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Foreign Trade Act Violations: When Rerouting Used Car Exports to Russia Becomes a Legal Problem, and How to Respond
1. Why Does Exporting Used Cars to Russia Raise Legal Issues? Not all used-car exports bound for Russia are uniformly prohibited, but a significant number of vehicles currently fall under situational licensing requirements, so item-by-item verification is necessary. Under Article 19-3 of the Foreign Trade Act, even goods that are not strategic items must obtain a situational license if there are certain grounds to believe they may be used or diverted for the manufacture, development, use, or storage of weapons of mass destruction and their delivery systems. Here, "strategic items" refers to goods and technologies separately designated as subject to export controls for the sake of international peace and national security. The law also identifies circumstances that must be checked in connection with situational licensing, such as when the price or payment terms fall outside the normal range, when the transport route is abnormal, or when it is unclear whether the goods will be used in the importing country or re-exported. [Foreign Trade Act Article 19-3 – Situational Licensing] This situational licensing system is also significant for export controls on Russia and Belarus, because a separate list of items subject to situational licensing currently applies specifically to those two countries. In February 2024, the criteria for situational licensing on automobiles exported to Russia were tightened, bringing passenger vehicles with an engine displacement over 2,000cc, among others, within scope. The current list of covered items includes a wide range of vehicles depending on their power source and HS code. The Korea Customs Service has likewise identified illegal exports of vehicles over 2,000cc to Russia as a key enforcement target. Korea's Trade Security Management Agency has also advised that exports of items subject to situational licensing for Russia and Belarus are prohibited in principle, and that a license is granted only after review in limited exceptional cases. Therefore, in an actual export transaction, the HS code, engine displacement, vehicle type, and detailed specifications of each vehicle must be individually checked against the notice that was in effect at the time of that export. 2. Does Exporting to Kyrgyzstan Avoid a Foreign Trade Act Violation? The mere fact that a vehicle was exported to Kyrgyzstan or Kazakhstan does not, by itself, constitute a violation of the Foreign Trade Act. Conversely, simply changing the destination stated on the export declaration to a third country does not allow an exporter to avoid Russia-related export controls, either. If a local Kyrgyz company genuinely purchased the vehicle for use within that country, this legitimate transaction must be distinguished from a circumvention export to Russia. However, the conclusion may differ if the actual Russian buyer was already determined from the outset of the deal, or if the exporter knew that the vehicle was to be moved on to Russia through a third-country intermediary. In March 2026, the Korea Customs Service disclosed, as a major type of detected violation, cases in which exporters declared vehicles as being exported to countries neighboring Russia such as Kazakhstan and Kyrgyzstan, but then actually brought the vehicles into Russia. The Customs Service also stated that, in addition to this method, it detected cases where vehicles over 2,000cc were falsely declared as being 2,000cc or under, and cases where new vehicles intended for the domestic market were disguised as used cars and declared as being exported to a third country. Accordingly, in an actual investigation, the key issue may not be limited to the destination country stated on the export declaration; the vehicle's actual final destination, judged from the transaction as a whole, can become the central point of contention. Key Points to Check When Assessing a Possible Circumvention Export to Russia Item to Check Key Points for Review Destination on the export declaration Whether the declared country matches the actual final destination Overseas buyer Whether the third-country company was the real buyer or merely an intermediary End user Who was actually intended to use the vehicle Contract, invoice, and B/L Whether the transaction structure on paper matches the actual transaction Vehicle's transport route Whether the vehicle moved on to Russia after arriving in the third country Transaction-related communications Whether there were communications about shipment to Russia or a Russian buyer Flow of funds Whether the contractual buyer matches the party that actually paid Ultimately, the mere fact that a transaction passed through a third country cannot, on its own, determine whether it was unlawful. It must be specifically determined whether the deal was a genuine third-country transaction or a structure designed to evade Russia-related export controls. 