On Improper Solicitation and Graft Act
By Jeffrey Jones
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As the largest and longest-standing foreign Chamber in Korea, AMCHAM has collaborated with many governmental organizations on numerous policy changes throughout the years. In recent years, AMCHAM’s engagement with the Anti-corruption and Civil Rights Commission has deepened both in frequency and significance. In the Korean business community, the Commission fulfills an indispensable role, as it not only works to prevent bureaucratic corruption and establish an ethical society but also facilitates the prosperity of foreign companies operating in Korea. The Commission’s presence has become more relevant with the implementation of the “Improper Solicitation and Graft Act,” otherwise known as the “Kim Young-ran Act,” last year.
This new legislation was passed as part of the government’s effort to tackle corruption and bribery in Korea. With the goal of prohibiting improper solicitations and illegal giving of money, goods or services, the Act imposes price limits of 30,000 won, 50,000 won and 100,000 won on food, gifts and congratulatory or consolatory payments, respectively. Transparency International’s Corruption Perceptions Index revealed that Korea’s rank fell from 37th in 2015 to 52nd in 2016 out of 168 countries, a development that was unrelated to South Korea’s recent scandals. According to Transparency International, issues such as the burden of vague governmental regulations and lack of transparency in policy decision-making weaken Korea’s global competitiveness. Justifiably, anti-corruption reform is one of the Moon administration’s most important initiatives.
As these new measures contribute to the establishment of a fairer competitive economy, it is in alignment with AMCHAM’s mission. AMCHAM is committed to contributing to the Commission’s efforts to boost Korea’s integrity and create a fair competitive environment to pursue win-win partnerships. Because many AMCHAM member companies are global corporations, they are already familiar with enforcing internal policies to ensure compliance with international standards on improper solicitation and anti-corruption legislation and all AMCHAM member companies are subject to the U.S.’s Foreign Corrupt Practices Act, which prohibits the payment of bribes to foreign public officials. As such, AMCHAM and its affiliates actively support ongoing efforts to target corruption in business and society.
It is evident that while the law has had almost immediate positive effects on Korean bureaucracy, business, and culture, it is not without its shortcomings. An evaluation of the law’s implementation conducted by the Commission in early March showed that six months after the effective date of the Act, there were 2,311 reports of violations of the Act out of 23,852 total reports, including 135 cases of inappropriate solicitations, 412 cases of monetary gift violations, and 1,764 cases of excessive honorariums for offsite lectures and other violations. Examination of the data suggests public officials are willing to comply with the law, but they have an incomplete understanding of the new legislation. Sixty-two percent of monetary gift violations were self-reported, suggesting that there is a conscious effort to avoid obvious or easily identifiable instances of illegal activity. However, 71.9% of improper solicitation violations were reported by a third party and 99.2% of excessive honorariums for offsite lectures and other violation reports were delayed or went unreported, suggesting that public officials are unclear about the appropriate steps regarding ambiguous parts of the law. This provides a positive outlook, suggesting that officials are generally in favor of complying with transparency and anti-corruption restrictions and just need clearer and more specific guidelines.
Clear guidance on the specifics of the new legislation would also be valuable to private businesses. Companies have begun training and educating their employees in order to better equip them for identifying inappropriate or illegal activity and complying with the Act. Providing a resource of clear and unambiguous guidance on the specifics of the Act is essential to facilitating full enforcement of the law.
Unfortunately, while the enforcement of the Act has helped to boost transparency and accountability in several domains, it has also had unintended negative effects on the profitability of many smaller businesses and certain domestic industries. Smaller businesses that depend heavily on Korea’s culture of gift-giving such as flower shops and butcher’s shops have suffered. Requests have been made for both alterations of and exceptions of the law for protection of several domestic industries including the agriculture, marine, and beef industries. The Commission must make efforts to ensure that these negatively affected businesses receive the support they need to recover from these unexpected consequences and enjoy the benefits of the Act’s intended noble purpose. New and creative opportunities must be explored so that these smaller businesses are able to participate in the evolving business environment in a modern way and the Korean economy does not suffer.
It is also important to recognize that the new legislation creates social tension because of its departure from many aspects of Korean culture, such as gift giving as an expression of sincere appreciation without expecting anything in return. The first reported violation was a case in which an elderly woman was reprimanded for gifting rice cakes to a police officer as an expression of appreciation for his service. Despite the innocent purpose of the gift, she was punished for a violation of the law, pointing out the need to develop a new method of expressing appreciation in order to maintain Korea’s jeong, one of the most unique and attractive features of Korean culture.
Relationships between professors and students are going through a transition because of the ban on the traditional method of expressing gratitude. Similarly, how to properly celebrate the upcoming Chuseok holiday, a major national holiday that traditionally involves significant exchanging of gifts, is creating similar frustrations. Many have labeled the Act as unrealistic and have called for revisions. It is imperative that the cultural implications of the law become a larger part of the discourse, as policies meant to target corruption and increase transparency should not have damaging effects on Korea’s culture or personal relationships. Increasing the dialogue on this cultural norm will help preserve the unique and wonderful element of Korean culture and help society develop creative ways to respond to this culture without violating the law.
AMCHAM will continue its efforts to strengthen the understanding of the legislation and continue engagement with the Commission to look for effective strategies for supporting negatively affected businesses. Increasing meaningful collaboration with the Commission and discussing potential improvements of the enforcement of the legislation is critical to President Moon’s initiatives to eradicate corruption.
Jeffrey Jones is the chairman of AMCHAM Board of Governors.