Jinwon “Eric” Park
A eric@decentlaw.ioEric has built extensive litigation and advisory experience, ranging from corporate advisory and commercial legislation review to insurance, civil, and criminal cases, during his time at the Commercial Legal Affairs Division and the Legal Affairs Advisory Office of the Ministry of Justice.
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BlogsVirtual Asset “Hwanchigi” in Korea: Penalties and Key Changes Under the 2026 Foreign Exchange Transactions Act
As cross-border transactions involving virtual assets and overseas payment services continue to increase, Korean regulators are paying closer attention to whether such transactions constitute unlicensed foreign exchange business or illegal remittance activities. The Korea Customs Service recently conducted targeted inspections of high-risk money exchange businesses and identified violations involving false transaction records, foreign currency sales exceeding statutory limits, and failures to report large cash transactions. The businesses selected for inspection also included entities suspected of using virtual assets for illegal cross-border remittances. A major regulatory change will take effect on December 3, 2026, when the amended Foreign Exchange Transactions Act comes into force. Under the amended Act, certain cross-border virtual asset transfer services will become subject to a separate registration requirement. Virtual asset service providers, payment companies, remittance operators, and businesses offering cross-border settlement services should review whether their current business models fall within the scope of the new registration regime. What Is “Hwanchigi” Under Korean Law? “Hwanchigi” is not a term expressly defined in the Foreign Exchange Transactions Act. It generally refers to an arrangement in which funds are transferred across borders without using a bank or another authorized foreign exchange institution. Instead, separate pools of funds or accounts in Korea and another country are used to produce the same economic effect as an international remittance. For example, a person in Korea may pay Korean won to a local operator, while the operator’s overseas partner pays an equivalent amount in foreign currency to the intended recipient abroad. The Korean won received in Korea is not physically transferred overseas. Nevertheless, because a corresponding payment is made abroad, the arrangement produces substantially the same result as an international remittance. Article 8 of the Foreign Exchange Transactions Act generally requires a person who engages in foreign exchange business as a commercial activity to obtain the necessary registration. A person may therefore be regarded as participating in foreign exchange business even if they did not personally send money overseas, provided that their role formed part of a broader structure designed to complete a cross-border payment. A Transaction May Be Regulated Even If No Foreign Currency Crosses the Border Under Korean foreign exchange law, the key issue is not whether the same cash or foreign currency physically crossed the border. What matters is whether payments made in Korea and abroad were connected in a manner that produced the same economic effect as a cross-border transfer. Common structures that may raise regulatory concerns include the following. ▪️ Korean Won Received in Korea and Foreign Currency Paid Overseas A Korean account receives the funds, while an overseas partner or local office pays foreign currency to the designated recipient abroad. ▪️ Funds Received Overseas and Korean Won Paid in Korea Foreign currency or local currency is received outside Korea, and Korean won is then paid into a designated Korean bank account. ▪️ Settlement Through Third-Party Accounts Funds are paid or received through accounts held by family members, employees, acquaintances, or unrelated business entities rather than the actual sender or recipient. ▪️ Offshore and Domestic Obligations Offset Against Each Other Amounts payable in Korea and abroad are offset, allowing the parties to settle without making a conventional international bank transfer. If these transactions are conducted repeatedly and the operator earns fees or profits from exchange-rate differences, the activity may be treated as unregistered foreign exchange business. Why the Supreme Court Treated Virtual Asset Arbitrage as Foreign Exchange Business In its September 4, 2025 decision, Supreme Court Case No. 2024Do16540, the Court confirmed that a transaction may constitute foreign exchange business even where no foreign currency was directly transferred across the border. In that case, the defendant received virtual assets from a non-resident located overseas, sold them through a Korean virtual asset exchange, and transferred the proceeds in Korean won to multiple domestic bank accounts designated by the non-resident. The defendant did not personally remit foreign currency overseas. Nevertheless, the Supreme Court upheld the lower court’s finding that the transaction performed substantially the same function as an inbound remittance service, in which a Korean foreign exchange bank pays Korean won to a domestic recipient based on payment instructions from a foreign bank. The relevant question was therefore not simply whether the defendant had directly sent funds abroad. The Court examined whether the overall transaction structure effectively facilitated payments between Korea and another country. However, the sale of virtual assets followed by a domestic Korean won transfer does not automatically