3. How Do Investigative Authorities Determine Whether a Circumvention Export Occurred? Customs and investigative authorities do not rely on a single export declaration alone. They may also review a range of other materials that can reveal the vehicle's actual movement and the structure of the transaction. The Korea Customs Service has stated that it currently uses AI and big data, based on export declaration records and cargo information, to identify companies at high risk of illegally exporting vehicles to Russia, and that it is strengthening cooperation between its dedicated trade-security investigation unit and other relevant agencies such as the Ministry of Trade, Industry and Energy. Therefore, once an investigation begins, the authorities can confirm the actual transaction structure and final destination through materials such as the following. Export declaration certificates for each vehicle Sales contracts and invoices Bills of lading and other shipping documents Emails and messenger records exchanged with overseas buyers Records of the vehicle's shipment and movement Records relating to the overseas buyer and final consignee Domestic and international remittance and payment records Transaction data stored on mobile phones and work computers In particular, even if the export declaration listed the transaction as being with Kyrgyzstan or Kazakhstan, if other materials show that the price was negotiated directly with a Russian buyer, or that shipment and transport were discussed on the premise of arrival in Russia, the investigative authorities may challenge the actual transaction structure. Conversely, if the vehicle was genuinely sold to an independent third-country company and the exporter was not aware, at the time of export, that it would be re-exported to Russia, it is necessary to organize the contractual relationships and transaction records that support this. In actual legal determinations as well, specific transactional circumstances — such as the transport route, price and payment terms, and whether the goods were used in or re-exported from the importing country — play an important role. Therefore, rather than simply explaining during an investigation that "I didn't know it was going to Russia," it is necessary first to examine what the contracts, communications, and flow of funds from that time actually show about the transaction. 4. What Penalties Can Apply If a Foreign Trade Act Violation Is Detected? Exporting or filing an export declaration for an item subject to situational licensing without obtaining that license can be subject to criminal punishment. Under the current Foreign Trade Act, Article 53(2) provides that a person who exports or files an export declaration for an item subject to situational licensing under Article 19-3 without obtaining that license shall be punished by imprisonment for up to five years or a fine of up to three times the value of the exported goods. [Foreign Trade Act Article 53 – Penalty Provisions] In addition, if a person exports an unlicensed item subject to situational licensing with the intent to promote the international proliferation of strategic items, imprisonment for up to seven years or a fine of up to five times the value of the goods may apply under Article 53(1) of the same Act. However, the seven-year imprisonment provision does not automatically apply to every Foreign Trade Act violation case. It must be separately confirmed whether the requirements of that specific provision are met, such as whether there was intent to promote international proliferation. Furthermore, if a person files an export declaration and actually exports goods without having obtained the required situational license, the offense of unlawful export under the Customs Act may be at issue together with the Foreign Trade Act violation. Article 270(3) of the Customs Act punishes exporting goods without satisfying the licensing or other conditions required by law, or satisfying those conditions through fraudulent means. [Customs Act Article 270] Therefore, when assessing the possibility of punishment, it is necessary to look not only at the export value, but also at whether the vehicle was subject to situational licensing at the time of export, who the actual buyer was and what the final destination was, and how the exporting company perceived these facts. 5. What Should You Do If You Have Already Exported, or Have Been Contacted by Customs or the Police? If an investigation has already begun, the first step is to identify the vehicles at issue and organize, vehicle by vehicle, the regulations that applied at the time of each transaction along with the actual transaction structure. It is advisable to organize the materials in the following order. ① First, identify the vehicles at issue Based on the export declaration certificate, organize information such as the vehicle registration number, vehicle type, engine displacement, HS code, export date, and destination country. Even vehicles exported by the same company cannot automatically be assumed to be subject to the same regulations, so each vehicle needs to be reviewed individually. ② Confirm the situational licensing rules that applied at the time of