ACRC to strictly manage public servants’ speculation in real estate using nonpublic information,
in accordance with the Act on the Prevention of Conflict of Interest Related to Duties of Public Servants

- Pre-announcement of legislation of Enforcement Decree of
Act on the Prevention of Conflict of Interest Related to Duties of Public Servants (September 10 ∼ October 20) -

(10th Sep. 2021, ACRC)

Conflict of interest situations of public servants will be managed and prevented. Such situations include public servants’ speculation in real estate using inside information, performing public duties in an unfair manner using private relations such as family members, and making a negotiated contract with family members of high-ranking public officials.

The Anti-Corruption and Civil Rights Commission (Chairperson : Jeon Hyun-hui, hereinafter ACRC) pre-announced the Enforcement Decree of the Act on the Prevention of Conflict of Interest Related to Duties of Public Servants(hereinafter the Act on the Prevention of Conflict of Interest) for 40 days from September 10 to October 20.

The Act on the Prevention of Conflict of Interest was enacted eight years after the ACRC submitted the bill to the 19th National Assembly in 2013. In accordance with the promulgation of the Act on May 18 this year, it will be enforced starting May 19 next year.

In order to prevent public servants from seeking unfair private interest and to ensure the fair performance of their duties, the Act contains 10 standards of behavior such as obligations to report and avoid persons with private interests, report possession and purchase of real estate, and restrictions on employment of family members of high-ranking officials and making negotiated contracts with them.

The Enforcement Decree of the Act on the Prevention of Conflict of Interest stipulates detailed regulations commissioned by the Act and needed to enforce it, in order to effectively implement the obligations of reporting and submission and to impose restrictions and prohibitions.

Under the Act, a public servant who works for a public organization that directly deals with real estate or manages real estate development such as housing site development and district designation must report to the head of his/her organization any possession or purchase of real estate in the district by the public servant, his/her spouse, or any lineal descendant/ascendant or spouse’s lineal descendant/ascendant living with the public servant, within 14 days from the day that he/she comes to know of the purchase and possession.

The Enforcement Decree designates 16 metropolitan city and development corporations, including Korea Land and Housing Corporation, Saemangeum Development Corporation, and Seoul Housing & Communities Corporation, as public organizations that directly deal with real estate.

Also, it categorizes the real estate development duties, such as housing site development and district designation, of public organizations, as projects of public housing, industrial complex development, urban regeneration, port redevelopment, and station area development, and provides the underlying clauses and provisions.

Accordingly, public servants of not only public organizations that directly deal with real estate, but also those that carry out real estate development projects such as central administrative agencies, local governments, and public-related organizations are also obliged to report. In turn, this is expected to strictly manage the real estate speculation of public servants using inside, nonpublic information.

	< Examples of real estate possession/purchase reports under the Act on the Prevention of Conflict of Interest >
◈ Mr. A, who works for a state-owned enterprise that mainly deals with real estate development, realized that he owned property in a “public housing project” district of which the operator is the company, and reported the fact to the official in charge of preventing conflicts of interest in the company. ◈ Ms. B, who works for a local government, came to know that her mother owned property in an “urban regeneration project” district that the local government approved, and reported the fact to the official in charge of preventing conflicts of interest in the government.

In addition to persons with private interests prescribed in the Act on the Prevention of Conflict of Interest, those who can effectively influence the fair performance of public duties have also been added as persons with private interests. These include 1) a superior who leads/supervises public servants; 2) one who has made a monetary transaction exceeding the allowed value under the Improper Solicitation and Graft Act (excluding transactions with relatives); and 3) one who deliberated/resolved a public servant’s issue as a non-standing commissioner.

Furthermore, even if a public servant’s duty-related party is not a prescribed person with private interests, when the official in charge of preventing conflicts of interest judges that it is difficult for the public servant to perform fair public duty because he/she has a close relationship with the duty-related party in terms of academic, relative, religious, or working ties or as a close colleague who was employed at the same time, the public servant is obliged to report the fact to the head of the organization and apply for avoidance.

	< Examples of person with private interests reports under the Act on the Prevention of Conflict of Interest >
◈ Last year, Lawyer C worked for a public organization as a non-standing commissioner and deliberated/resolved legal violations of Company X. When Lawyer C was hired by a law firm this year and defended Company X regarding its legal violations, a public servant of the public organization reported Lawyer C as a person with private interests and applied for recusal. ◈ Applicant D requested for a construction approval. A public servant in charge of the approval found out that Applicant D was his middle-school friend with whom he still had a close relationship, so he requested the official in charge of preventing conflicts of interest to check whether he should avoid his duty or not. Following the decision of the official, the public servant reported the situation and applied for avoidance.

