CONTENTS
- 1. Property Crime | The Need for an Experienced Attorney
- - Major Disadvantages a Company May Suffer When Property Crime Occurs
- 2. Property Crime | Types and Response Measures
- - Larceny
- - Crime of Fraud
- - Embezzlement
- - Breach of Trust
- - Extortion
- - Robbery
- - Destruction of Property
- - Receiving Stolen Property
- - Fraud by Use of a Computer
- - Aggravated Punishment for Occupational Breach of Trust and Embezzlement
- 3. Property Crime | Detailed Measures for Prevention
- - Property Crime Prevention Checklist
1. Property Crime | The Need for an Experienced Attorney
Property crime is a serious offense that occurs frequently across a variety of corporate environments, from large enterprises, public institutions, and ventures and startups to small and medium-sized enterprises, and it has a serious impact on business operations.
Property crime refers to any criminal act that infringes another person's property or unfairly obtains a benefit.
It is defined under the Criminal Act as theft, embezzlement, breach of trust, fraud, extortion, robbery, destruction of property, and dealing in stolen goods, and recently cyber property crime using information and communications networks has also surged.
In the case of companies, property crime occurs through a variety of channels, ranging from unlawful acts by internal officers and employees to partner firms, customers, and external hacking, and it can lead not only to the loss of corporate assets but also to serious legal risks such as criminal punishment, civil liability, a decline in creditworthiness, and the termination of contracts, so preemptive management is critical.
Major Disadvantages a Company May Suffer When Property Crime Occurs
▶Direct Financial Loss
The possibility of losses ranging from hundreds of millions to tens of billions of won when fraud or breach of trust occurs that is difficult to cover by insurance
Leakage of customer information and financial loss due to cyber property crime
▶Criminal Punishment and Legal Sanctions
The possibility of punitive damages against the corporation, the imposition of an administrative fine, and criminal accusation
Termination of the contract and a claim for damages when an unlawful act occurs under a contract concluded with a public institution or a business partner
▶Civil Liability for Damages
The possibility of an astronomical increase in the amount of damages depending on the scale of the harm and the presence of fault
The risk of expansion into a class action, an investor lawsuit, or a shareholder derivative suit
▶Decline in Corporate Reputation and Trust
A decline in sales due to customer attrition and loss of business partners' trust
A decline in creditworthiness with talent recruitment and financial institutions, and failure to attract investment
▶Credit Rating Downgrade and Disadvantages in Financial Transactions
A reduction in loan limits at financial institutions, an increase in interest rates, and refusal of new financial transactions
Demands for collateral and for early repayment of existing loans
▶Termination of Contractual Relationships and Claims for Damages
Claims for damages for breach of contract by suppliers, vendors, and client companies
▶Internal Talent Drain and Weakened Organizational Stability
Departure of key talent, lowered morale, and intensified internal conflict
Calls for management accountability, the general meeting of shareholders, and backlash from the labor union
▶Administrative Disposition and Revocation of Certifications
The possibility of punishment for violations of the Foreign Exchange Transactions Act, the Personal Information Protection Act, or the Electronic Financial Transactions Act
▶Inducement of Additional Crime and Copycat Crime
An increased likelihood of becoming a target of internal officers and employees or external criminal organizations
2. Property Crime | Types and Response Measures
The types of property crime that frequently occur in companies, along with response measures and levels of punishment, are as follows.
Larceny
Larceny is the act of stealing another person's property.
It applies to the theft of money and goods within a company, of inventory assets, of office supplies, of plant equipment parts, and the like.
▶Level of Punishment : Imprisonment for up to 6 years or a fine of up to 10 million won
▶Response Measures : CCTV, access control, regular asset inspections, and the inclusion of an anti-theft clause in consignment contracts
Crime of Fraud
The crime of fraud is the crime of deceiving another person with false facts to obtain property or a benefit.
It applies to false transactions by partner firms, the misappropriation of payments by business partners, fictitious contracts, and phantom transactions.
