All about Kim Young-ran Act

By Ahn Chan-sik

Everybody is talking about Korea's new anti-graft law, popularly known as the "Kim Young-ran Act," which took effect Sept. 28. This new law prohibits improper solicitations and illegal giving of money or goods and services. Unlike Korean businesses panicking about the new law, most multinationals here do not seem to be very concerned, largely because they have for quite some time been implementing very stringent anti-corruption policies or guidelines, reflecting the U.S. Foreign Corrupt Practices Act or similar legislation from their home countries. Some multinationals even welcome the new law in hope it will serve to level the playing field between them and their local competitors. However, those multinationals still need to pay close attention to the nuts and bolts of the new anti-bribery law, because it has quite different requirements and exceptions than their own internal policies.

First, what does the new law have in store for you as foreigners and local subsidiaries of foreign corporations operating in Korea? Foreigners living or residing in Korea who are not ‘public officials or other relevant persons' as defined by the law are exempted. A foreign school in Korea is a public institution _ as are all local schools, whether public or private _ and its employees are thus all subject to the law. However, local offices of foreign media organizations are not classified as media companies under the Korean code, and are therefore not subject to the law. So for example, a journalist at The Korea Times is subject to this law, whereas a journalist working for the New York Times in Korea is not. A foreign diplomat is not deemed a "public official or other relevant person" under the law, and is therefore not subject to the act, but a Korean diplomat is, whether at home or abroad.

The new law lists a total of 14 types of illegal solicitation, which is solicitation in violation of law or beyond the scope of a public official's position or authority. It should be noted that this is an exhaustive list, meaning that if your specific activity does not fall under any of these listed activities, then it is not a violation of the law.

There are some notable exceptions. If you publicly exhort public officials to take a certain action, for example, by holding a demonstration in front of the National Assembly calling upon the government to pass certain legislation, it is not considered improper solicitation. But lobbying a National Assembly member in private to do so over an expensive dinner and drinks that you have paid for is illegal. In addition, if you request an elected public official to convey your complaint or grievance to the relevant authorities for the public good, it will not be an improper solicitation. Thus, it is perfectly acceptable for companies to have their complaints, grievances and constructive proposals passed on to public officials by third-party channels, such as chambers of commerce or industry associations.

The simple rule of thumb for exceptions to the prohibition on graft is the "‘30/50/100 rule." Food, drinks and snacks are permitted up to 30,000 won in value. Gifts up to a value of 50,000 won are acceptable. Congratulatory, condolence money, flowers and wreaths are allowed up to 100,000 won in value. But be careful: the maximum value includes VAT but not shipping expenses. Any and all items in the same category shall be added up to determine the total value. So if food and drinks are provided together with gifts, then the maximum value permitted for all items combined is 50,000 won, as long as the value of the food and drinks does not exceed 30,000 won. If you give all three categories _ food and drinks, gifts and congratulatory or condolence money _ at once, then the maximum value permitted for all items combined is 100,000 won, as long as the value of the food and drinks do not exceed 30,000 won and the gifts do not exceed 50,000 won.

Companies can consider another exception, the so-called "official event" exception. If an organizer of an official event related to the duties of a public official or relevant person provides financial or other advantages, including transportation, accommodation, and food and drink, uniformly to all participants of the event, that is fine. To qualify for this exception, three elements should be satisfied: it must be an official event, the benefits must be uniformly provided and they must stay within a general range and value. For example, if the PyeongChang Winter Olympics Organizing Committee offers to provide Korean journalists with free transport, accommodation and meals to the opening ceremony in 2018, this potentially falls within the exception I just outlined.

The law permits solicitation or financial advantage which is permitted by social norms as activities that are exempt from sanction. That said, however, you cannot simply fall back on this seeming catch-all exception, because the "social norms" will be extremely narrowly interpreted and enforced by the courts.

Then when is a company liable to be punished? When an employee breaks the law in performance of duties for the company, not only the employee but also the company will be punished with the same fine. However, if the company can show that it has not been negligent in giving due attention and supervision to prevent such violations by employees, it can escape punishment. Here is what a company should do: (i) ensure that its compliance manuals, policies and guidelines are in compliance with the requirements of the law; (ii) establish a dedicated compliance department or a compliance officer, and allocate budget, staff and other resources to the same; (iii) conduct training and seminars and circulate relevant instructions on a regular basis rather than giving a one-shot seminar or notification; (iv) establish a constant monitoring system to ensure compliance; and (v) take disciplinary action against any violating employee, strictly enforce rules and take measures to prevent recurrence.

Ahn Chan-sik is a senior partner at Hwang Mok Park law firm. For future columns, we welcome questions from readers. csahn@hmplaw.com