In addition, the Act on the Prevention of Conflict of Interest commissioned the Enforcement Decree to restrict public organizations from making negotiated contracts with corporate bodies of which the representative is a high-ranking official of the public organization or the spouse of the official, and to stipulate the exceptional cases. The exceptional cases are confined to when a specific person’s technique is needed or when there is only one producer of a certain product without any competitors.

Moreover, the ACRC specified the report’s range and contents regarding the report of transaction with a duty-related party, submission of a high-ranking official’s activities in the private sector, and report of private contact with a retired official. The ACRC also systemized the report and processing procedures so that anyone can easily understand the obligations of the Act and report its violations in a convenient way.

ACRC Chairperson Jeon Hyun-hui stated, “The ACRC is going to collect a variety of opinions from citizens and competent agencies during the pre-announcement of legislation in order for the Act on the Prevention of Conflict of Interest and the Enforcement Decree of the Act to have an effective institutional foundation.” She also added, “We will continue to make efforts for the Act to be settled so that it can guarantee the fair performance of public duties by public servants, restore trust in the public sector, and further, raise the status of Korea in the world as a country of integrity.”

Attachment		Main contents of the ｢Act on the Prevention of Conflict of Interest Related to Duties of Public Servants｣: 10 standards of behavior

□ The Act on the Prevention of Conflict of Interest Related to Duties of Public Servants contains 10 standards of behavior – 5 obligations on report/submission and 5 restrictions/prohibitions – to fundamentally prevent public servants from seeking improper private interests that may occur while performing public duties.

< 5 obligations on report/submission >

① Report/avoidance/recusal of a person with private interests & relevant measures (Articles 5 & 7)

- When a public servant performs any one of 16 types of public duties to persons with private interests (including agents), the public servant shall report the fact to the head of the organization he/she belongs to and avoid the duty.

② Report of possession/purchase of real estate related to public organization’s duties (Article 6)

- A public servant who works for a public organization that directly deals with real estate shall report any possession or purchase of property related to public duties by the public servant, his/her spouse, his/her lineal descendant/ascendant (or the spouse’s lineal descendant/ascendant) living with the public servant.

* Even if a public servant does not work for a public organization that directly deals with real estate, if he/she performs public duties related to real estate development such as housing district development or district designation, he/she has the same obligation to report.

③ Report of transactions with a duty-related party (Article 9)

- When a public servant, his/her spouse or lineal descendant/ascendant (including those of the spouse) living with the public servant engages in any private monetary or realestate transactions with a duty-related party, the public servant shall report it.

④ Report of private contact with a retired public servant(Article15)

- When a public servant plays golf, travels, engages in gambling activities with a duty-related party who is a retired official (confined to those within two years of retirement) of the organization he/she belongs to, the public servant shall report it.

⑤ Submission of detailed activities in the private sector by high-ranking public officials (Article 8)

- A high-ranking public official shall submit detailed statements of his/her activities in the private sector for the past three years preceding the date of the commencement of his/her office. The head of the organization he/she belongs to may disclose such statements to the public.

< 5 restrictions and prohibitions >

⑥ Restriction on employment of family members (Article 11)

- A public organization (including its affiliated agencies and subsidiary companies) is prohibited from employing family members of high-ranking public officials, unless they are employed through a competitive procedure such as open recruitment.

⑦ Restriction on making negotiated contracts (Article 12)

- A public organization(including its affiliated agencies and subsidiary companies) is prohibited from making negotiated contracts(except for unavoidable reasons such as when there is only one producer) with high-ranking officials, their spouse, or their lineal descendant/ascendant (including spouse’s descendant/ascendant living with the official).

⑧ Restriction on duty-related outside activities (Article 10)

-  Outside activities that would damage the impartiality in performing public duties such as receiving payment for providing duty-related knowledge or information shall be fundamentally prohibited.

⑨ Prohibition of private use of goods belonging to public organizations and making profits from such use (Article 13)

- A public official shall be prohibited from privately using goods, vehicles, buildings, land and facilities, etc. owned or rented by public organizations, benefiting from such use, or allowing a third party to do so.

⑩ Prohibition of use of confidential or nonpublic information obtained in performing public duties (Article 14 & 27)

- If a public official uses duty-related confidential or nonpublic information for personal profit, he/she shall be subject to imprisonment with labor no more than seven years or a fine not exceeding KRW 70 million(USD 59,000), and the profit shall be confiscated and collected.

* This standard shall also apply to those who have not exceeded three years since retirement, and a third party who gained profit using the duty-related confidential or non-disclosed information shall be punished likewise.