constitute unregistered foreign exchange business in every case. The following factors should be considered together: ▪️ The purpose and background of the transaction ▪️ The size and frequency of the transactions ▪️ The duration and degree of repetition ▪️ Whether fees or exchange-rate profits were earned ▪️ Whether the activity was conducted as a business Can Virtual Assets and Overseas Payment Services Be Treated as Hwanchigi? The use of virtual assets or overseas payment services does not, by itself, exclude a transaction from the application of Korean foreign exchange laws. ▪️ Receiving Korean Won and Sending Virtual Assets to an Overseas Wallet Where Korean won is received in Korea and Bitcoin, USDT, or another virtual asset is sent to an overseas recipient in return, the transaction may be treated as a cross-border payment service rather than a simple virtual asset sale. ▪️ Receiving Virtual Assets Overseas and Paying Korean Won in Korea A transaction may also be treated as cross-border payment activity where virtual assets received from overseas are sold in Korea and the proceeds are paid into domestic accounts designated by the overseas party. ▪️ Settling Funds Through WeChat Pay or Alipay Regulatory concerns may arise where Korean won is received in Korea and an overseas payment account is funded abroad, or where funds are received overseas and Korean won is paid to a recipient in Korea. These transactions are not automatically illegal. The authorities will generally examine: ▪️ Whether the domestic payment corresponded to an overseas payment ▪️ Whether third-party accounts were used ▪️ Whether the activity was repeated ▪️ Whether the operator earned fees or exchange-rate profits ▪️ Whether the transaction was conducted for a commercial purpose Key Changes Under the 2026 Amendment to the Foreign Exchange Transactions Act The amended Foreign Exchange Transactions Act was promulgated on June 2, 2026 and will take effect on December 3, 2026. The amendment introduces three major changes. ▪️ Registration Requirement for Cross-Border Virtual Asset Transfer Services A virtual asset service provider that uses virtual asset sales, purchases, or exchanges to transfer value between Korea and another country, or to produce substantially the same effect, will be required to register with the Minister of Economy and Finance. A virtual asset service provider registration under the Act on Reporting and Using Specified Financial Transaction Information may not be sufficient by itself. A separate registration under the Foreign Exchange Transactions Act may be required where the business provides cross-border virtual asset transfer services. ▪️ Stronger Administrative Sanctions for Operating Outside the Registered Scope A specialized foreign exchange business operator that conducts foreign exchange activities outside its registered scope may be subject to: ▪️ Cancellation of registration ▪️ Business restrictions ▪️ Suspension of business ▪️ Administrative surcharges imposed in place of certain suspension measures Businesses should therefore confirm that their actual services remain within the scope of their registration. ▪️ Criminal Penalties for Unregistered Business and Certain Payment Procedure Violations A person who conducts cross-border virtual asset transfer business without registration may be subject to: ▪️ Imprisonment for up to three years ▪️ A fine of up to KRW 300 million The amended Act also introduces criminal penalties of: ▪️ Imprisonment for up to one year ▪️ A fine of up to KRW 100 million These penalties may apply where a person violates prescribed payment procedures for the purpose of obtaining an improper financial benefit for themselves or another person. The amendment does more than simply clarify which businesses must register. It expressly brings cross-border virtual asset transfer services within the registration framework and clarifies the scope of criminal liability for unregistered activities and certain payment procedure violations. The Substance of the Fund Flow Matters More Than the Name of the Transaction Virtual asset-based hwanchigi and arbitrage cases are primarily governed by the Foreign Exchange Transactions Act. Depending on the transaction structure, the following laws may also apply: ▪️ The Act on Reporting and Using Specified Financial Transaction Information ▪️ The Virtual Asset User Protection Act ▪️ Other criminal and financial regulations related to money laundering, fraud, or unlawful fund transfers Businesses and individuals should review the entire flow of funds, including: ▪️ The roles of the parties ▪️ Domestic and overseas bank transactions ▪️ Wallet transfers and transaction records ▪️ Fee and exchange-rate arrangements ▪️ The frequency and commercial nature of the activity Decent Law Firm’s Virtual Asset Practice Group advises clients on investigations involving alleged violations of the Foreign Exchange Transactions Act and virtual asset-based remittance activities. We also assist virtual asset businesses, payment providers, and cross-border settlement operators in assessing whether their services are subject to registration under the amended Act. Where the Korea Customs Service or the police requests attendance or submission of documents, or where a business needs to determine whether its services fall within the amended regulatory framework, the transaction structure and supporting records should be reviewed before responding. This publication is provided for general informational purposes only and does not constitute legal advice for any specific matter.
