SOUTH KOREA Law and Practice Contributed by: Soo Bong Jung, Jinwook Song, Jinwon Choi and Jiyoung Sohn, Bae, Kim & Lee LLC
The Korea Financial Intelligence Unit (KoFIU) of the FSC plays a leading role in the enforcement and regu - lation of AML laws in Korea. The KoFIU may conduct a comprehensive assessment of financial institutions’ compliance with AML obligations on an annual basis, and may also require financial institutions to evalu - ate their own AML capabilities. In addition, the FSS supervises and inspects on behalf of KoFIU and has the power to demand sanctions against financial insti - tutions violating AML laws and regulations. The key sanctions for violations of AML laws and reg - ulations are as follows: • filing of a false suspicious transaction report (STR) or currency transaction report (CTR) – imprison - ment for up to one year and/or a criminal fine of up to KRW10 million; • failure to comply with internal control measures, or non-compliance with, refusal of, or interference with a KoFIU order, direction or inspection – admin - istrative fines of up to KRW100 million; • failure to submit an STR or CTR, neglecting cus - tomer due diligence obligations or failure to meet record preservation requirements related to AML compliance – administrative fines of up to KRW30 million; and • failure to implement a correctional order for viola - tion or receipt of repeated warnings on three or more occasions – suspension of business in part or entirety for up to six months. 3.14 ESG-Related Offences Korean law does not treat “ESG misconduct” as a unified offence. Each area is regulated by separate statutes. • Environmental offences under the Framework Act on Air Quality Conservation, the Act on the Conser - vation and Use of Water and Aquatic Ecosystems, and the Wastes Control Act criminalise unauthor - ised emissions or unlawful waste disposal. Penal - ties include imprisonment or criminal fines. • Social/labour-related offences under the Labour Standards Act, Occupational Safety and Health Act, and the Criminal Act, address unlawful dis - missal, wage violations, and breaches of workplace safety rules. Serious abuses such as forced labour
or confinement are prosecuted as modern slavery- related offences. • Governance offences are governed by the Com - mercial Act and the FSCMA, covering embezzle - ment, breach of fiduciary duty, accounting fraud, and unfair trading practices, and may lead to both criminal liability as well as administrative sanctions. There is no general statutory obligation to monitor supply chains for ESG compliance, though compa - nies in certain sectors may fall under US or EU due diligence rules, and others voluntarily adopt oversight to mitigate reputational or compliance risks. 3.15 Artificial Intelligence and Automation Misuse There is no law in Korea specifically regulating artificial intelligence misuse, but existing statutes can apply. Algorithmic trading or market manipulation is pun - ishable under the FSCMA or the Electronic Financial Transactions Act. AI is treated as an instrumentality, so liability attaches to the human or entity controlling it. Misuse leading to discriminatory outcomes, such as programming algorithms with biased data, may trigger liability under the PIPA or Criminal Act. Offences could include defamation, obstruction of business, or other crimes depending on the harm. Sanctions follow the breached statute: market manipulation, for example, carries at least one year of imprisonment or fines of three to five times unlawful gains. This framework ensures AI-related misconduct is prosecutable within existing law. 3.16 Crypto-Assets and Digital Currency Crimes South Korea enforces a strict regime for crypto- assets, reinforced by the Virtual Asset User Protection Act. Fraudulent schemes are prosecuted as criminal fraud under the Criminal Act. Market manipulation and unfair trading, including dissemination of false information and wash trading, are punished under the FSCMA or directly under the new Act. Money launder - ing via crypto-assets is a violation of the AML Act. Courts classify cryptocurrencies as property rather than securities, guiding which statutes apply. Virtual Asset Service Providers (VASPs) must register with
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