export The list of items subject to Russia-related situational licensing has been expanded several times. Current standards should therefore not be applied retroactively to past exports; whether an item is covered must instead be checked against the Public Notice on the Export and Import of Strategic Items that was in effect on the actual export date of each vehicle. ③ Organize the actual transactional relationship with the third-country buyer You should confirm who the buyer was under the contract, who actually paid for the vehicle, and whether the third-country company is a genuinely operating business. In particular, if the issue is whether the overseas counterparty merely served as a paper consignee, it is necessary to secure materials that can demonstrate the actual transaction. ④ Review communications and shipping records from the time of the transaction Rather than arbitrarily deleting or altering KakaoTalk, Telegram, WhatsApp, or email records, it is important to preserve them so that the circumstances of the transaction at the time can be verified. Invoices, bills of lading, and shipping records should also be organized together. ⑤ Organize the facts for each vehicle before questioning When multiple transactions are at issue, giving statements without distinguishing the transaction history of each individual vehicle can result in explanations that differ from what actually happened. Therefore, before questioning, you should at least separately organize, for each vehicle, whether it was subject to regulation, the buyer, the party who paid, the destination country, its subsequent travel route, and related communications. If you have already received a summons from customs or the police, or a search and seizure has taken place, you should not merely prepare an explanation that you "exported normally to Kyrgyzstan." Instead, you should first review which aspects are likely to become contested issues between the materials the investigative authorities have obtained and the actual transaction structure. 6. Frequently Asked Questions (FAQ) Q1. If a vehicle exported to Kyrgyzstan later ends up in Russia, will I automatically be punished? Not necessarily. A case in which the vehicle was genuinely sold to a Kyrgyz company that later resold it to Russia on its own initiative must be distinguished from a case in which the transaction was routed through Kyrgyzstan from the outset on the premise that it would be sold to Russia. Both the exporter's understanding of the final destination and the actual transaction structure must be examined together. Q2. Customs hasn't contacted me yet — can I review my past transactions in advance? Yes, you can. In particular, if you are continuing to export used cars to countries neighboring Russia, it is advisable to check in advance which vehicles in your past transactions were subject to situational licensing, and whether your end-user verification and transaction documentation are sufficient. For transactions currently in progress, it is necessary to confirm the item classification and whether a situational license is required before export. Q3. After a search and seizure, what should I do first? You should first check the alleged offenses and items listed in the warrant, as well as the materials actually seized. After that, you need to identify the vehicles and transactions at issue and compare the materials obtained by the investigative authorities with what actually happened, in order to organize your approach to giving statements before questioning. 7. Summary and Key Takeaways The mere fact that a vehicle was exported to a country neighboring Russia does not, by itself, establish a violation of the Foreign Trade Act. However, if a third country was used from the outset merely as a nominal destination on the premise that the goods would ultimately go to Russia, the investigation may extend beyond the contents of the export declaration to cover the actual buyer, the final destination, the flow of funds, and the entire transaction process. In these cases, it is important to review, vehicle by vehicle, both the regulations that applied at the time of export and the actual transaction structure. In particular, if you are facing an upcoming customs or police investigation, you should first organize how your contracts, invoices, shipping records, payment records, and messenger communications connect to the actual transaction. Decent Law Firm reviews all of these factors together — whether the vehicles at issue were subject to situational licensing, the actual transaction structure, the exporter's awareness of the final destination, and the materials obtained by the investigative authorities — to promptly work out a response strategy. If you have already received a summons to appear or a search and seizure has taken place, we recommend seeking professional assistance before your first round of questioning to organize the specific facts and prepare your response.
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Commercial Lease and Change of Use in Korea: Can the Lease Be Terminated If Business Operations Are Not Permitted?
