The Improper Solicitation and Graft Act (the Act) came into force 29 September 2016, capturing the attention of the whole nation. The formulation of the Act was led by Young-ran Kim, the former Chairperson of the Anti-corruption and Civil Rights Commission, after public criticism of the rampant corruption in officialdom. Because of this, the Act is commonly referred to as the “Kim Young-ran Act”.
The Act is composed of only 26 articles, but seems complicated and not understandable to many people, since hundreds of questions regarding the Act have been raised so far. Many are being overly cautious to ensure they not become liable as a case for exemplary punishment. Companies in particular should check the scope of application, key points, and proper measures required to comply with the Act, since company executives and staff often have meetings with civil servants.
Scope of Application
The Act was originally designed to eradicate corruption and evasion of the law by government employees, and bring transparency to a bureaucratic society.
Nonetheless, the scope of the application, ‘public official or relevant persons,’ was enhanced to include civil servants, heads and employees of public institutions, educational personnel, and representatives and employees of media companies. A number of educational personnel in private schools and personnel in media companies insisted that enhancing the scope in this way was unconstitutional, but the Constitutional Court upheld the constitutionality of the Act by stating that those personnel also require the same integrity as civil servants.
Even if a person is not a civil servant or ‘relevant person’, the Act still applies if he or she is a member of any of a variety of committees established under the legislation. In this instance, such a person is a ‘private person performing public duties.’
Under the Act, not only a ‘public official or relevant person’ and/or a ‘private person performing public duties,’ but also individuals who improperly solicit or provide financial advantages are punished as well. Therefore, the Act can cover almost every citizen.
Key points of the Improper Solicitation and Graft Act
(1) Prohibition on improper solicitation
Improper solicitation refers to any action to influence a civil servant or relevant person to handle or do any act beyond the limits of his or her position and authority granted by Acts and subordinate statutes. For example, asking an employee in a hospital to change a surgical schedule or adjust dates for hospitalization is considered improper solicitation, since this action is against ‘normal transaction practices in public institutions.’ The Act stipulates 14 cases of improper solicitation, including improper authorization, permission, and appointment, promotion, job transfer or other forms of personnel management of civil servants.
However, the Act does not apply to the following cases: 1. Requesting certain actions in accordance with the procedures and methods prescribed by the Petition Act, Civil Petitions Treatment Act, Administrative Procedures Act, National Assembly Act, other Acts and subordinate statutes and standards; 2. Publicly soliciting a civil servant public official or relevant person to take a certain action; 3. Where an elected public official, political party, civil society organization, etc., conveys a third party’s complaints and grievances the public interest; 4. Requesting or demanding that a public institution complete a certain duty within a statutory deadline; 5. Applying or making a request for verification or certification of a certain duty or juristic relationship; 6. Requesting explanation or interpretation of systems, procedures or Acts and subordinate statutes related to a particular duty in the form of an inquiry or consultation; and 7. Any other conduct not deemed as defying social norms.
(2) Prohibition on accepting financial or other advantages
No public official or relevant person shall accept, request, or promise to receive any financial or other advantage. Providing any financial or other advantage in relation to duties is subject to punishment. More importantly, it should be noted that providing such advantages without any relation to duties can still be punished. Public official or relevant persons should not accept or receive any financial or other advantage in excess of KRW one million (USD 872) at one time or a total of KRW three million (USD 2,615) in a fiscal year from the same person or the same entity, regardless of the relationship between such offer and his or her duties. Employers are advised to pay special attention to this point since it is quite different from tradition and practice.
Financial or other advantage includes: 1. Any financial interest, such as money, vouchers, admission tickets, etc.; 2. Offering of entertainment, such as food and drink, alcoholic beverages and/or golf, or conveniences such as transportation and/or accommodation; and 3. Other tangible and intangible financial benefits, such as cancellation of debts, offering of employment opportunities, and granting of rights and interests.
Under the Act, it is possible to be punished by accepting, requesting, or promising to receive any financial or other advantage without determining whether such offer is given in exchange for any favors. Therefore, companies should be very cautious that they do not follow this practice in terms of carrying out external relations.
However, receiving or providing financial or other advantages is allowed under the following exceptions:
- Food and drink, congratulatory or condolence money, gifts, or other items that are offered to facilitate performance of duties or for social relationships, rituals, or assistance to festivities and funerals;
No financial or other advantage should be accepted or given if the offer is made to directly influence work duties. Nonetheless, food and drink which has a value not exceeding KRW 30,000 (USD 27), gifts with a value not exceeding KRW 50,000 (USD 44), and festivity and funeral assistance with a value not exceeding KRW 100,000 (USD 87) are allowed if the offer is to facilitate performance of duties, or for social relationships, rituals, or assistance to festivities and funerals.
It could be misunderstood that providing food and drink with a value not exceeding KRW 30,000 (USD 27) to a government employee is allowed no matter what. However, companies should note that such a gift is allowed only for a certain purpose, such as facilitating performance of duties, etc.
Festivities and funerals include only the marriage of an individual and the immediate family of the individual, and funerals of the individual, the spouse of the individual, and direct ancestors and direct descendants of the individual. Under the Act, parties to celebrate a promotion, first birthday of a baby, 60th birthday, and book publications are not considered eligible festivities. Thus, gifts or money for such celebrations are not allowed. Moreover, the total value of an offering cannot exceed KRW 50,000 (USD 44) if the gift is offered with a meal. When flowers are offered along with congratulatory or condolence money, the total value cannot exceed KRW 100,000 (USD 87).
- Financial or other advantages that are uniformly provided by an organizer of an official event related to the duties of a public official or relevant person to all participants thereof, including transportation, accommodation, and food and drink;
Companies can provide transportation, accommodation and food and drink to all participants uniformly, during their official events. However, it is illegal if the offering is made during a closed event, or if an extra offering is made for a certain group such as public officials or relevant persons.
- Souvenirs or promotional goods distributed to many and unspecified persons, or awards or prizes that are given by a contest or lottery;
Public officials or relevant persons can accept an offering if it is a souvenir or promotional item which is for promotion of new products, public relations, or contests. Public officials or relevant persons can also accept goods from a contest or lottery.
- Financial or other advantages that are provided by family and relatives, or permitted by social norms.
For example, a businessman can offer KRW two million (USD 1,743) as congratulatory money for the wedding of his nephew, who happens to be a civil servant. A businessman also can give luxury goods to his girlfriend who happens to also be a civil servant.
Joint liability and measures of business
The Improper Solicitation and Graft Act states that not only shall the violator be punished, but the organization to which the violator belongs shall also be punished. However, this joint liability is not applied to the organization if it has not been negligent in giving due attention and supervision concerning relevant duties so as to prevent such violation. For determining whether or not the organization gave due attention and supervision, the Supreme Court mentions that overall factors such as all related circumstances, purpose of the Act, size of the business, probability of supervision over the actor (violator), specific work directions, and actual measures taken to prevent violations should be taken into consideration.
Considering this, companies are recommended to set standards for gifts, congratulatory or condolence money, etc., and monitor continually. Regular seminars for employees on providing financial advantages and examination of existing practices of sales departments or external affairs departments are also recommended. It is highly possible that it would be considered that a company gave due attention and supervision to prevent the violation if it could be demonstrated that the company took such measures.
Nonetheless, judicial precedents consider that a violation by a director or CEO of a company is not subject to exemption from joint liability. Therefore, CEOs should take extra precautions regarding the Act.
The Act finally came into force despite much controversy. Confusion is expected until actual cases concerning violations have accumulated. Companies should thoroughly understand the contents of the Act, and carefully check all possible instances which could contravene it.