New rules will boost corporate penalties by 1.5 times and individual fines by 2.5 times, closing loopholes for former executives. (Image supported by ChatGPT)
SEOUL, Aug. 28 (Korea Bizwire) — South Korea’s financial regulators said Wednesday they will impose significantly harsher penalties on accounting fraud, expanding fines for both companies and executives in an effort to close loopholes that have allowed senior management to escape responsibility.
Under the new framework approved by the Securities and Futures Commission, fines for deliberate and prolonged accounting violations will rise sharply. Company-level fines will increase by about 1.5 times and personal fines by as much as 2.5 times.
The measures also introduce new legal grounds to hold former executives and other de facto decision-makers financially liable, even if they no longer draw salaries or dividends.
Officials said penalties for intentional falsification, such as document tampering or concealment, will now be aligned with those imposed for embezzlement or unfair trading.
For example, a 30 billion won ($22 million) violation that once drew a 4.5 billion won fine will now trigger a penalty of roughly 6 billion won. Fraud that continues for more than a year will face additional surcharges of up to 30 percent annually.
Yeouido’s financial district. (Image courtesy of Yonhap)
The reforms also double the cap on fines for individuals complicit in corporate fraud, from 10 percent to 20 percent of the company’s penalty. Former executives will no longer be able to claim reductions for post-scandal remediation efforts.
The tougher stance comes amid a steady rise in fraudulent reporting. Regulators uncovered 490 accounting violations from 2018 through the first half of 2025, imposing nearly 100 billion won in fines. Intentional cases jumped from eight in 2022 to 21 in 2024.
“Accounting fraud that undermines market trust must be punished at a level that strips away all economic incentives,” said Kwon Dae-young, vice chairman of the Financial Services Commission.
The plan also strengthens oversight of Korea’s three-tier audit system — internal auditors, external auditors and government inspections.
Companies that obstruct audits will face the same penalties as for intentional fraud, including forced auditor appointments, suspensions of executives, or criminal referrals.
At the same time, firms with robust, independent internal audit systems may receive leniency or exemptions when violations occur.
Regulators aim to implement the measures in the first half of next year, pending legislative and regulatory amendments.
M. H. Lee (mhlee@koreabizwire.com)