A tenant may sign a commercial lease intending to operate a restaurant, café, convenience store, academy, or other specific business, only to later discover that the premises cannot legally be used for that purpose. This may occur because the building’s registered use does not permit the intended business, the required change of use cannot be approved, or separate business licensing requirements cannot be satisfied. In such cases, the landlord is not automatically liable simply because the change of use is unsuccessful. Whether the tenant may terminate the lease, recover the security deposit, or claim damages depends on factors such as the agreed purpose of the lease, the reason the intended business cannot operate, any contractual allocation of responsibility for permits and change-of-use procedures, and the representations made by the landlord before the lease was signed. Contents When a Change of Use Is Required What to Check Before Signing a Commercial Lease Landlord Liability When a Change of Use Is Not Possible Lease Termination and Return of the Security Deposit Damages for Interior and Business Preparation Costs Recommended Commercial Lease Clauses Frequently Asked Questions Key Takeaways on Commercial Leases and Change of Use 1. When Is a Change of Use Required for Commercial Premises? If the current registered use of a building differs from the tenant’s intended use, it is necessary to determine whether a change-of-use procedure is required under the Korean Building Act. Article 19 of the Building Act requires a building whose use is changed to comply with the building standards applicable to the intended new use. Depending on the type of change, approval, reporting, or an application to amend the building register may be required. [Article 19 of the Building Act – Change of Use] However, a change of use under the Building Act and a business-specific license or registration are separate legal issues. Even if the registered building use can be changed, the premises may still fail to satisfy requirements applicable to a restaurant, academy, or other regulated business. A prospective tenant should therefore confirm not only the current use shown on the building register but also whether the intended business can legally operate at the premises. 2. What Should Be Checked Before Signing a Commercial Lease? Before signing a commercial lease, the tenant should verify the registered use of the premises, whether the intended business can operate there, and who will bear responsibility for any change of use or licensing process. ?Key Checks Before Signing a Commercial Lease Item What to Check Building Register Current registered use of the premises Intended Business The specific business to be operated Change of Use Whether the required change can legally be made Building Standards Parking, fire safety, structural, and other requirements Business Licenses Whether permits, registrations, or reports required for the business are available Lease Agreement Who is responsible for permits, change of use, and related costs Special Clauses What happens if the tenant cannot obtain the required approval or operate the intended business Where a tenant is leasing premises for a specific business, it is generally preferable to state that purpose expressly rather than describing the premises only as a “commercial unit” or “store.” The purpose stated in the agreement may become an important factor if a dispute later arises over whether the premises were suitable for the intended use. 3. Is the Landlord Liable If the Change of Use Is Not Possible? If the premises cannot be used for the purpose agreed under the lease, the landlord’s contractual obligation to enable the tenant to use and benefit from the premises may become an issue. Article 623 of the Korean Civil Act requires a landlord to deliver the leased property and maintain it in a condition necessary for the tenant’s use and enjoyment during the lease term. [Article 623 of the Civil Act – Obligations of the Lessor] In Supreme Court Decision 2021Da202309, dated April 29, 2021, the lease expressly stated that the premises would be used as a convenience store, but issues relating to the building’s registered use interfered with normal business operations. The Supreme Court held that the condition in which leased premises must be provided should be determined in light of the agreed purpose and terms of the lease, and that the landlord’s obligation to maintain the premises in a usable condition does not automatically disappear merely because the landlord was unaware of the relevant defect. [Supreme Court Decision 2021Da202309, April 29, 2021] However, the landlord is not automatically liable whenever a change of use is denied. Relevant factors may include: the business purpose stated in the lease; whether the landlord knew the tenant’s intended business; whether the landlord represented that the business could operate at the premises; whether the problem arises from the building itself; and whether responsibility for permits or change-of-use procedures was allocated to a particular party. The central issue is whether the premises were leased for a specifically agreed business purpose and why that purpose became impossible to achieve. 4. Can the Lease Be Terminated If the Change of Use Is Not Permitted? If the inability to change the building use prevents the tenant from carrying out the business contemplated by the lease, termination of the lease may be considered. Where the tenant has already taken possession and used the premises, however, Korean law may treat the issue as termination with prospective effect rather than cancellation that retroactively unwinds the entire contractual relationship. In Supreme Court Decision 93Da61321, dated November 22, 1994, the tenant had taken possession of the premises but could not achieve the purpose of the lease because a legal restriction prevented the necessary change of use. The Supreme Court considered the continuing nature of the lease relationship and addressed the matter as one of termination rather than retroactive cancellation. [Supreme Court Decision 93Da61321, November 22, 1994] If the lease is validly terminated, the tenant may also seek the return of the lease security deposit upon returning the premises. Disputes may nevertheless arise over unpaid rent, restoration costs, or other amounts the landlord claims should be deducted from the deposit. 