Enforcement of Improper Solicitation and Graft Act (Effective from Sep 28, 2016)

The “Improper Solicitation and Graft Act” (more commonly known as “Kim Young-Ran Act”) will come into force starting September 28, 2016 as the bill passed the plenary session of the National Assembly on March 3, 2015.

As this Act is expected to impact all businesses and individuals in Korea, we summarized the key aspects of this Act for your special attentions as follows:

·What are the background and objectives of this Act

The bill was first proposed in August 2012 by Kim Young-Ran, a former Supreme Court Justice and then Head of the Anti-Corruption & Civil Rights Commission (ACRC), to overcome the limitations of the existing anti-corruption laws such as the Criminal Act, the Public Service Ethics Act, etc. The purpose of the Act is to establish a more advanced corruption prevention system by setting codes of conduct and ethics standards of public officials to live up to the global standards such as the OECD guidelines.

As the non-compliance with the requirements stipulated in this Act may trigger criminal punishment and resultant fines, penalties, etc., which are not tax deductible, companies or individuals who are dealing with or doing business with the public sector must plan properly to avoid any non-compliance issues.

·Who will be subject to this Act

Organizations

·All the public institutions including constitutional institutions, central administrative agencies, local governments, municipal/provincial offices of education, and public service-related organizations

·Private and public schools, and media companies

Individuals

·Public officials or relevant persons: Civil servants of national or local governments, heads and employees of public service-related organizations, public institutions, schools, educational corporations, and media companies

·Spouses of public officials

·Private persons performing public duties: Individuals participating in the decision-making process of public organizations

·General public: Persons who improperly solicit public officials or who offer them prohibited financial or other advantages

·Which acts constitute improper solicitations and reporting process required

Definition of improper solicitations

·No one should solicit, directly or through a third party, a public official or relevant person performing duties.

·A total of 15 types of improper solicitations are stipulated to explicitly explain which acts constitute the acts of improper solicitation.

·A total of seven exceptions to improper solicitations including an act of requesting certain actions in public are stipulated, in order to prevent people from being discouraged to duly exercise their rights

Reporting and handling process of improper solicitation

·If a public official or relevant person receives an improper solicitation, he should clearly express an intention to refuse the solicitation, and report the fact to the head of the concerned agency if such solicitations repeatedly occur.

·What are prohibited as acceptance of financial or other advantages

Unacceptable financial or other advantages and sanctions

·A public official or relevant person should be subject to criminal punishment if he receives financial or other advantage in excess of KRW 1 million at a time or KRW 3 million in a fiscal year from the same person,regardless of his duties or the title of such offer.

·A fine for negligence will be imposed when a public official receives financial or other advantages not exceeding KRW 1 millionif the acceptance is in connection with his duties.

Prohibition of acceptance of financial or other advantages by the spouse of a public official

·The spouse of a public official or relevant person should not receive financial or other advantages that are in connection with the duties of the public official or relevant person.

·A public official will face sanctionsif he or relevant person knew the fact that his spouse received unacceptable financial or other advantages, but did not report it.

·Disciplinary Actions and Punishments

Disciplinary actions may be taken along with punishment or fine for negligence.

<Improper solicitation>

Violations	Sanctions
A stakeholder who improperly solicits a public official through a third party	Fine for negligence not exceeding KRW 10 million
A person who improperly solicits a public official for a third party (Private person)	Fine for negligence not exceeding KRW 20 million
A public official who improperly solicits another public official for a third party	Fine for negligence not exceeding KRW 30 million
A public official or relevant person who performs his duties as directed by an improper solicitation	Imprisonment for not more than two years or by a fine not exceeding KRW 20 million

<Graft>

Violations

Sanctions

Fine for negligence for the receipt of a financial or other advantage not exceeding KRW 1 million

A public official who received a financial or other advantage not exceeding KRW 1 million in connection with his duties, regardless of whether such offer is given in exchange of any favors

* A public official who does not report the financial or other advantage received by his spouse

* A person who provided a financial or other advantage to a public official or his spouse

Fine for negligence in the amount of two times to up to five times the received amount

Criminal punishment for the receipt of a financial or other advantages in excess of KRW 1 million at a time or KRW 3 million in a fiscal year

A public official who receives a financial or other advantage in excess of KRW 1 million at a time or KRW 3 million in a fiscal year from the same person, regardless of his duties or the title of him

* A public official who does not report the financial or other advantage received by his spouse

* A person who provided a financial or other advantage to a public official or his spouse

Imprisonment for not more than 3 years or by a fine not exceeding KRW 30 million