2026-07-13 -
Blogs
DUI Traffic Stops in Korea: Penalties and Key Legal Issues at the Scene
As public concern over drunk driving continues to grow in Korea, law enforcement agencies are applying DUI laws and enforcement standards more strictly. Many foreign residents and visitors are aware that blood alcohol concentration, or BAC, is the primary factor in a DUI case. However, statements made at the scene, the driver’s conduct during testing, and the circumstances surrounding the driving may also be reviewed during the investigation and court proceedings. This article explains the penalties for drunk driving under Korean law and the legal significance of how a driver responds during and immediately after a traffic stop. DUI Penalties Under Korean Law Article 148-2 of the Korean Road Traffic Act sets different criminal penalties depending on the driver’s BAC level. Category Blood Alcohol Concentration Criminal Penalty Level 1 0.03% to less than 0.08% Imprisonment for up to 1 year or a fine of up to KRW 5 million Level 2 0.08% to less than 0.2% Imprisonment for 1 to 2 years or a fine of KRW 5 million to KRW 10 million Level 3 0.2% or higher Imprisonment for 2 to 5 years or a fine of KRW 10 million to KRW 20 million Refusal to Submit to Testing Refusal without a legally valid reason Imprisonment for 1 to 5 years or a fine of KRW 5 million to KRW 20 million Source: Article 148-2 of the Korean Road Traffic Act These are the general statutory ranges. A person who commits another DUI-related offense within 10 years after a previous DUI, test-refusal, or test-interference conviction may be subject to aggravated penalties. Administrative sanctions may also be imposed separately from criminal penalties. A BAC of 0.03% to less than 0.08% generally results in a driver’s license suspension, while a BAC of 0.08% or higher generally results in license revocation. License revocation may also apply where drunk driving causes bodily injury or death. The precise administrative measure may vary depending on the circumstances and the standards prescribed by the Enforcement Rule of the Road Traffic Act. How Korean Courts Assess BAC and Conduct at the Scene Where there is a time gap between the driving and the BAC test, the Supreme Court of Korea has held that the driver’s BAC at the time of driving must be assessed by considering the surrounding circumstances as a whole. “The determination must be made reasonably, in accordance with logic and common experience, by comprehensively considering factors established by the evidence, including the time interval between driving and testing, the difference between the measured blood alcohol concentration and the statutory threshold, the duration and amount of drinking, the driver’s conduct at the time of the traffic stop and testing, and, where a traffic accident occurred, the circumstances surrounding the accident.” — Supreme Court of Korea, Decision 2013Do6285, October 24, 2013 This means that the measured BAC is not always considered in isolation. The driver’s behavior, statements, drinking history, timing of the test, and any accident-related circumstances may also be taken into account. Statements made at the scene may therefore become evidence regarding how and why the person drove. An explanation intended to minimize the incident may later be interpreted as an admission that the person knowingly chose to drive after drinking. Key Legal Issues After a DUI Traffic Stop ▪️Statements Made at the Scene A written or verbal statement may be used to establish the driving circumstances, distance traveled, reason for driving, and the driver’s awareness of the situation. Expressions such as “I only drove a short distance” or “I was just moving the car” may not necessarily reduce liability. Depending on the context, they may instead confirm that the person voluntarily operated the vehicle after drinking. ▪️Legality of the Testing Procedure The time of testing, the method used, whether a second test was requested or conducted, and whether the applicable procedures were followed may require legal review. A procedural issue does not automatically invalidate a BAC result, but the accuracy and admissibility of the evidence should be assessed based on the specific facts. ▪️Involvement in a Traffic Accident The consequences may differ significantly depending on whether the incident involved only property damage, bodily injury, or death. An accident may lead to additional criminal charges, increased sentencing exposure, and more severe administrative penalties. ▪️Refusal to Submit to Testing Refusing a lawful breath test without a valid