5. Can the Tenant Claim Interior and Business Preparation Costs as Damages? Where the landlord has breached a contractual obligation and the required elements for liability are satisfied, the tenant may consider claiming damages for losses such as interior construction costs. Article 390 of the Civil Act provides for damages where a party fails to perform its contractual obligations in accordance with the terms of the contract. [Article 390 of the Civil Act – Damages for Non-performance] Potential losses in a commercial lease dispute may include: interior construction costs; fixtures and equipment; demolition and restoration expenses; and expenses actually incurred in preparing permits or business registrations. However, not every expense incurred by the tenant will automatically be recoverable. The tenant must generally establish the connection between the landlord’s breach and the claimed loss, as well as the amount actually incurred. Construction agreements, tax invoices, bank transfer records, receipts, and similar documentation may therefore become important evidence. Claims for anticipated profits or lost business revenue generally require additional proof and should be considered separately from actual out-of-pocket expenses. 6. What Clauses Should Be Included in a Commercial Lease? Where the premises are being leased for a specific business, the lease should clearly address what happens if the required change of use or business license cannot be obtained. Relevant provisions may address: the specific business to be operated; whether a change of use is required; which party will handle the change-of-use procedure; allocation of related costs; the landlord’s obligation to provide documents or cooperation; termination rights if approvals are not obtained within a specified period; return of the deposit or other payments; and treatment of interior construction and restoration obligations. In particular, a general provision stating that “all permits and licenses are the tenant’s responsibility” may not adequately distinguish between regulatory issues relating to the tenant’s individual business and legal restrictions arising from the building itself. Where the ability to operate the intended business remains uncertain, the parties may consider expressly addressing termination and payment-return arrangements if the necessary approvals cannot be obtained. 7. Frequently Asked Questions Q1. If the lease says the premises will be used as a restaurant, must restaurant operations necessarily be permitted? The stated business purpose is an important factor, but it does not by itself determine liability. It is also necessary to consider whether the landlord knew the intended use, why the business cannot legally operate, and how the lease allocated responsibility for regulatory approvals. Q2. Is the landlord free from liability if the landlord did not know that the change of use was impossible? Not necessarily. A landlord’s lack of knowledge does not automatically eliminate the obligation to maintain the leased premises in a condition suitable for the agreed use. Whether damages may also be claimed requires a separate review of the requirements for contractual liability. Q3. What happens if neither the landlord nor the tenant is responsible for the inability to operate the business? If the contractual purpose becomes impossible to achieve for reasons attributable to neither party, Korean rules on risk allocation in bilateral contracts may become relevant. The result will depend on why the business became impossible and on the specific terms of the lease. Q4. What should a tenant do if interior construction has already been completed but the business license cannot be obtained? Before incurring additional expenses, the tenant should determine the exact reason the license cannot be issued and whether the problem can be corrected. The tenant should also preserve the building register, lease agreement, licensing documents, interior construction agreements, invoices, receipts, and communications with the landlord before assessing termination, deposit recovery, or damages. 8. Commercial Lease and Change of Use: Key Takeaways In a Korean commercial lease dispute involving a change of use, the registered use of the building is only one part of the analysis. The business purpose agreed between the landlord and tenant is also critical. If the parties entered into the lease for a specific business but a problem inherent in the building prevents that business from operating, issues such as lease termination, return of the security deposit, and damages may arise. However, the landlord is not automatically liable simply because a change of use cannot be completed. The lease agreement, special provisions, building register, reason for the licensing failure, representations made before signing, and records of actual expenditure should be reviewed together.
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2026 AML Reform in Korea: 3 Key Anti-Money Laundering Obligations Under the Revised FSCMA
