White-Collar Crime

White-collar crime also tends to connect at the same time to several areas of regulation, including accounting, tax, finance, fair trade, labor, industrial safety, personal information, and trade secrets.

The improper diversion of company funds, for example, does not end with embezzlement; it can extend to false accounting entries, the booking of fictitious expenses for tax purposes, the deception of investors, and failures of internal control.

One of the defining features of white-collar crime is that a single incident can spread at once into criminal exposure, administrative sanctions, civil damages, and reputational risk.

White-collar crime is also dangerous because it can give rise to liability for the company itself.

Even where the actor is an individual officer or employee, the company may be punished alongside that person under a joint penalty provision if the conduct was carried out in connection with the company's business or if a lapse in internal control is found. The company may also face sanctions from supervisory authorities, such as penalty surcharges, administrative fines, business suspension, institutional warnings, and restrictions on bidding participation.

In recent years, investigations and sanctions have increasingly extended to holding representative directors, registered officers, and department heads with genuine decision-making power accountable for their management and supervisory responsibilities.

The method of investigation also differs from that in ordinary criminal cases.

White-collar crime cases are typically investigated around vast amounts of digital data, including email, messaging, accounting records, electronic approval logs, server logs, and records of external storage device use.

Digital forensics therefore carries great weight in establishing the facts and analyzing the evidence, and the response to a search and seizure or an internal investigation must be approached strategically from the earliest stage.

A company may also have to respond at the same time, separately from the investigation by the authorities, to a range of procedures such as an internal audit, a review by the compliance officer, a Financial Supervisory Service examination, a Fair Trade Commission investigation, and a Korea Exchange review, so the matter cannot be treated as a criminal problem alone.

Ultimately, white-collar crime reaches beyond the question of punishment and can affect a company's credibility, business relationships, ability to attract investment, share price, management control, and standing with supervisory authorities, so it should be viewed as both a criminal risk and a management risk for the company.

A company needs to approach white-collar crime not as a matter of after-the-fact defense but as one of advance internal control and compliance management, and where a problem has arisen, it should develop a comprehensive strategy that covers not only the criminal response but also accounting, tax, fair trade, human resources and labor, and the analysis of digital evidence.

Embezzlement and breach of trust are the most typical white-collar offenses to arise in a corporate setting.

Occupational embezzlement refers to an offense in which an officer or employee who is entrusted with company funds or assets uses them for personal purposes or diverts them to a third party.

This may include the personal use of a corporate card, the diversion of company funds through sham transactions, the creation of slush funds, and the unauthorized use of an affiliate's funds.

By contrast, occupational breach of trust refers to an offense in which an officer or employee abandons the duty to protect the company's interests and causes the company loss for the benefit of himself or a third party.

Representative examples include the conclusion of contracts favorable to related parties, the improper sale of assets below value, the provision of excessive guarantees, and biased decision-making in the course of a management control dispute.

Bribery and corruption offenses frequently arise in a company's external transactions, sales to public institutions, permits and licenses, procurement, and the conclusion of contracts.

Domestically, the bribery provisions of the Criminal Act, the Improper Solicitation and Graft Act, and the Act on Aggravated Punishment of Specific Crimes may apply, and for companies operating overseas, foreign anti-corruption laws such as the U.S. FCPA and the U.K. Bribery Act may also come into play.

For example, providing money or goods to officials of public institutions, entertainment aimed at securing supply or contract awards, the payment of rebates, and the indirect provision of money or goods through a third party are all leading corruption risks.

Financial, insurance, and securities crime is a sophisticated type of white-collar crime that combines the capital markets with financial regulation.

It includes, among others, the use of undisclosed material information, market manipulation, fraudulent and unfair trading, false disclosure, illegal short selling, insurance fraud, and loan fraud.

These offenses call for an understanding not only of general criminal doctrine but also of the Financial Investment Services and Capital Markets Act, the Insurance Business Act, and financial supervisory regulations, and a Financial Supervisory Service investigation often runs in parallel with a prosecutorial one.

Tax, customs, and foreign exchange offenses frequently arise in the course of a company's international transactions and financial processing.

Leading examples include tax evasion, the exchange of false tax invoices, customs evasion, false labeling of country of origin, violations of the Foreign Exchange Transactions Act, and unregistered foreign exchange dealing.