reason does not generally provide a legal advantage. Under Article 148-2 of the Road Traffic Act, refusal may result in imprisonment for 1 to 5 years or a fine of KRW 5 million to KRW 20 million. A driver should therefore avoid making an impulsive decision to refuse testing and should seek legal advice regarding any procedural concerns. Why Legal Advice May Still Matter After Testing Some drivers assume that there is no reason to contact a lawyer once a BAC test has already been completed. The BAC result is a central piece of evidence, but the case does not end with the test. Statements concerning the driving distance, reason for driving, drinking timeline, accident circumstances, and post-incident conduct may affect the investigation, charging decision, sentencing, and administrative proceedings. Early legal review can help clarify what evidence has already been created, identify procedural issues, prepare for questioning, and organize relevant sentencing materials. 24/7 DUI Response by Decent Law Firm’s Criminal Defense Team Decent Law Firm’s Criminal Defense Team assists clients from the initial traffic stop and police investigation through criminal proceedings and sentencing preparation. Our team provides 24-hour consultations and, where necessary, on-site assistance for urgent criminal matters. We also assist foreign clients in understanding Korean investigative procedures and preparing for police questioning. Those currently at a DUI checkpoint or scheduled for questioning should obtain legal advice before making additional statements or submitting further documents. This content is provided for general informational purposes only and does not constitute legal advice for any individual case.
2026-07-10 -
Blogs
Can Mere Participation in a Group Chat Lead to a Finding of School Violence in Korea?
As cyberbullying through group chats becomes more common, students who did not directly post insulting or defamatory messages are increasingly being included in school violence investigations conducted under Korea’s school violence response system. In many cases, students and their parents assume that there will be no consequences because the student did not personally use abusive language. However, investigators and the School Violence Countermeasures Deliberation Committee may examine not only whether the student made direct comments, but also how the student participated in the chat and reacted to the conduct of others. This article explains how Korean law and court decisions assess a student’s level of participation in a group chat and how the severity of a school violence measure may affect the student in practice. Cyberbullying, Social Exclusion, and Disciplinary Measures under Korean Law Article 2 of the Act on the Prevention of and Countermeasures Against Violence in Schools expressly includes both social exclusion and cyberbullying within the definition of school violence. Under the Act, social exclusion generally refers to conduct in which two or more students repeatedly subject a particular student to physical or psychological attacks that cause distress. Cyberbullying includes social exclusion and other conduct carried out through information and communications networks that causes physical, psychological, or financial harm. When school violence is established, the School Violence Countermeasures Deliberation Committee may request that the superintendent of the relevant local education office impose one or more of the following measures on the student responsible. Measure Description Measures 1–3 Written apology, prohibition on contact, threats, or retaliation, and school-based community service Measures 4–6 Community service, special education or psychological treatment, and suspension from school Measures 7–8 Transfer to another class or another school Measure 9 Expulsion, except for students in compulsory education Source: Article 17(1) of the Act on the Prevention of and Countermeasures Against Violence in Schools A student or parent who disagrees with a measure may challenge it through an administrative appeal under Article 17-2 or an administrative lawsuit under Article 17-3 of the Act. How Korean Courts Assess Participation in a Group Chat Korean courts interpret the concept of school violence broadly. In Seoul Administrative Court Case No. 2014Guhap250, the court held that school violence is not limited to the specific categories listed in the statute, such as assault, defamation, or insult. It may also include similar conduct that causes physical, psychological, or financial harm to a student. Courts have also distinguished