SOUTH KOREA Trends and Developments Contributed by: Heejun Choi, Kyoung-Ho Kim, Sungsok Yang, Eunjee Kim and Kwang-Chun Park, Dentons Lee
Introduction Over the past two years, South Korea has moved quickly to become a major hub for Artificial Intel - ligence (AI) in Asia. In doing so, the government is shifting its approach away from outdated “perim - eter security” (simply blocking outside connections) toward a modern system focused on safe data use. A primary example of this change is the Framework Act on Artificial Intelligence and the Establishment of a Foundation for Trust, known as the AI Basic Act, which officially took effect in January 2026 and establishes the basic legal rules for AI. However, South Korea’s actual AI market involves much more than just this single law. Multiple govern - ment agencies are working together on a sweeping update to the country’s digital landscape. These agen - cies include: • the Financial Services Commission (FSC); • the Financial Supervisory Service (FSS); • the Personal Information Protection Commission (PIPC); and • the National Intelligence Service (NIS). Together, they are changing several major policy areas at once. They are dismantling a decade-old rule that strictly separated corporate networks from the out - side internet, consolidating the security rules for pub - lic cloud computing and buying massive amounts of computing hardware to build national tech independ - ence. For companies and legal professionals, operat - ing successfully in South Korea now requires a clear understanding of how these practical changes affect everyday compliance and business strategy. The Architecture of the AI Basic Act: Minimal Enforcement and Administrative Grace Periods The AI Basic Act serves as the legal foundation for South Korea’s AI market. Unlike the European Union’s strict risk-classification model under the EU AI Act, which requires extensive government evaluations before a tool can even launch, South Korea uses an administrative style focused on “minimal enforce - ment”. The Ministry of Science and ICT (MSIT) has stated that its priority is to boost industrial growth rather than to punish companies. To give companies sufficient time to prepare, the MSIT has established
a mandatory grace period of at least one year from the launch date, during which no active administra - tive fines will be issued. Instead, officials will focus on education and compliance guidance. Even with this flexible approach, the Act creates spe - cific legal responsibilities that companies must meet, as outlined below. AI transparency and labelling mandates Companies that offer generative AI products or ser - vices must make sure users know they are interacting with an AI system. The outputs must be clear and verifiable by both humans and machines. While this labelling rule applies only to the businesses selling the tools, failing to provide a proper notice can result in administrative fines of up to KRW 30 million. High-impact AI operational standards AI systems used in important socioeconomic tasks (such as credit scoring and loan reviews by commer - cial banks) are classified as “High-Impact AI”. Busi - nesses operating these systems must follow a struc - tured five-pillar framework: • risk management – setting up and executing formal risk-management plans; • explanation – creating automation standards to explain how the AI makes decisions; • user protection – putting active measures in place to safeguard consumers; • human oversight – maintaining continuous human supervision over AI; and • record-keeping – documenting and maintaining clear records of all safety measures. Under Articles 40 and 43 of the Act, noncompliance with these High-Impact AI rules does not incur imme - diate fines. Instead, a business can face administra - tive fines of up to KRW 30 million only if it fails to follow a formal corrective order issued by the MSIT. Mandatory appointment of a domestic representative For foreign technology companies and multinational corporations entering South Korea, Article 36 of the AI Basic Act introduces an important local presence rule. Foreign AI businesses that do not have a registered
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