Improper Solicitation and Graft Act Compliance in Korea

Introduction

Improper Solicitation and Graft Act compliance has become a frontline issue for foreign companies doing business in Korea. A routine client dinner, a holiday gift to a public‑sector counterpart, or a sponsorship tied to a government‑linked entity can trigger regulatory risk under the Act on the Prohibition of Improper Solicitation and Graft Act, commonly known as the Kim Young‑ran Act.

Unlike many anti‑corruption frameworks that focus on direct bribery, Korea’s Act regulates a broader range of benefits and applies to a wide universe of “public officials,” including employees of public enterprises and schools. For foreign executives unfamiliar with its scope, the compliance gap can be significant.

This 2026 guide explains Improper Solicitation and Graft Act compliance for foreign companies, highlights the key statutory thresholds, and provides practical controls to reduce risk in everyday business operations.

Improper Solicitation and Graft Act compliance: who is covered

The Act applies not only to civil servants but also to employees of public institutions, public corporations, and certain educational and media organizations. The definition is broader than many foreign investors expect.

For compliance planning, foreign companies should consider the following categories as likely covered:

• Government officials and civil servants
• Employees of state‑owned enterprises and public institutions
• Public school and national university staff
• Journalists and certain media organization employees

Because the covered list is expansive, foreign companies should avoid assuming that only “government ministers” are subject to the Act. In practice, many counterparties in procurement, licensing, and public sector projects fall within the scope.

Improper Solicitation and Graft Act compliance: gift and hospitality limits

The core restrictions are found in Article 8, which limits the monetary value of gifts, meals, and ceremonial expenses provided to covered persons. The rule is often described as a “3‑5‑10” framework in Korea, but companies should verify current thresholds and any updates for specific categories or circumstances.

Key compliance points include:

• Limits apply to meals, gifts, and event‑related expenses.
• The limits are assessed per person and per occasion.
• Even when a payment is modest, the context can create a violation if it is tied to an improper request or expectation.

Foreign companies should adopt internal policies that are stricter than the statutory limits to reduce risk. This is particularly important when multiple employees interact with the same public official, creating aggregation risk.

Improper solicitation: a broader risk than bribery

The Act also regulates “improper solicitation,” which can occur even without a transfer of value. Examples include asking a public official to influence hiring decisions, licensing outcomes, or contract awards outside legitimate procedures.

This is where foreign companies often face hidden risk. A request made informally at a conference or during a client meeting can be interpreted as improper solicitation if it bypasses formal processes. Training staff on how to frame requests and how to document compliance is essential.

Ceremonial expenses and exceptions

The Act recognizes limited exceptions for ceremonial occasions such as weddings, funerals, or public events. These exceptions are narrowly defined and subject to monetary limits. For foreign companies, the key point is that exceptions are not a blanket safe harbor. The event must be genuine, the recipient must fall within the covered category, and the amount must remain within prescribed thresholds.

If a company relies on an exception, it should record the event type, date, recipient relationship, and exact expense. This documentation is essential if a regulator later questions the purpose of the payment.

Enforcement trends and reputational exposure

Even when penalties are administrative or criminal in nature, enforcement can create reputational damage that far exceeds any monetary penalty. Public investigations often trigger internal audits, procurement freezes, and delays in licensing or project approvals. Foreign companies in sensitive sectors—healthcare, infrastructure, defense, and education—face the highest exposure because their counterparts are frequently covered persons under the Act.

A practical compliance response includes periodic risk assessments by sector, mapping which business units interact with public‑sector counterparties, and setting stricter approval thresholds for those teams.

For multinational groups, it is also useful to maintain a directory of counterparties likely to be covered persons, such as public enterprises, national universities, and state‑funded research institutes. This helps front‑line teams identify risks quickly before hospitality or sponsorship decisions are made.

Practical controls for foreign companies

Improper Solicitation and Graft Act compliance requires more than a written policy. It requires day‑to‑day controls that match the realities of Korean business culture.