cases according to the extent of the student’s participation. In Seoul Central District Court Case No. 2017Kahap80876, the court considered disparaging remarks exchanged in a group chat that the alleged victim had not joined. The court held that it was necessary to examine whether the conduct was directed at causing harm to the student at the time it occurred and whether actual harm resulted. The later disclosure of the chat, by itself, was not necessarily sufficient to establish school violence. Practical investigation guidelines also reflect the importance of the degree of participation. Guidance issued by Korea’s Ministry of Education and local education authorities recognizes that school violence may arise not only between the direct aggressor and the victim, but also in a broader peer environment involving students who encourage, support, or passively tolerate the conduct. As a result, investigators may review the statements and reactions of all participants in the group chat. Accordingly, the absence of a direct insulting message does not automatically exclude a student from the investigation. At the same time, simply being present in a group chat does not, by itself, establish participation in school violence. The decision may depend on whether the student repeatedly reacted in support of ridicule or exclusion, actively encouraged the conduct, helped spread the content, or otherwise participated in a way that contributed to the harm. Factors Used to Determine the Level of Participation During the investigation and committee review, the following factors may be considered together. ▪️Frequency and content of messages Even where the student did not post direct insults, repeated emojis, short comments, or other reactions supporting the ridicule may be viewed as evidence of participation. ▪️Reason for remaining in the group chat Investigators may examine whether the student understood that the conduct was continuing, how long the student remained in the chat, and whether there was a reasonable explanation for not leaving, such as the chat also being used for class notices or group activities. ▪️Scope and context of screenshots Screenshots are often used as key investigative materials, even when the original messages have been deleted. However, a partial screenshot may not show the entire context, so the messages before and after the captured conversation should also be reviewed where possible. The Practical Impact of Different School Violence Measures The retention period of a school violence measure in a student’s school record differs according to the level of the measure. Measure General Retention Period Measures 1–3 Generally deleted upon graduation Measures 4–6 Retained for two years after graduation Measures 7–8 Retained for four years after graduation Measure 9 Not subject to ordinary deletion Source: Article 22 of the Enforcement Rule of the Elementary and Secondary Education Act Measures 4 through 7 may, in certain circumstances, be deleted upon graduation if the student has faithfully completed the measure and is considered unlikely to reoffend, following review by the school’s dedicated school violence body. Beginning with the 2026 university admissions cycle, school violence records must be reflected across university admissions pathways in Korea. The specific method of assessment varies by university, but the level of the measure may have a direct impact on the student’s admissions prospects. For this reason, where a student’s role in a group chat is unclear, it is important to explain the entire conversation, the student’s actual level of participation, and the reason the student remained in the chat from the earliest stage of the investigation. Legal Support for Group Chat and Cyberbullying Cases Group chat and cyberbullying matters may involve several stages, including the review of chat screenshots, assessment of the student’s level of participation, preparation for investigator interviews and committee proceedings, and, where necessary, administrative appeals or litigation challenging the final measure. The School Violence Practice Team at Decent Law Firm advises students and parents from the initial investigation stage through committee proceedings and post-decision challenges. Where a child has received notice of an investigation involving a group chat, the full conversation and the circumstances of the child’s participation should be reviewed before a written statement is submitted. This article is provided for general informational purposes only and does not constitute legal advice for any specific matter.
2026-07-09
