SOUTH KOREA Trends and Developments Contributed by: Heejun Choi, Kyoung-Ho Kim, Sungsok Yang, Eunjee Kim and Kwang-Chun Park, Dentons Lee
Fast-track processing mechanism To support developers, the PIPC is deploying an accelerated review system. Businesses can submit data exemption applications through a unified govern - ment portal and receive a formal decision within 30 days. For applications that feature identical or highly similar technical profiles, the decision timeline drops to just 15 days, drastically reducing time-to-market friction. The relaxation of financial network segregation: transitioning to SaaS and Zero Trust For more than ten years, South Korea’s financial sector was legally cut off from the global internet. Absolute physical network segregation rules enforced under Article 21 of the Electronic Financial Transactions Act (EFTA) and Article 15 of the Electronic Financial Super - visory Regulations (EFSR) effectively blocked financial firms from using global cloud systems and Software- as-a-Service (SaaS) tools within their internal business networks. This strict regulatory wall was updated on April 20, 2026, when financial authorities revised the EFSR Enforcement Rules. Under this modernised approach, cloud-based SaaS is now explicitly recognised as a formal exception to the legacy network separation rule. This means financial institutions can deploy these outside software tools directly on internal office computers without going through the slow regulatory sandbox process. To safely use this new flexibility, financial firms and software vendors must meet three major compliance criteria: • strict data constraints – the network exception is limited to business tasks that do not process sen - sitive personal information, unique resident num - bers or personal credit histories; • mandatory security vetting – financial institu - tions may deploy only SaaS tools that have been explicitly audited and cleared by designated state security vetting agencies; and • continuous internal governance – banks must install advanced endpoint protections on user devices and run semi-annual internal security
physical address or local office in South Korea but meet certain thresholds for revenue, user numbers or data volume must legally appoint a domestic repre - sentative and report the representative to the MSIT. This representative serves as the local contact for government inquiries, data requests and compliance issues. Under Article 43 of the Act, failing to appoint or report a local representative bypasses the corrective order phase and directly triggers an administrative fine of up to KRW30 million. To help companies handle these new responsibili - ties, the MSIT opened an AI Basic Act Support Desk and a specialised consultative body in early 2026 to resolve conflicting rules across different government ministries. Data Governance: PIPC’s “AI Special Exemption” Framework South Korea’s personal data rules under the Person - al Information Protection Act (PIPA) have long been among the strictest in the world, creating high bar - riers for global cloud providers due to rigid consent requirements and stringent cross-border data transfer policies. However, the rise of large language models (LLMs) has forced the government to pivot toward data utility. The Personal Information Protection Commission (PIPC) is driving this change by applying its “Guide - lines on Personal Data Processing for the Develop - ment and Utilisation of Generative AI”. This guide divides the AI development lifecycle into four opera - tional phases: purpose definition, strategy formula - tion, AI training/development and system deployment/ management. Two main mechanisms help streamline To address the lack of high-quality training data, the PIPC is working on an amendment to PIPA targeted for final approval by the fourth quarter of 2026. This update will create a clear legal pathway for using non- pseudonymised personal data (data that still contains identifying details) for AI training. To qualify, the data use must serve a verified public interest or social benefit, undergo prior review and run entirely within a secure, isolated cloud environment. data processing across these steps: The “AI Special Exemption” regime
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