Financial Crime

Financial crime rarely stops at harming a single individual; it can pose a serious threat to confidence in, and the stability of, the financial market as a whole.

For a company, financial crime by an officer or employee can affect its credibility, share price, and ability to keep operating, and weak internal controls can give rise to financial supervisory sanctions and criminal liability.

When a company becomes involved in financial crime, the lack of a dedicated legal response system, one that covers everything from the early response and the investigation to internal inquiry and the management of sanction risks, can lead to significant losses.

Money laundering is the process of making illegally obtained funds appear to be legitimate assets.

Where money laundering is committed in violation of the Act on Regulation and Punishment of Criminal Proceeds Concealment, the following penalties apply.

Financial fraud is the act of deceiving or misleading another person in a financial transaction in order to gain an unlawful benefit.

It takes many forms, including telecommunications-based financial fraud and investment fraud, and the number of actual victims continues to grow.

A person who commits financial fraud may face criminal punishment and may also be subject to a claim for damages by the victim.

Insider trading occurs when so-called insiders, such as corporate officers, employees, or major shareholders, use undisclosed information to secure an improper gain.

A person who commits insider trading is subject to imprisonment for at least 1 year or a fine equivalent to not less than 4 times and not more than 6 times the profit gained or the loss avoided through the violation.(Article 443(1)1 of the Financial Investment Services and Capital Markets Act)

When the profit gained or the loss avoided through insider trading reaches 500 million won or more, aggravated punishment applies.

A financial crime investigation generally begins with an inquiry by a financial supervisory authority or with the detection of an abnormal transaction by the Korea Financial Intelligence Unit (FIU).

Relying on information such as unusual fund flows, large cash transactions, and suspicious transaction reports, the Korea Financial Intelligence Unit (FIU) notifies financial companies or investigative agencies, and the tracing of the relevant accounts and the review of transaction records then begin in earnest.

Through this work, investigators often uncover methods such as the lending of bankbooks, the misuse of corporate accounts, and virtual asset wallet transactions, and they seek to identify the source and purpose of the money quickly.

Once suspicions take concrete shape, investigators carry out search and seizure, account tracing, and forensic analysis under a court warrant.

Because the analysis of digital traces and fund flows lies at the heart of financial crime, the servers, emails, and messenger records of the suspect or the company may also be targeted.

Where there appears to be a risk of flight or a possibility that evidence will be destroyed, compulsory measures may be taken against the suspect, such as a travel ban, a request for communication confirmation data, and a request for a detention warrant.

The Sentencing Commission applies the following sentencing standards to financial crime.

▶ Mitigating Factors

▶ Aggravating Factors

If you have been harmed by a financial crime, the first step is to file a report and a criminal complaint without delay.

Besides filing a criminal complaint with a police station or the prosecutors' office, depending on the type of case you may file a civil petition or a damage report with bodies such as the Financial Supervisory Service and the Korea Financial Intelligence Unit (FIU).

Separately from seeking the suspect's criminal punishment, the actual monetary loss can often be recovered through a civil claim for damages.

Where funds have been hidden through virtual assets or borrowed-name accounts, prompt legal measures such as an application for provisional attachment can be central to recovering the loss.

※ Gathering evidence matters. Recorded calls, text and messenger records, remittance histories, transaction statements, and similar materials serve as key proof of legal liability.

If you are investigated as a suspect in a financial crime, the direction of your initial response can shape the outcome of the case.

When you comply with a request from investigators to appear, it is generally advisable first to understand fully the suspicion against you, the scope of the investigation, and the related evidence, and to consult a qualified attorney beforehand rather than responding on your own.

Where the flow of funds or the structure of a contract is complex, a simple explanation rarely dispels the suspicion, so the logical consistency and legal soundness of your account carry real weight.

Unnecessary statements may instead be used against you, so it helps to set a deliberate direction for what you say.

※ The belief that 'admitting the charge will lighten the punishment' is a dangerous misconception. Statements should always be decided only after obtaining legal advice.

A company should build an organized internal control system to guard in advance against risks such as the misappropriation of funds, the leakage of information, and false reporting that can arise within the organization.

In particular, fund settlement and approval procedures, restrictions on access to customer information, and double-checking of accounting entries should be treated as core elements.

The internal control system should not remain mere paperwork; it should consist of procedures that work in practice, and it should keep correcting and improving weak points through regular risk reviews and internal audits.

A large share of the financial crimes that occur within a company stem from the intent or negligence of insiders.

To address this, a company should run an independent compliance officer system and set up a structure that can continually monitor the compliance risks of each department.

An internal reporting system is also an important way to recognize and address illegal acts or misconduct within a company at an early stage.

The anonymity and protection of the reporter should be firmly guaranteed, and the system should be arranged so that reports can be handled objectively by departments such as legal affairs and audit.

A company should establish and operate organized compliance guidelines in order to prevent financial crime and observe the relevant laws and regulations.

These guidelines should cover anti-money laundering (AML), the protection of personal information, and internal control procedures, and regular training and review should accompany them so that they are understood and applied in practice.