powers that are otherwise only granted to the police or prosecutors.  These include the authority to conduct dawn raids, interviews of suspects/witnesses and emergency arrests as well as to obtain telecommunications and bank account records.  Upon completing its investigation, the SAP can refer the case for further investigation to the Prosecutors' Office.  

In addition to the FSS, there are numerous government agencies which maintain an SAP section.  By granting of criminal investigative authority to these teams, there is an implicit recognition that having certain cases investigated by government officials with specialized expertise and knowledge of the relevant sector would be an effective means of investigation and enforcement in the relevant sectors.  In the following, we review the specific roles of the SAP of several major government agencies.  

  1. FSS:  The FSS SAP was formed to conduct criminal investigations relating to unfair trading activities.  Since its launch in July 2019, the FSS SAP has completed or is currently conducting approximately ten investigations, including the dawn raid against a non-financial private company, as discussed above.  The formation of the SAP within the FSS has accelerated the process of criminal investigations into financial crimes by enabling the FSS to launch a criminal investigation concurrently with the regulatory inquiry.

  2. Korea Customs Service (the "KCS"):  The KCS SAP actively inspects and investigates violations of the Customs Act.  Since 2018, customs officers may additionally investigate whether there have been violations relating to labeling, approval and product quality requirements under the applicable laws.  Further, they may investigate whether any of the concerned products are distributed, sold or displayed in violation of such requirements.

  3. Ministry of Employment and Labor (the "MOEL"):  The MOEL SAP is comprised of approximately 2,100 officials.  It has been actively conducting various criminal investigations related to Labor Standard Act violations, which have included dawn raids and review of data through digital forensic analysis.

  4. Ministry of Food & Drug Safety (the "MFDS"):  Since its launch, the MFDS SAP has primarily dealt with gathering and managing information concerning food and pharmaceutical-related crimes, as well as investigating suspected criminal violations of the Food Hygiene Act and the Pharmaceutical Affairs Act.  Since 2015, it has expanded the scope of the SAP's duties to include matters relating to criminal violations of the Cosmetics Act and Medical Device Act.

  5. Ministry of Environment (the "MOE"):  The MOE SAP oversees and conducts criminal investigations into various environmental crimes such as emission of environmental pollutants.

  6. Korea Intellectual Property Office (the "KIPO"): The KIPO SAP is authorized to conduct investigations on infringement of patent rights, trade secrets and design rights.

The presence of SAP sections within the various regulatory authorities listed above shows the intertwined nature of administrative (regulatory) liability and criminal liability in Korea, and reflects the wide-ranging nature of possible sanctions under the applicable laws.  Numerous regulatory statutes provide that violations of applicable regulations can lead not only to administrative sanctions (such as a fine and/or restrictions on business activities) but also to criminal sanctions to potentially both the corporate entity and the individual wrongdoer.  The trend towards greater use of SAP also indicates a departure from the previous approach used in criminal investigations involving alleged regulatory beaches where the police or prosecutors, in many cases, would generally defer to the assessment of the relevant regulator on technical/regulatory matters. 

Following the FSS SAP's dawn raid into a non-financial private company, we expect that the SAP across all government agencies will continue to pursue aggressive investigative methodologies for even administrative (regulatory) violations, including dawn raids, and will continue to reinforce its digital forensic capabilities and criminal information database.  Additionally, as we have seen in a number of recent cases, we expect that the formation of joint investigation teams comprised of SAP sections from different government agencies will become more frequent.  We expect that it will become more critical for private companies to be well prepared for such joint investigations, which can potentially cover a wide range of legal issues.