▶Level of Punishment : Imprisonment for up to 10 years or a fine of up to 20 million won
▶Response Measures : Due diligence on the counterparty before a contract, credit checks, contract forms that prevent forgery and alteration, and inspection before payment
Embezzlement
Embezzlement is the crime in which a person who keeps another's property uses it at their own discretion.
Representative examples are the misappropriation of company funds by an accounting staff member, arbitrary withdrawals by an accountant, and the failure of a salesperson to remit collected payments.
▶Level of Punishment : Imprisonment for up to 5 years or a fine of up to 15 million won
▶Response Measures : A multiple approval system, a dual approval system, control over the use of corporate cards, and the separation of duties
Breach of Trust
Breach of trust is the act in which a person who handles another's affairs violates their duty to obtain a financial benefit or to cause harm to another person.
It applies to unauthorized discount sales by officers and employees, the funneling of business to a particular partner, and directions to engage in improper transactions.
▶Level of Punishment : Imprisonment for up to 5 years or a fine of up to 15 million won
▶Response Measures : Prior review of contracts, anti-rebate clauses, a conflict-of-interest reporting system, and a compliance pledge for officers and employees
Extortion
Extortion is the crime of extracting property or a benefit through assault or intimidation.
Threatening a partner firm with termination of a contract or coercing a business partner may fall under this.
▶Level of Punishment : Imprisonment for up to 10 years or a fine of up to 20 million won
▶Response Measures : Education to prevent intimidation and verbal abuse, a claim response manual, and legal advice when a dispute arises
Robbery
Robbery is the crime of taking property by assault or intimidation, and it applies to robbery by external intruders, the seizure of money and goods at business sites, and the like.
▶Level of Punishment : Imprisonment for a definite term of at least 3 years
▶Response Measures : Emergency alarms at the business premises, linkage with a security company, and real-time CCTV monitoring
Destruction of Property
Destruction of property is the act of damaging another's property or impairing its utility.
This includes damage to company supplies and the intentional destruction of business equipment.
▶Level of Punishment : Imprisonment for up to 3 years or a fine of up to 7 million won
▶Response Measures : CCTV of those entering, the express stipulation of compensation rules upon damage to equipment, and training for supervisors
Receiving Stolen Property
The crime of receiving stolen property covers acquiring, taking over, transporting, or storing property obtained through theft, fraud, embezzlement, or similar offenses.
Examples include the improper purchase of a supplier's delivery inventory or the acquisition of embezzled goods.
▶Level of Punishment : Imprisonment for up to 7 years or a fine of up to 15 million won
▶Response Measures : Strengthening inspection of delivered logistics, organizing inventory receipt and disbursement ledgers, and blocking transactions involving false receipts
Fraud by Use of a Computer
The crime of fraud by use of a computer involves using an information system to obtain payments by deception, make false transfers, or carry out unauthorized transfers.
▶Level of Punishment : Imprisonment for up to 10 years or a fine of up to 20 million won
▶Response Measures : Management of system access rights, two-factor authentication systems, management of system audit logs, and IT audits
Aggravated Punishment for Occupational Breach of Trust and Embezzlement
Embezzlement and breach of trust committed by corporate officers and employees in the course of their duties are subject to aggravated punishment.
▶Level of Punishment : 500 million won or more → life imprisonment or imprisonment for at least 3 years; 100 million won or more → imprisonment for at least 3 years and up to 5 years
▶Response Measures : A board approval system for high-value transactions, due diligence on counterparties, and immediate legal review in the event of a large-scale loss
3. Property Crime | Detailed Measures for Prevention
Property crime can deal a serious blow to a company's image, and a company involved in such a crime must respond promptly and appropriately.
1. Dual Control of Asset Management and Operation Systems
For asset management tasks involving corporate assets, accounting, inventory, securities, financial transactions, and electronic documents, a dual approval system and a system of separated authority are introduced to prevent any single person from exercising full control.
