Happy New Year of the Rooster! Last week marked the beginning of Seollal, or the Lunar New Year, which is one of the most significant holidays in Korea and the greater Asia region. During this celebratory season, multinational companies operating in Korea must be mindful of the regulatory risks involved with exchanging gifts, no matter how well-meaning, particularly as Korea tightens its regulatory grip under the newly enacted Kim Young-Ran Act.
This season is traditionally a time for families and friends to gather, celebrate and offer gifts, and this practice often extends to business partners, government officials, teachers and co-workers. To avoid any appearance of impropriety, companies and their executives should carefully review and reinforce their gift-giving policies and ensure that their employees avoid misconduct under the new Korean law and current U.S. regulatory rules.
Below are a few considerations that companies doing business in Korea should be mindful of:
- Offering public officials or “relevant persons” a gift of more than ₩50,000 (approximately US $40) is not permissible.
- Both the employee and the company can be held criminally liable under the vicarious penalty provision of the Kim Young-Ran Act.
- If an employee’s gift-giving violates the Kim Young-Ran Act, such violation may have larger implications for multinational companies doing business in Korea, including potential U.S. Foreign Corrupt Practices Act (FCPA) violation.
- Gift-giving that raised no red flags during last year’s Lunar New Year season may result in criminal sanctions if repeated similarly this year. For example, there is no longer an exception for a “facilitating payment,” which is a small payment made to expedite or secure performance of a “routine government action.” A similar type of exception is allowed under the FCPA.
As demonstrated in recent cases in which an investigation by Korean authorities triggered an investigation by U. S. counterparts, the Korean government continues to maintain close ties with U.S. regulators; likewise, U.S. regulators closely observe the enforcement actions that Korean authorities take. Consulting counsel who is well-versed in cross-border regulatory issues can help minimize risk, flag potential issues and avoid letting graft taint this time of joyous celebration.