CONTENTS
- 1. Punishment for Illegal Bank Accounts, What Are the Detailed Circumstances?
- - What Are the Statutes Related to the Punishment for Illegal Bank Accounts?
- 2. Punishment for Illegal Bank Accounts, What Was the Determination of the Lower Courts?
- 3. Punishment for Illegal Bank Accounts, What Was the Determination of the Supreme Court?
- 4. Punishment for Illegal Bank Accounts, Daeryun's Strategy
1. Punishment for Illegal Bank Accounts, What Are the Detailed Circumstances?
A, who was brought to trial in connection with the punishment for illegal bank accounts, was accused of visiting a bank in Gwangju and opening an account in the name of a corporation using a shell corporation that had no substance.
A opened the account and obtained a bankbook and a check card by representing to the employee in charge of opening the account, as though A were normally operating the corporation and would use the account for normal financial transaction purposes, and by submitting documents such as a business registration certificate and a seal impression certificate.
However, A had carried this out after receiving an offer to be paid 3 million won for establishing a shell corporation and handing over the account.
A was ultimately indicted by the prosecution for interference with business, violation of the Electronic Financial Transactions Act due to lending an access medium (the account), and embezzlement due to withdrawals from the account.
What Are the Statutes Related to the Punishment for Illegal Bank Accounts?
🔗An illegal bank account refers to a borrowed-name account, that is, an account in which the account holder differs from the person who actually uses it.
In Korea, the use of borrowed-name accounts became illegal after the introduction of the real-name financial transaction system in 1993. In the early period, only the officers and employees of financial institutions who created such accounts could be punished, but after the Electronic Financial Transactions Act took effect in 2007, users also became subject to punishment.
As it became easier to open an account in the name of a company than in an individual's name, cases of creating illegal accounts in the name of shell companies have been increasing. Many cases have also been detected in which, after providing a small fee to an ordinary person, a shell company is established to obtain an illegal bank account.
The relevant punishment provisions are set forth in the Electronic Financial Transactions Act.
▣ Article 49 of the Electronic Financial Transactions Act
① Where a person, while receiving, demanding, or promising consideration, borrows or lends an electronic medium, or stores, delivers, or distributes it
② Where a person, for the purpose of using it for a crime or while knowing that it will be used for a crime, borrows or lends an access medium*, or stores, delivers, or distributes it
the person shall be punished by imprisonment for not more than seven years or a fine not exceeding 50 million won.
* Access medium: a means or information falling under any of the following items that is used in electronic financial transactions to give a transaction instruction or to ensure the authenticity and accuracy of the user and the transaction details. This refers to a check card, a bankbook, an OTP, a public certificate, and the like.
2. Punishment for Illegal Bank Accounts, What Was the Determination of the Lower Courts?
The court of first instance, which tried the lawsuit related to the punishment for illegal bank accounts, found A guilty of all charges, including interference with business and violation of the Electronic Financial Transactions Act, and sentenced A to one year of imprisonment.
The court of first instance stated that A had "interfered with the account-opening business by deceiving the bank into believing that a corporation that was not actually in operation was a normal corporation," and that, "because the account in question was highly likely to be used for a crime, there is a need to punish the conduct severely."
The appellate court also upheld the judgment of the court of first instance.
3. Punishment for Illegal Bank Accounts, What Was the Determination of the Supreme Court?
The determination of the Supreme Court, which tried the case related to the punishment for illegal bank accounts, was different.
Finding that A's conduct did not constitute interference with business, the Supreme Court reversed and remanded the case.
The decisive reason was that the bank's employee in charge had not sufficiently verified the purpose of A's account opening, among other matters.
The Supreme Court stated, "The account-opening application form prepared by A and the documents A submitted were merely the basic documents necessary to open a corporate account; they were not materials from which it could be confirmed that the corporation was operating normally."
It went on to determine that, "because the financial institution in charge of the review did not request additional materials to verify the authenticity of the financial transaction purpose, it is difficult to find that an appropriate review procedure was carried out."
Citing existing precedent, the Supreme Court added that "even if an account-opening applicant submits a false financial transaction purpose, the crime of interference with business is not established if the bank employee did not thoroughly verify it."
4. Punishment for Illegal Bank Accounts, Daeryun's Strategy
In the case related to the punishment for illegal bank accounts, we analyzed the Supreme Court's judgment, which held that, as to the act of establishing a shell corporation, opening an account, and handing it over to another person, the crime of interference with business is not established because the matter resulted from the bank employee's insufficient review.
If you create an illegal bank account or a borrowed-name account and a report is filed, you may become subject to a tax audit and may also be assessed a substantial penalty tax. Therefore, if you come to be investigated by a tax office or the National Tax Service on these allegations, it is important to retain an attorney and respond carefully.
At Daeryun Law Firm LLP, our 🔗finance attorneys, drawing on experience in numerous cases, can handle matters ranging from financial regulatory advisory and risk review to financial crimes.
If you are facing the risk of punishment for illegal bank accounts and need assistance, you are welcome to request a 🔗legal consultation with Daeryun Law Firm LLP at any time.
