Whistle-blower

A whistle-blower (or whistleblower, 내부고발자/內部告發者) is a person who exposes misconduct, alleged dishonest or illegal activity occurring in an organization like a government agency or company. The alleged misconduct may be classified as a violation of a law, rule, regulation and/or a direct threat to public interest, such as fraud, health and safety violations, and corruption.

Whistle-blowers may make their allegations internally (for example, to other people within the accused organization) or externally (to regulators, law enforcement agencies, to the media or to groups concerned with the issues).

In Korea, a whistle-blower is now regarded as a for-public interest reporter (공익신고자/公益申告者) not as a betrayer. Whistle-blowers both in the public sector and the private sector are legally protected by the Act on the Protection of Public Interest Whistleblowers (공익신고자보호법). Also they are given a handsome amount of money by the authorities concerned when their reports turn out to be true and substantial.

Key words
whistle-blower, rewards, underground economy, frauds, tax dodging

Situation in Korea
Korean government institutions and private companies are waking up to the value of whistle-blowers and the information they can provide, and are starting to offer financial rewards as high as the winning prize in many lotteries, ranging from as high as 2 billion won ($1.8 million) to 3 billion won.

The Ministry of Strategy and Finance expanded its rewards in 2012 year from 100 million won to up to 1 billion won and is currently examining the idea of going up to 2 billion won in 2014.

The Financial Services Commission (FSC) plans to raise its reward cap from a current 100 million to up to 2 billion won for whistle-blowers who report on stock trading manipulation. In August 2013, the FSC raised the cap for insurance fraud from 100 million won to 500 million won. For whistle-blowers who report about market shenanigans such as price-fixing, the Fair Trade Commission (FTC) expanded its top reward from 2 billion won to 3 billion won.

In the past, whistle-blowing on North Korean spies, which now has a maximum reward of 500 million won, used to be the gold standard.

Combating underground economy
Nowadays financial crimes such as tax dodging, stock manipulation and price-fixing are of more concern to society than anything an agent from the North can do.

The rise in rewards reflects the current government’s effort to tap into the underground economy as a source of new tax revenues. The National Tax Service has operated a squad specialized in investigation in the Investigation Intelligence Division,

But financial crimes are also often very clever and technical, either involving accounting or computers, which makes the cheaters ever more difficult to catch.

For example, offshore tax evasion is on the rise, for example, but it is extremely difficult to hunt it down without whistle-blowers due to the number of countries involved in the process. That’s why many countries are making changes in their whistleblowing rewards to encourage more inside information.

In 2006, the United States completely abolished the ceiling on rewards for reporting tax evasion. The government amended related laws to allow rewards up to 30 percent of the criminal fines levied on the evaders. The bigger the fish that’s caught, the larger the reward for the whistle-blower.

The United Kingdom has no official reward policies, but it does offer rewards at the government’s discretion.

Most sources with top-secret information such as large-scale price-fixing are high-level executives from large conglomerates. The FTC raised the cap to the point where the reward could finance someone’s post-retirement life, which will bring us high-quality information.

To get the big rewards, whistle-blowers have to provide solid evidence like internal documents and the amount of money involved in tax dodging.

Scale of rewards
Higher rewards definitely attract more significant information. In the case of uncovering collusion by a cartel, the criminal fine should exceed 100 billion won for the whistle-blower to receive 3 billion won as a reward.

The NTS spent 2.1 billion won on rewards for 126 whistle-blowers, or an average of 16.7 million won per person. Only two received rewards higher than 100 million won.

Prizes for reporting insurance fraud is even smaller, averaging about 600,000 won, while the biggest ever was 126 million won.

That leads to questions about upping the prizes. The National Assembly’s Strategy and Finance Committee wrote that “it could be less effective to raise the rewards for whistle-blowers on tax dodging” in a tax law review released in April 2013.

Yet, authorities insist rewards promote whistle-blowing. As rewards rose so did the number of informants. In 2013 alone, the NTS received 12,147 confidential reports through the end of August, up 60 percent compared to the same period last year.

A large insurance company recently reported that it has been receiving triple the number of whistle-blowing reports in the two years, i.e., 324 cases in 2011 to 688 cases in 2012, further to 983 cases in 2013, since it started offering prizes of up to 1 billion won.

Statutory ground
The Act on the Protection of Public Interest Whistle-blowers promulgated by Act No.10472 on March 29, 2011 came into force on September 30, 2011.

Article 2 (Definitions)
 * The definitions of terms used in this Act shall be as follows:
 * 1. The term “violation of the public interest” means an act that infringes on the health and safety of the public, the environment, consumer interests and fair competition, and falls under any of the following items:
 * a. An act that is subject to any penal provisions defined in the Acts listed in an attached table;
 * b. An act that is subject to an administrative action determined by Presidential Decree, including the cancellation or suspension of a permit or license in accordance with the Acts listed on the attached table.
 * 2. The term “public interest whistleblowing” means reporting, petitioning, informing, accusing or complaining that a violation of the public interest has occurred or is likely to occur, or providing an investigation clue of a violation of the public interest to a person who falls under any of the Subparagraphs in Article 6. However, if a case falls under any of the following items, it shall not be deemed a case of public interest whistleblowing:
 * a. In the event that the public interest whistleblowing was performed even though the whistleblower had known or could know that the information was false;
 * b. In the event that the whistleblower demanded money, goods, or special privileges within the context of the employment relationship in return for the information, or that the whistleblowing was done for some other illegal purpose.

Article 12 (Confidentiality Obligation for Public Interest Whistleblower, etc.)
 * (1) No person with the knowledge of the fact that someone is a public interest whistleblower, etc., shall tell, disclose to or publicize to any third party personal information concerning the public interest whistleblower, etc., or other facts that infer the identity of the public interest whistleblower, etc. However, this provision shall not apply provided that the public interest whistleblower, etc., gives his/her consent to the revelation of such information.
 * (2) The Commission may request a relevant disciplinary officer to take disciplinary action against a person who has told, disclosed to or publicized to any third party personal information concerning the public interest whistleblower, etc., or other facts that infer the identity of the public interest whistleblower, etc., in violation of Paragraph 1.

Article 13 (Protection of Personal Safety)
 * (1) The public interest whistleblower, etc., his/her relatives or cohabitants may request the Commission to take protective measures for their personal safety (hereinafter referred to as “personal protection measures”) in the event that the public interest whistleblower, etc., his/her relatives or cohabitants have faced or are likely to face serious danger to their lives or persons. In such an event, the Commission may, if deemed necessary, request the chief of the police station or agency to provide the necessary personal protection measures.
 * (2) The chief of the police station or agency who has received a request for the personal protection measures in accordance with Paragraph 1 shall provide said measures under the conditions as prescribed by Presidential Decree without delay.

Article 15 (Prohibition of Disadvantageous Measures)
 * (1) No person shall implement any disadvantageous measure against the public interest whistleblower, etc. in retaliation for his/her public interest whistleblowing, etc.
 * (2) No person shall obstruct the act of the public interest whistleblowing, etc. or force the public interest whistleblower, etc. to rescind his/her case.