SOUTH KOREA: An Introduction to Dispute Resolution: White-Collar Crime
Increasing Use of Preliminary Investigations in Corporate Investigations
A notable shift in corporate investigations in South Korea has been the increasing trend for regulatory authorities to conduct preliminary examinations before the prosecution initiates a full-scale investigation. This development reflects a move toward more proactive regulatory oversight, with agencies such as the Financial Supervisory Service (FSS) and the special judicial police playing a greater role in assessing cases before they are referred for prosecutorial action. Recent investigations into market price manipulation through tender offers and illegal lending by commercial banks were initiated following requests from the FSS or after investigations by the special judicial police. Similarly, major platform companies suspected of violating the Fair Trade Act have been subjected to large-scale search and seizure operations based on complaints filed by the Fair Trade Commission (FTC). These cases illustrate how a regulatory agency’s complaint, request for investigation, or transfer of relevant materials based on a preliminary examination often serves as the trigger for the prosecution’s involvement. The prosecution actively utilises these preliminary findings to broaden the scope of its activities through compulsory investigative measures such as search and seizure. In cases where the prosecution collaborates closely with regulatory bodies, searches and seizures tend to be extensive, prolonged and conducted at an accelerated pace.
A concerning development in these investigations is the increasing inclusion of corporate legal departments in search and seizure warrants. The prosecution and the special judicial police, acting under prosecutorial direction, have frequently included legal teams within the scope of search and seizure operations, confiscating mobile phones and internal legal communications, including exchanges with external counsel. Investigators argue that these materials are directly related to the case, leading to ongoing controversy over potential infringement of the right to legal assistance. Since South Korea has not yet established an attorney-client privilege system, legal teams remain particularly vulnerable to such investigative intrusions. Given these risks, companies must act swiftly to secure professional legal assistance, minimise the scope of seizures during execution, and, if necessary, pursue quasi-appeal procedures against unlawful seizures.
Greater Regulatory Scrutiny of Virtual Asset Transactions
Regulatory scrutiny of virtual asset transactions has also intensified following the enactment of the Act on the Protection of Virtual Asset Users on 17 July 2024. Dedicated virtual asset examination teams have been established within the Financial Services Commission (FSC) and the FSS, and both agencies are working closely with the Seoul Southern District Prosecutors’ Office, which has formed a specialised joint investigation team to address crimes related to virtual assets. This collaboration has already led to an expansion of investigations into unfair trade practices involving virtual assets. In a recent case, the FSS and FSC conducted a preliminary examination of an unfair trade case involving virtual assets and referred it to the prosecution as Fast Track Case No 1. The prosecution responded by immediately conducting search and seizure and requesting an arrest warrant. Additional cases involving market price manipulation of virtual assets remain under intensive investigation by both the FSS and the prosecution. The recent surge in the value of major cryptocurrencies, including Bitcoin, has contributed to increased public interest in virtual assets, with growing recognition of these assets as legitimate investments. Investigations into fraudulent coins and market manipulation schemes, which have caused financial harm to ordinary investors, are expected to continue, reinforcing public trust in prosecutorial oversight of the virtual asset sector.
Evolving Prosecution Priorities and Potential Reform
The prosecution’s investigative priorities have also shifted over time. In the early stages of the current administration, the prosecution focused its investigations on the opposition party’s leadership. However, after the appointment of Prosecutor General Woo-Jung Shim, there was a notable shift toward investigation into economic crimes in the latter half of 2024. Despite this shift, the prosecution’s ability to maintain a strong focus on economic crimes in 2025 may be challenged by various political and institutional factors. The establishment of a special investigation team to handle the declaration of martial law on 3 December 2024, the impeachment of key officials within the Seoul Central District Prosecutors’ Office, and broader political turmoil may divert prosecutorial resources away from financial crime investigations.
Since the start of the 22nd National Assembly in May 2024, the opposition party has actively pursued prosecutorial reform, which, if enacted, would bring significant changes to South Korea’s investigation and prosecution system. The Democratic Party of Korea has proposed legislative measures aimed at separating the authority to investigate from the authority to indict. These proposals include the establishment of an independent indictment office, the creation of a Serious Crime Investigation Office to handle cases involving corruption, economic crimes, elections, national defence, large-scale disasters, organised crime and narcotics, and the formation of a National Investigation Committee to oversee the Serious Crime Investigation Office. The Rebuilding Korea Party has similarly proposed the full separation of investigative and prosecutorial functions, the transformation of prosecutors’ offices into indictment offices, and the creation of specialised investigative bodies for financial, economic and drug-related crimes. Additionally, the party is advocating for the election of the directors of prosecutors’ offices. If these prosecutorial reform bills are passed, they would lead to fundamental structural changes in the country’s investigation and prosecution system. Given the ongoing impeachment proceedings and political uncertainty, it is necessary to continue monitoring the potential impact of these legislative efforts.
Should the impeachment trial be concluded and state affairs return to normal, investigative agencies are expected to resume various investigations that have been delayed since the latter half of the year. In particular, the prosecution authorities may seek to intensify investigations into economic crimes as a means of restoring public confidence and reinforcing their legitimacy. Given this possibility, companies should take advantage of the current lull to strengthen compliance frameworks and undertake proactive risk management efforts. Key steps include enhancing internal compliance programmes, conducting internal audits and reinforcing regulatory monitoring mechanisms.
Despite political variables, routine investigative operations at individual institutions are expected to proceed as usual. Laws governing corporate criminal liability are comprehensive, and investigation procedures – such as the provision of materials and the filing of complaints between regulatory agencies – are well-established under existing legal frameworks. Unlike large-scale, intelligence-driven investigations into financial or corporate misconduct, which require significant manpower and co-ordination, routine investigations involving serious workplace accidents, labour law violations, or trade secret disputes occur regularly and demand swift action to address potential damages.
The Importance of Vigilance and Preparedness
As demonstrated by the ongoing jurisdictional disputes over the investigative authority to handle treason allegations, competition between investigative institutions remains a key factor influencing enforcement trends. If discussions regarding the restructuring of the investigative system gain further momentum, competitive investigations may increase, leading to potential conflicts over jurisdiction. Given the evolving and complex investigative landscape in 2025, it will be essential for companies to remain vigilant, assess potential legal risks, and prepare for various investigative scenarios arising from political, legislative, and institutional changes. Although the political landscape remains uncertain, businesses should take a proactive approach to assessing compliance risks and ensuring they are well positioned to respond effectively to regulatory and prosecutorial actions.