Korea’s Anti-Corruption and Civil Rights Commission ( ACRC) recently published its annual report setting forth its major accomplishments for 2015. Though the ACRC was established in 2008, it has recently become very proactive in its measures to fight corruption in Korea. Anti-corruption has become a major focus of the Korean Government and has resulted in the recent passage of Korea’s major anti-corruption law known as the “Kim Yong-Ran Act” or “Act”. The Kim Yong Ran Act provides criminal penalties for officials and certain quasi-officials including teachers and public school officials who are involved in bribery. It also provides criminal penalties for bribery and vicarious liability extending criminal penalties not only to the employee but the employer as well and expanding bribes to also include the exchange of monetary interest. This puts Korean companies in a difficult position domestically as not only do Korean companies now have to worry about potential prosecution under the new Act, but they also should worry about how this relates to FCPA or the UK Anti-Bribery Act, as there is now the distinct possibility that Korean companies could also face domestic prosecution under the Act.
As Korean companies did not have to worry about prosecution at home in Korea if convicted of FCPA violations in the US, Korean companies never had to take international corruption or anti-bribery laws that seriously. Now, faced not only with expanded and more rigorous corruption laws domestically (besides increased enforcement of anti-trust and competition laws), companies operating in the Korean domestic marketplace have renewed concerns concerning corruption and bribery issues and the potential criminal liability resulting from the enforcement of anti-corruption and anti-bribery laws. In the US and elsewhere, companies are implementing compliance programs to fight corruption or bribery issues as well as antitrust and other violations as well as mitigate or limit exposure to criminal fines and penalties. The main issue Korean companies must not face is whether compliance programs are enough to insulate the company from criminal liability in case of violation of domestic laws or adequate enough to prevent or mitigate violation of domestic and international anti-bribery laws.
How Should Companies Prepare for the New Anti-Corruption Laws In Korea?
It is clear there will be an increased focus on abolishing corruption in Korea and efforts to implement and enforce the Act will continue unabated. Moreover, with the adoption of the vicarious liability provision, there will be greater pressure upon companies to secure the compliance of their employees. Thus, companies operating in Korea will have to take actions to mitigate the risks associated with violation of the Act.
Recently the Anti-Corruption and Civil Rights Commission of Korea proposed the implementation of enforcement decree for the anti-corruption law or Act. According to the Act, a public official, journalist, or teacher or administrator of a private school can be subject to imprisonment of 3 years or less or penalty of KRW 30 million or less for receiving a favor with value exceeding KRW 1 million regardless of whether the favor was given as a bribery or was related to the recipient’s works. Even if each favor is worth less than KRW 1 million, an annual cap of KRW 3 million applies. Also, even if the amount given is less than KRW 1 million, if the favor was given in connection with the recipient’s works, administrative fines of the amount equivalent 2 to 5 times of the favor given can be imposed
To mitigate exposure to the criminal penalties of domestic and foreign anti-bribery laws, it is obvious that Korean companies need to establish a robust corporate compliance program as well as revise the ones already established, if any, to meet the high standard of conduct required by the new Act. But establishment of compliance programs will not in and of themselves result in protecting the company. Early identification of wrongdoers within a company or organization may help limit a company’s criminal and civil liability under the Act but also the FCPA and Anti-Bribery act. This means that besides considering compliance guidelines or a code of conduct, companies are now under great pressure to implement guidelines and procedures covering internal investigations as well.
Therefore, What Should Companies Consider When Contemplating Internal Investigations?
Conducting an investigation can be an emotion-charged, time-consuming process that requires expertise and effective planning. Managers and other staff who investigate sexual claims in an organization including corruption or bribes, harassment, discrimination, employee fraud and other allegations should be prepared to conduct interviews and document the investigation in a proper and thorough manner.
Of course, the ultimate goal of an investigation is to enable the company’s decision-makers to resolve matters fairly and effectively. The immediate goal of an investigation is to obtain the facts. Therefore, to be effective, an investigation must be:
- Thorough and accurate.
- Fair and impartial.
- In compliance with the requirements of law and the company’s ethics program.
- Commenced and competed in a timely manner. The investigators must establish a good rapport with those individuals involved in the investigation (whether it be the individual making the report, an interviewee or other individual).
- The investigators should:
- Determine if there is any reason an interviewee thinks the investigator or the investigation cannot be fair or objective.
- Explain the Company’s anti-retaliation policy and reassure the individual that the Company will not tolerate retaliation.
- Remind the individual that he or she must report any suspicion they have of retaliation.
- Establish WHO, WHAT, WHEN, WHERE, HOW, WHY, and any other data that might be relevant to the report; and
- Be flexible in the approach to the investigation, interview, meeting or other aspect to the investigation.
The company must also consider the various rights of the employee inlcuding:
- Contractual rights.
- Protection of whistle-blowing activity
- Employee rights of privacy.
- Employee rights under Data Privacy Laws, etc.
Below are other important reminders for investigators when conducting internal interviews or when interviewing an individual in connection with an investigation.
When Conducting An Internal Investigation Here Are Several Dos and Donts to Keep in Mind:
- Ask for guidance, especially from the Company’s General Counsel and other designated attorneys.
- Limit discussions about the matter to individuals who need to know.
- Remind all interviewees of the anti-retaliation policy and need for confidentiality.
- Document all interviews and phone conversations.
- Secure all files, reports and other documents.
- 1. .Discuss disciplinary action with the source, the subject or anyone interviewed.
- 2. Make speculative remarks in your work papers or Investigation Report.
- 3. Allow anyone to tape record an interview.
- 4. Allow anyone (except attorneys assigned to the matter) to make copies of interview notes. As corruption and anti-bribery laws take effect, not only should companies worry about compliance but the companies should also realize that internal investigations will now become very important. It is vital therefore that proper internal mechanisms are in place to properly handle internal investigations.