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On June 29, 2020, the newly appointed commissioner of the Anti-Corruption and Civil Rights Commission (the “Commission”), Ms. Hyun-Hee Chun emphasized in her introductory statement that “the most important promise that this administration made to the nation, is to make a corruption-less Korea” and that the Commission would truly become the control tower for anti-corruption policies and efforts. The year 2021 marks the fifth anniversary of the adoption of the Anti-Graft Act. When the Anti-Graft Act was enacted in 2016, it was a watershed event for anti-corruption and compliance efforts in Korea, particularly because of the strict monetary limits for meals, gifts, and other benefits provided to a broadly defined scope of “public officials” (including not only government employees, but public and private media employees and public and private school employees). The Act also imposes criminal penalties for benefits above a certain amount (even without corrupt intent, quid pro quo, or relation to the recipient’s duties), and official statistics from the PO’s “Prosecutorial Yearbook” indicate that there has been an increase in criminal indictments for Anti-Graft Act violations every year since it was enacted. In the past four years, however, there have not been any “blockbuster cases” involving criminal penalties for major corporations, and the five-year mark may prove a meaningful test to assess the level of enforcement in serious violations of the Anti-Graft Act.
Meanwhile, the original draft of the Anti-Graft Act had included provisions concerning conflicts of interest for public officials, which were removed before the Act was enacted. However, on June 25, 2020, the Commission submitted a draft bill on the Act on the Prevention of Public Officials’ Conflicts of Interest (the “Conflict of Interest Act”) to the National Assembly, in the aftermath of several conflict of interest cases. In one particularly well-known case involving a National Assembly member who was a long-time member of a committee overseeing the construction industry, it was found that the National Assembly member’s family had interests in certain companies that were awarded projects worth trillions of Korean Won from public agencies and state owned enterprises. The Conflict of Interest Act was proposed to prevent and monitor conflicts of interest that could unfairly benefit public officials. The draft bill is currently under review in a standing committee within the National Assembly. If a public official violates the Conflict of Interest Act, the bill proposes penalties subjecting public officials to sanctions of up to KRW 70 million in criminal fines or up to seven years’ imprisonment. The draft bill also includes the following provisions aimed to prevent conflicts of interest:
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Sanctions for a public official’s failure to report personally interested parties;
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High-ranking officials obligated to submit civil/non-public related activity records;
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Public officials obligated to report transactions with individuals that have a “direct business relationship” with the public official;
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Limitations on outside activities in connection with the public official’s duties;
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Limitations on hiring family members of high-ranking public officials as well as public officials that are normally tasked with recruiting public officials;
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Restrictions on entering into a transactional relationship (free/private contract) between a public official overseeing such transactions and his/her family members;
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Restrictions on personal use of public property; and
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Public officials restricted from using confidential methods of communication while performing their official duties.
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If the draft Conflict of Interest Act passes the National Assembly and is introduced as law, we expect there will be heightened attention on the part of regulators and enforcement authorities on interactions between public officials and the private sector. Therefore, we would advise private enterprises that regularly deal with regulators, and government entities as customers in, for example, public projects, to proactively prevent violations by preparing detailed, transparent guidelines, policies or standard operating procedures which specifically address the issue of conflict of interest, as well as guidelines to implement such rules and to monitor such processes.
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& CHANG nor relied upon in lieu of specific advice. Recipients of this publication, whether clients or otherwise, should not act or refrain from acting on the basis of any information included in this publication
without seeking appropriate legal or other professional advice. |
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