Over the past several decades, the Republic of South Korea has enacted a series of extremely successful whistleblower laws that serve to protect and incentivize whistleblowers and are among the best in the world. According to the Index of Public Integrity, South Korea ranks 20th out of 117 countries in its capacity to control corruption and ensure public resources are not spent on corrupt practices.
South Korea passed its very first whistleblower law in 1951, known as the Tax Evasion Informant Reward Program, under the National Tax Service (NTS) which allows individuals to confidentially disclose evidence of tax fraud. 61 years later, a new whistleblower law was passed under NTS known as the Foreign Financial Account Report Reward Program. This program expands on the initial law, covering foreign accounts and allowing potential whistleblowers to disclose information on foreign financial account violations such as failing to report an account or reporting inaccurately.
Additionally, in 2008, South Korea passed the Act on the Prevention of Corruption and the Establishment and Management of the Anti-Corruption and Civil Rights Commission (ACRC Act) to encourage anyone who has learned of corruption in the public sector to disclose wrongdoing without fear of retaliation. The Anti-Corruption and Civil Rights Commission (ACRC) was established by integrating the Ombudsman of Korea, Korea Independent Commission Against Corruption, and the Administrative Appeals Commission under the Prime Minister. Since its establishment, the ACRC has continued to advance South Korea’s whistleblower program by pushing for further anti-corruption reforms and launched the Public Interest Whistleblower Day in 2018 to raise awareness and spread positive perceptions about whistleblowing. Last year, the ACRC also amended a key anti-corruption law to allow citizens to use “proxy” lawyers to file reports on their behalf in order to keep their identity confidential. The government will pay for these legal fees.
Building on the success of the ACRC Act, South Korea also expanded protections to private sector whistleblowers in 2011 when it passed the Act on the Protection of Public Interest Whistleblowers. The Act allows whistleblowers to report violations by the private sector such as infringements on the health and safety of the public, environment, consumer interests and fair competition, etc. With the public paying more attention than ever to corruption and public interest reporting, the ACRC addressed nearly 30,000 cases of civil complaints in 2019 alone.
Under both the National Tax Service and the ACRC Act, whistleblowers are eligible to receive rewards for their disclosures.
Reporting Tax Violations
In 1951, South Korea enacted its first whistleblower reward program, the Tax Evasion Informant Reward Program, under the National Tax Service (NTS). This program allows an individual with “significant information” on tax and law violations to confidentially disclose their evidence to the NTS. Similar to many successful U.S. whistleblower reward laws such as the False Claims Act and the Dodd-Frank Act, if a whistleblower’s evidence leads to a successful prosecution resulting in monetary sanctions exceeding 50 million KRW (about $44,000 USD), a whistleblower could receive a monetary reward of between 5% and 20% of the proceeds collected.
In order for a whistleblower to meet the basic requirements under the reward program, they must provide credible evidence. This evidence or “significant information” includes “all available documentation to substantiate the claim including financial records, bank account numbers, and information identifying the disputed transactions or analyses, and specific and credible information concerning the person (s) or transaction,” according to the National Tax Service. Whistleblowers can expect to receive a reward within two months after the litigation concludes and after the NTS has obtained the required money from the delinquent taxpayer. A whistleblower’s identity, whether they are domestic or foreign nationals, will be kept private and confidential to protect them from retaliation or backlash for providing such information on tax law.
In 2012, the NTS enacted another whistleblower reward program known as the Foreign Financial Account Report Reward Program. This program covers foreign accounts and permits an individual to confidentially disclose claims concerning the foreign financial account report violations such as failing to report an account or reporting inaccurately. Foreign financial account holders refer to residents or domestic corporations that have stocks, bonds, cash, insurance policies with a cash value, and any other foreign financial assets under the foreign financial accounts. These accounts include bank accounts, securities accounts, commodity futures, or any other financial accounts created by the foreign financial institutions. This program, however, only concerns foreign financial accounts that exceed 1 billion KRW (about $88 million USD) at any time.