1) Pre‑approval for gifts and hospitality

Implement a pre‑approval process for any gifts, meals, or hospitality involving public‑sector counterparts. The process should capture:

• Recipient identity and role
• Purpose of the interaction
• Estimated cost in USD
• Confirmation that the event falls within legal limits

2) Clear documentation and receipts

Documenting the business purpose and cost is crucial. In investigations, regulators often look at whether the company had a structured approval and record‑keeping process, not just whether the cost was below a numeric threshold.

3) Third‑party intermediaries

Foreign companies frequently use agents, consultants, or distributors to engage public clients. These intermediaries must be covered by the same compliance rules. Contracts should include anti‑corruption clauses, audit rights, and training obligations.

4) Training tailored to Korean business culture

Compliance training should address real‑world scenarios such as holiday gifts, conference sponsorships, and promotional events. Employees should understand that cultural norms do not override statutory restrictions.

Cross‑border events, sponsorships, and marketing risk

Global companies often host conferences or sponsor public‑sector seminars where Korean officials attend. These events create unique compliance risks because benefits may be delivered indirectly through travel, accommodations, or third‑party organizers. Under the Act, indirect benefits can still be scrutinized if they function as a gift or an improper inducement.

Companies should establish clear rules for sponsorship budgets, travel support, and speaker fees. If a public official is invited, the company should document the official purpose of the event, the selection criteria for participants, and the cost allocation. Keeping these records in a centralized compliance system is often the difference between a manageable inquiry and a prolonged investigation.

Internal reporting and escalation

Improper Solicitation and Graft Act compliance is strongest when employees have a safe channel to report concerns. A simple escalation workflow—manager review, compliance review, and documented decision—reduces ambiguity and creates an audit trail. For foreign companies, aligning the Korea workflow with global compliance hotlines ensures consistency and protects local teams who may be unsure about cultural expectations.

Practical example: Government procurement meeting

A foreign infrastructure company invites a public‑enterprise project team to a business dinner after a tender briefing. The dinner is modest, but a senior executive casually requests that the team “consider the company’s unique engineering experience” in the evaluation.

Even if the dinner cost is within the statutory limit, the verbal request could be interpreted as improper solicitation if it implies preferential treatment. A compliant approach would be to keep the discussion within published tender criteria and avoid any suggestion of special consideration.

Interaction with other compliance regimes

Improper Solicitation and Graft Act compliance should be integrated with broader anti‑corruption programs, including the US FCPA and UK Bribery Act. While those regimes focus on bribery, Korea’s Act addresses a broader set of conduct and lower thresholds.

Foreign companies should harmonize policies so that Korean‑specific restrictions are not treated as an afterthought. This includes aligning gift limits, approval workflows, and monitoring procedures across jurisdictions.

Compliance in M&A and vendor onboarding

When acquiring a Korean business, foreign investors should review historical gift and hospitality practices, government contracting relationships, and third‑party agents. A due diligence checklist that covers public‑sector interactions, sponsorships, and marketing expenses can identify legacy risk that might otherwise surface after closing. Similarly, vendor onboarding processes should include anti‑corruption certifications and training obligations to reduce exposure through intermediaries.

Key takeaways for foreign investors and operators

• Treat the Act’s coverage of public officials as broad and inclusive.
• Build a pre‑approval and documentation process for gifts and hospitality.
• Train employees and intermediaries on improper solicitation risks, not just bribery.
• Align Korean compliance rules with global anti‑corruption standards.

A proactive compliance posture can also support smoother government relations, faster procurement cycles, and stronger reputational standing in Korea’s tightly networked public‑sector ecosystem. It also protects local teams from personal liability.

Conclusion

Improper Solicitation and Graft Act compliance is a core operational requirement for foreign companies in Korea. The Act’s breadth, low thresholds, and cultural sensitivity mean that practical controls matter as much as legal knowledge.

Korea Business Hub advises foreign investors on compliance program design, public‑sector engagement, and governance risk management. If your team interacts with Korean public institutions or state‑linked entities, we can help tailor a compliance framework that meets both Korean legal requirements and global best practices.