Blind trust

A blind trust (블라인드 트러스트, 백지신탁/白紙信託) is a trust in which the trustee with power of attorney has full discretion over the assets.

Blind trusts are generally used when a trustor or donor wishes to keep the beneficiary unaware of the specific assets in the trust. Blind trusts are to avoid conflicts of interest between the beneficiary and the investments.

In the United States, the President, Vice President, Secretaries, Chairman of the Federal Reserve Board, Generals, Congress men and other high ranking public officials are to apply for blind trusts.

In some cases, a blind trust is often frequently used with those who have come across a fortune within a short period of time (e.g. an inheritance, or a multimillion lottery) in order to keep their identity anonymous to the public.

Key words
blind trust, public servant, job ethics, job relevance, trustee, property registration

Statutory ground
In general, politicians or high ranking officials in sensitive positions are often required to place their personal assets (including investment income) into blind trusts, to avoid public scrutiny and accusations of conflicts of interest when they direct government funds to the private sector.

In Korea, public servants' blind trust (공직자재산신탁/公職者財産信託) was introduced in 2005 by the Public Service Ethics Act (공직자윤리법/公職者倫理法). While other properties shall be registered with the Registry, if the job relevance is acknowledged, the stocks owned by the public servants shall be trusted to a third party and disposed by the trustee in a short period of time, at first 60 days, then extended to another 30 days. Article 14-4 of the Act. The purpose of the Act is to provide for the followings related with high ranking public servants and candidates hereof, thus to prevent unfair accumulation of their properties, to secure fair conduct of public jobs, to avoid conflicts of public interest and private benefit, and to enhance the public servant ethics: Article 1 (Purpose) of the Act
 * Registration of properties;
 * Disclosure of registered properties and explanation of the property accumulation;
 * Regulation of public job-based acquisition of properties;
 * Report of gifts received by public servants;
 * Blind trust of shares;
 * Restriction of job taking of retired public servants; and
 * Other restriction of occupational activities.

Mandatory blind trust
When one of the following public servants, and his/her spouse, lineal ascendants and lineal descendants (except ones who deny the property registration) have, in total, the shares worth of 30 million won or more, the public servant is required to do outright sale of the shares exceeding 30 million won or to entrust such shares to an independent trustee for the disposition of such shares within 60 days; provided, however, that the forgoing does not apply unless the Blind Trust of Shares Review Committee (주식백지신탁 심사위원회) acknowledges the job relevance.
 * 1. 대통령, 국무총리, 국무위원, 국회의원, 국가정보원의 원장 및 차장 등 국가의 정무직공무원
 * 2. 지방자치단체의 장, 지방의회의원 등 지방자치단체의 정무직공무원
 * 3. 일반직 1급 국가공무원(「국가공무원법」 제23조에 따라 배정된 직무등급이 가장 높은 등급의 직위에 임용된 고위공무원단에 속하는 일반직공무원을 포함한다) 및 지방공무원과 이에 상응하는 보수를 받는 별정직공무원(고위공무원단에 속하는 별정직공무원을 포함한다)
 * 4. 대통령령으로 정하는 외무공무원과 국가정보원의 기획조정실장
 * 5. 고등법원 부장판사급 이상의 법관과 대검찰청 검사급 이상의 검사
 * 6. 중장 이상의 장관급 장교
 * 7. 교육공무원 중 총장·부총장·학장(대학교의 학장은 제외한다) 및 전문대학의 장과 대학에 준하는 각종 학교의 장, 특별시·광역시·특별자치시·도·특별자치도의 교육감 및 교육위원
 * 8. 치안감 이상의 경찰공무원 및 특별시·광역시·특별자치시·도·특별자치도의 지방경찰청장
 * 8의2. 소방정감 이상의 소방공무원
 * 9. 지방 국세청장 및 3급 공무원 또는 고위공무원단에 속하는 공무원인 세관장
 * 10. 제3호부터 제6호까지, 제8호 및 제9호의 공무원으로 임명할 수 있는 직위 또는 이에 상당하는 직위에 임용된 「국가공무원법」 제26조의5 및 「지방공무원법」 제25조의5에 따른 임기제공무원. 다만, 제4호·제5호·제8호 및 제9호 중 직위가 지정된 경우에는 그 직위에 임용된 「국가공무원법」 제26조의5 및 「지방공무원법」 제25조의5에 따른 임기제공무원만 해당된다.
 * 11. 공기업의 장·부기관장 및 상임감사, 한국은행의 총재·부총재·감사 및 금융통화위원회의 추천직 위원, 금융감독원의 원장·부원장·부원장보 및 감사, 농업협동조합중앙회·수산업협동조합중앙회의 회장 및 상임감사
 * 12. 그 밖에 대통령령으로 정하는 정부의 공무원 및 공직유관단체의 임원
 * 13. 제1호부터 제12호까지의 직(職)에서 퇴직한 사람(제6조제2항의 경우에만 공개한다)
 * 14. 기획재정부의 금융정책ㆍ은행ㆍ증권ㆍ보험 등 금융에 관한 사무를 관장하는 국(본부ㆍ단ㆍ부ㆍ팀을 포함한다) 소속 고위공무원단에 속하는 공무원 및 4급 이상 공무원(이에 상당하는 공무원을 포함한다)과 금융위원회 소속 고위공무원단에 속하는 공무원 및 4급 이상 공무원(이에 상당하는 공무원을 포함한다)

Hwang Chul-joo case
In March 2013, it was remarkable news that Hwang Chul-joo, CEO of a small business was nominated as the head of the Small and Medium Business Administration. But a few days later, he was forced to resign because he had to see his enterprise being dismantled because his shares should be disposed via a blind trust pursuant to the Public Servant Ethics Act.

Actually, He was believed to be the best possible choice to guide policies and governance in addressing the real challenges smaller businesses struggle with every day. In August 2012, however, the Constitutional Court ruled that the blind trust system is valid. At that time, justices were divided in determining whether it infringes on basic civilian rights or not. The four justices of the eight-judge panel who were against the system deemed it unfair to force nominated and elected officials to sell all of their shares.

On the other hand, lawmakers have much leeway to evade such job relevance if super rich representatives like Chung Mong-joon of Hyundai Heavy Industries Co., Ltd. select a standing committee irrelevant to their businesses.

Relationship in blind trust
The trust beneficiaries have no knowledge of the holdings of the trust and no right to intervene in their handling, management or disposition. The trustee shall not provide any information about the trust. Article 14-7 of the Act.