Compliance Reporting Rewards for Savings Banks, Mutual Finance and Card Companies Raised to KRW 1 Billion

FSS Implements Measures to Promote Compliance Reporting in the Small and Medium-Sized Financial Sector
Establishes Standard Compliance Reporting Framework Based on Six Core Principles: "S.A.F.E.T.Y."
Codifies Ban on Seven Types of Retaliatory Measures, Including Unfair Personnel Actions, to Deter Misconduct

Employees and retirees in the specialized credit finance sector, including savings banks, mutual finance institutions, credit card companies and capital companies, will be eligible for rewards of up to KRW 1 billion for reporting compliance violations. The rules will explicitly prohibit seven types of retaliatory measures, including unfair personnel actions, to deter misconduct, and companies will bear the burden of proof if unlawful conduct occurs in the workplace.

Financial Supervisory Service headquarters in Yeouido, Seoul. Financial Supervisory Service (FSS)

On October 14, the Financial Supervisory Service (FSS) announced that it had established a standard compliance reporting framework with the small and medium-sized financial sector. The framework focuses on strengthening incentives for reporting and rigorously protecting whistleblowers, including by raising the maximum reward to KRW 1 billion and prohibiting seven types of retaliatory measures.

The standard compliance reporting framework will take effect this month for savings banks and mutual finance institutions, and on November 1 for the specialized credit finance sector.

The framework will operate according to six core principles (S·A·F·E·T·Y): ▲establishing a standardized compliance reporting system (Standardized) ▲allowing anyone to report and broadening the scope of reportable conduct (Anyone) ▲strengthening whistleblower anonymity and protective measures (Fully protected) ▲expanding reporting incentives and rewards (Enlarged reward) ▲reducing disciplinary penalties for voluntary reporters and holding non-reporters accountable (Total responsibility) ▲continuously improving the system and fostering a culture of compliance reporting (Yearly improvement).

First, the framework will apply “Operational Standards for Compliance Reporting,” which set out procedures for handling reports. In the mutual finance sector, the central federations will be solely responsible for operating the system, while in the savings bank and specialized credit finance sectors, central federations or associations and financial companies will share the work. The range of people eligible to report, previously limited to current employees, will be expanded to include former and current employees, as well as external parties—in other words, anyone.

To protect whistleblowers, anonymous reporting channels will be introduced across the board, and reports submitted through lawyers will be permitted. In addition, previously vaguely defined retaliatory measures, such as unfavorable treatment in personnel matters, will be specified as seven types: ▲measures that adversely affect employment status, such as dismissal ▲unfair personnel actions, such as disciplinary measures or restrictions on promotion ▲personnel actions against an individual’s wishes, such as transfers or reassignment of duties ▲discriminatory treatment, such as in performance evaluations ▲measures restricting professional development opportunities or access to available resources ▲conduct such as ostracism or verbal abuse ▲unfair audits.

The framework will also specify the conditions under which an action against a whistleblower is presumed to be retaliation. In such cases, the burden of proof will shift to the party taking the action (the company). These conditions include taking any of the seven retaliatory measures within two years of a compliance report, attempting to identify the whistleblower, or obstructing a compliance report.

The maximum rewards will also be raised. The previous limits, which ranged from several million to tens of millions of won, will increase to as much as KRW 1 billion or KRW 500 million. In the savings bank sector, the maximum will be KRW 1 billion for institutions with total assets of at least KRW 1 trillion and KRW 500 million for those with total assets of less than KRW 1 trillion. In mutual finance, NongHyup and the National Credit Union Federation of Korea will offer up to KRW 1 billion, while Suhyup and forestry cooperatives will offer up to KRW 500 million. In the specialized credit finance sector, companies with total assets of at least KRW 2 trillion will offer up to KRW 1 billion, while those with total assets of less than KRW 2 trillion will offer up to KRW 500 million.

Eligibility for rewards will also be expanded. Rewards, previously limited to reports that led to the “detection of financial incidents,” will also cover reports that ▲lead to the discovery of harm to 50 or more financial consumers ▲contribute to uncovering serious violations of financial laws and regulations ▲prevent financial incidents through proactive reports of unlawful or unfair instructions or deficiencies in internal controls. The criteria for calculating rewards will be made more specific, including by paying a set percentage, such as 5%, of the amount involved in an incident, the amount of losses, or the amount of the violation.

A new expense reimbursement fund will cover actual costs, including expenses for physical and mental health care resulting from a report and legal expenses related to reporting. The respective central federations and associations will serve as the sole channels for paying rewards and reimbursing expenses.

An FSS official said, “This reform focuses on establishing strong incentives for reporting and rigorously protecting whistleblowers in order to encourage voluntary and proactive reporting.” The official added, “When inspecting financial companies in the future, we will review whether their handling of compliance reporting systems is appropriate, and will continue to improve the framework and provide related support to ensure it is smoothly implemented across the small and medium-sized financial sector.”

This content was produced with the assistance of AI translation services.