Similar to the Tax Evasion Informant Reward Program, whistleblowers under the Foreign Financial Account Report Reward Program will receive a reward within two months after the litigation concludes and after the NTS has obtained the required money from the delinquent taxpayer. Rewards will be equivalent to 5% to 15% of the collected proceeds obtained by the government.
Following the campaign promise by President Park Geun-hye to crack down on the so-called underground economy and ramp up on its war against tax evaders in 2013, South Korea has seen an increase in the number of whistleblower reports and has awarded whistleblowers $44 million USD in the last seven years.
Reporting Corruption in the Public Sector
In 2008, South Korea passed the Act on the Prevention of Corruption and the Establishment and Management of the Anti-Corruption and Civil Rights Commission (ACRC Act) to encourage anyone who has learned of corruption in the public sector to disclose wrongdoing without fear of retaliation. To file a claim under the ARCR regarding one or more government agencies, a potential whistleblower must fill out a corruption report with the Government Complaints Counseling Center, clarify the subject they are reporting on, and if possible, provide evidence of their claim in order to be protected.
After submitting their claim, the potential whistleblower can request the ACRC take protective measures such as protection of confidentiality, employment, physical safety, and mitigation of culpability. Under the ACRC Act, if a potential whistleblower is subject to workplace discrimination, they can request the ACRC take necessary actions to protect their employment, including reinstatement. The ACRC may directly impose a penalty of 10 million KRW (about $8,800 USD) on the officer who took disciplinary action against the whistleblower. Should the officer who took disciplinary action against the potential whistleblower fail to follow the ACRC’s demand, they will be punished with imprisonment of up to 1 year or a fine not to exceed 10 million KRW.
South Korea’s whistleblower program has a unique approach when it comes to compensation as whistleblowers can receive both awards and rewards. To receive an award, whistleblowers must be recommended by a public institution or by the ACRC as prescribed by the Awards and Decorations Act. Generally, a whistleblower will receive an award not exceeding 200 million KRW (about $88,000 USD), if their disclosure leads to a substantial financial benefit to the government or benefits the public interest. Between 2008-2019, the ACRC paid whistleblowers nearly $800,000 USD across 93 cases.
In order to receive a reward, whistleblowers may submit a request for monetary compensation if their disclosure led to a substantial financial recovery. The reward may range from 4% to 20% of the amount recovered with a maximum reward of 3 billion KRW (about $ 2.637 million USD). Between 2008-2019, over $15 million USD was awarded to whistleblowers across 775 reported cases.
Thanks to whistleblowers, 1,621 public officials were removed from office due to corruption such as money embezzlement and abuse of authority between 2014-2018.
Reporting Corruption in the Private Sector
South Korea’s initial whistleblower law under the ACRC Act failed to protect whistleblowers in the private sector against retaliatory measures or provide them the opportunity to receive a reward for their disclosure. To remove this loophole, the Act on the Protection of Public Interest Whistleblowers (PPIW) was passed in 2011. The Act allows whistleblowers to report violations by the private sector such as infringements on the health and safety of the public, environment, consumer interests and fair competition, etc.
Whistleblowers who wish to report under PPIW may do so confidentially to the Government Complaints Counseling Center. It is banned under this Act for anyone to disclose or publicize the potential whistleblower’s personal information or any facts that may identify them. If a potential whistleblower feels their safety is at risk, the ACRC may request police to provide protective measures. The potential whistleblower may also request the ACRC to recover their lost position should they be retaliated against at work. Should anyone violate the PPIW, they can be imprisoned for no more than three years or by a fine not exceeding 30 million KRW (about $30,000 USD).
The ACRC also provides relief funds to a whistleblower should they incur any damages or expenses related to medical treatment, residential relocation, litigation, wage loss, or other reasons related to their whistleblowing. Additionally, if a public interest whistleblower’s disclosure directly results in the recovery of revenue, the ACRC shall provide the whistleblower with a reward of up to 3 billion KRW (about $3 million USD).
Between 2011 – 2019, public interest whistleblowers were rewarded 8.361 billon KRW (over $7 million USD) across 6,193 cases. In 2019, one whistleblower was paid 503 million KRW (about $425,000 USD) for helping South Korean authorities recover $4.4 million from a crooked hospital.