In particular, it is advisable to have the accounting and fund management departments regularly inspected by an external auditor or an internal control audit team, and to require a dual approval process for account transfers, card payments, and disbursement approvals.
2. Activation of Whistleblowing and Misconduct Reporting Systems
An internal reporting system that allows anonymous reports, together with external audit and legal advisory channels, is established so that misconduct by officers and employees can be detected and investigated promptly.
Protective measures and a reward system for whistleblowers should be put in place to enhance the effectiveness of reporting, and the post-reporting handling procedure should be managed transparently to secure trust in the protection of whistleblowers.
3. Control of Access to Key Assets and Information
Access to key assets and information, such as funds, inventory, customer information, trade secrets, and internal computer networks, is limited to the minimum necessary for the work, and authority is reviewed and logs are monitored on a regular basis.
Procedures for the immediate withdrawal of authority from departing employees and those reassigned are put in place, and the history of changes and grants of authority is recorded and managed.
4. Strengthening of Electronic Finance and Cybersecurity Systems
To prepare for email hacking, electronic financial fraud, and unlawful intrusion into systems, firewalls, intrusion detection systems, two-factor authentication, and encryption technology are actively introduced, and a cybersecurity incident response manual is prepared to prepare for emergencies.
Access records of computer systems and logs of external connections are inspected periodically, and analysis of security vulnerabilities and simulated hacking are carried out regularly.
5. Employee Ethics Training and Crime Prevention Education
Regular ethical management training for officers and employees, along with preventive education covering the types of property crime, case examples, levels of punishment, and response measures, is conducted to strengthen awareness of legal risks.
For new hires, key asset managers, accounting staff, and sales managers, separate tailored legal training and a pledge of responsibility are conducted in parallel to enhance the preventive effect.
6. Operation of a Management System for External Vendors and Partners
Through prior credit checks on subcontractors, partners, and outsourced personnel, provisions in contract terms to prevent improper solicitation, and the conclusion of fair trade agreements, the possibility of external crime is minimized.
To clarify the responsibility of partners when property crime occurs, it is also effective to include a clause in the contract providing for ‘termination of the contract and compensation for damages upon the occurrence of a criminal case.’
7. Establishment of an Immediate Response System When Property Crime Occurs
A response manual is prepared and a responsible department is designated so that, when an incident occurs, reporting, initial measures, legal advice, reporting to investigative authorities, and recovery procedures can be carried out promptly.
The history of property crime incidents is compiled into a casebook for use in recurrence-prevention training, and is managed so that prompt measures can be taken when a similar case occurs.
Property Crime Prevention Checklist
Preventing property crime is not a matter of one-time management. The key is to build a comprehensive framework spanning the company's overall organizational culture, control systems, and legal risk management, while conducting regular reviews and training.
In particular, it is advisable to strengthen internal controls and electronic finance and security systems, establish a response framework linked to legal counsel, prevent the company's economic and legal risks in advance, and secure management stability through prompt remediation and recovery of damage when an incident occurs.
▶Property Crime Prevention Checklist
| Category | Review Item |
|---|---|
| Asset Management Controls | Dual approval of assets and funds, separation of authority, and regular monitoring |
| Operation of a Whistleblower System | Anonymous reporting system, protection of informants, and a reward program |
| Control of Information Access Rights | Minimization of access rights, and management of the history of changes and revocations of access rights |
| Inspection of Electronic Finance and Security Systems | Intrusion detection, two-factor authentication, log analysis, and penetration testing |
| Ethics Training and Legal Training | Regular training, training for new employees, and collection of written pledges |
| Partner Risk Management | Credit checks, anti-misconduct agreements, and contract termination clauses |
| Establishment of an Incident Response Manual | Initial measures, reporting to investigative authorities, and damage recovery procedures |
| Regular Reviews and Management of Incident Cases | Full inspections at least twice a year, and compilation of a casebook of incidents |
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