Because the transaction structures are complex and the tax and customs rules are technical, these offenses can arise not only from intentional crime but also from inadequate internal management or errors in interpreting the law.

The National Tax Service, the Korea Customs Service, the prosecution, and financial institutions also often analyze the records together, so reviewing transaction structures and putting reporting systems in order in advance matters more than defending after the fact.

Fair trade is one of the areas of white-collar crime where regulation has tightened the most in recent years.

Leading examples include bid rigging, price fixing, abuse of a superior bargaining position, unfair support, the channeling of work to affiliates, and resale price maintenance.

Such matters can begin with a Fair Trade Commission investigation and lead on to a criminal complaint, a prosecutorial investigation, and a damages action.

Collusion cases in particular turn on internal email, minutes, messaging, and bid preparation materials as key evidence, so internal investigations and digital forensics are of great importance.

Technology leakage and trade secret infringement are a leading type of white-collar crime that occurs frequently in manufacturing, IT, pharmaceuticals, semiconductors, and the content industry.

For example, the removal of technical materials by departing employees, the leakage of materials when moving to a competitor, the unauthorized use of information during joint development, and the downloading of data from internal servers can all give rise to problems.

This type of offense may bring the Unfair Competition Prevention and Trade Secret Protection Act, the Copyright Act, the Patent Act, and the Network Act into play together, and a civil injunction, damages, and a criminal complaint often proceed at the same time.

In construction and real estate, a variety of white-collar crimes arise in connection with large development projects, redevelopment and reconstruction, development and construction work, permits and licenses, sales of units, and subcontracting structures.

Leading examples include bidding irregularities, improper handling of construction payments, bribery related to permits and licenses, sales fraud, the booking of false construction costs, and the disbursement of funds in breach of trust.

The medical, pharmaceutical, and food sectors carry a high risk of white-collar crime, given their nature as regulated industries.

Leading examples include the provision of illegal rebates, false advertising, the submission of false clinical data, improper claims for insurance benefits, and the submission of false data for product approval.

Rebate cases in the pharmaceutical and medical device sectors in particular may be examined together with issues under the Pharmaceutical Affairs Act, the Medical Service Act, the offenses of taking property in breach of trust and bribery under the Criminal Act, and violations of fair competition codes.

In such cases, the defense must extend beyond the criminal proceedings to address administrative sanctions involving the Ministry of Food and Drug Safety, the Ministry of Health and Welfare, and the National Health Insurance Service.

White-collar crimes involving environmental and product liability typically arise in connection with major industrial accidents, the discharge of hazardous substances, and the concealment of product defects.

Examples may include the unauthorized discharge of wastewater, false reporting of air pollutants, violations of toxic substance controls, concealment intended to avoid a recall, and failure to meet safety standards.

These matters carry significant social repercussions and can severely damage a company's reputation. Beyond criminal punishment, they may lead to substantial damages, administrative dispositions, business suspension, and a downgraded ESG rating, which makes early response and crisis communication a priority.

White-collar crime can also arise in the area of human resources and labor.

Common examples include unfair labor practices, unpaid wages, violations of occupational safety obligations, illegal dispatch of workers, concealment of workplace harassment, and improper interference in union matters.

These cases readily connect to oversight by the Ministry of Employment and Labor, prosecutorial investigations, civil wage claims, and industrial accident disputes. Where they intersect with the Serious Accidents Punishment Act in particular, the personal criminal liability of the responsible managing officer may also come into question.

In recent corporate crime investigations, the analysis of digital evidence has become a central component.

Common investigative methods include the following.

Scope of Digital Forensic Analysis

• Analysis of email records
• Messenger conversation logs
• Records of file creation and deletion
• USB access logs
• Internal server data

Digital forensics is especially important in cases such as the following.

• Leaks of trade secrets
• Insider trading
• Embezzlement cases
• Accounting fraud cases

A corporate internal investigation goes beyond simply confirming the facts and becomes a core resource for shaping the criminal response strategy that follows.

✔ Building an internal control system
✔ Strengthening the compliance management framework
✔ Operating an internal reporting system
✔ Compliance training for executives and staff
✔ Regular internal audits

When these systems are in place, they can serve to mitigate a company's liability during an investigation by the authorities.