The amended Korean Anti-Money Laundering law is no longer just a compliance issue for banks. It is rapidly becoming a core operational and governance issue for virtual asset businesses, fintech companies, and even certain professional service providers. The revised Act on Reporting and Using Specified Financial Transaction Information (commonly referred to as Korea’s AML law or “Special Financial Transactions Act”) was promulgated on February 19, 2026, and is scheduled to take effect on August 20, 2026. The amendments significantly strengthen AML obligations for Virtual Asset Service Providers (VASPs) and expand the overall compliance framework surrounding crypto-related transactions in Korea. This article outlines the three most important AML changes businesses should understand before the new rules take effect. What Is Korea’s “Special Financial Transactions Act” (특금법)? Korea’s AML framework is governed by the Act on Reporting and Using Specified Financial Transaction Information, which establishes reporting, monitoring, and internal control obligations designed to prevent: Money laundering Terrorist financing Illicit use of financial systems Under this framework, financial institutions and VASPs must identify suspicious transactions, verify customer information, maintain records, and implement internal AML controls. In practical terms, the law is designed to prevent criminal proceeds from entering or moving through the Korean financial system. 1. Stronger KYC and Transaction Monitoring Requirements The first major change is the expansion of customer due diligence and risk-based monitoring obligations. Under the revised rules, financial institutions and VASPs will be expected to verify not only customer identity, but also: Source of funds Purpose of transactions Beneficial ownership (BO) Ongoing transaction behavior and risk profile Electronic KYC (e-KYC), non-face-to-face identity verification, and real-time suspicious transaction detection systems are becoming effectively mandatory operational standards. The revised framework also strengthens the Risk-Based Approach (RBA) and Enhanced Due Diligence (EDD) requirements for high-risk customers and transactions. In other words, AML compliance in Korea is moving away from a simple “ID verification” model toward a continuous risk management model. For crypto exchanges and fintech operators, this means AML systems must function as active monitoring infrastructure rather than passive onboarding procedures. 2. Expanded Reporting Obligations and Stronger Travel Rule Enforcement The second major reform focuses directly on virtual asset transactions. Stricter Entry Requirements for VASPs Korean regulators are strengthening licensing and registration standards for virtual asset businesses. Proposed measures include enhanced screening of: Major shareholders Executives and management personnel Financial soundness and governance structures The regulatory approach increasingly resembles traditional financial institution supervision. Expanded Suspicious Transaction Reporting (STR) Proposed amendments to the enforcement decree and supervisory regulations would effectively require mandatory suspicious transaction reporting (STR) for certain virtual asset transactions exceeding KRW 10 million. The final regulations are expected to be confirmed around July 2026. Expansion of the Travel Rule Korea is also moving toward broader implementation of the Travel Rule. The proposed changes would: Expand sender/recipient information transmission requirements Increase the scope of covered transactions Impose additional verification obligations on receiving VASPs For VASPs operating in Korea, AML obligations are no longer limited to registration requirements. They are becoming a central factor affecting operational design, transaction processing, onboarding policies, and even fee structures. 3. Broader AML Accountability and Expansion to Professional Service Providers The third major reform concerns governance, accountability, and expansion of regulated entities. AML Officers Elevated to Executive-Level Responsibility Korean regulators are pushing to formalize AML reporting officers as executive-level positions. This means boards of directors and senior management will be expected to assume direct responsibility for AML governance and oversight. AML compliance is increasingly treated as a corporate governance issue rather than merely an internal compliance function. Formalization of AML Compliance Evaluations The amendments would also codify AML system evaluations into law. Participation in regulatory AML assessments may become mandatory, and penalties are expected for: Refusing to submit materials Providing false information Obstructing regulatory reviews Expansion to DNFBPs Korea is also formally considering AML obligations for Designated Non-Financial Businesses and Professions (DNFBPs), including: Lawyers Accountants Tax advisors The government has indicated that further amendments aligned with FATF standards are under discussion for 2026. This signals a broader regulatory trend: AML obligations are expanding beyond banks and crypto exchanges into the wider professional services ecosystem. What Should Companies Prepare Before August 20, 2026? With the revised law taking effect on August 20, 2026, companies have limited time to review and upgrade their AML frameworks. Financial institutions, fintech operators, and VASPs should now assess: Internal AML policies and procedures KYC and monitoring systems Transaction screening capabilities Governance and reporting structures Travel Rule compliance processes Risk-based customer classification systems For many businesses, the real legal risk will not come from the existence of AML obligations themselves, but from failing to implement operational systems that regulators consider “effective” in practice. If your company is preparing for Korean AML compliance, virtual asset regulation, or VASP-related legal risk management, the Virtual Asset Team at Decent Law Firm can assist with regulatory analysis, compliance structuring, and AML framework reviews.
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Front-Running in Korean Stocks: Where Does It Become Illegal? (A Complete Guide for Foreign Investors, Listed Company Executives, and Finance Professionals in Korea)
If you've been investing in Korean stocks, or working in Korea's financial industry, you've probably heard the term "front-running" (선행매매) come up more and more lately. It's not just an issue for stock YouTubers or chat-room operators. Listed company executives, fund managers, analysts, and even ordinary retail investors can find themselves caught up in it — whether as victims or, in some cases, unwitting participants. The Financial Supervisory Service (FSS) recently identified illegal activity across five YouTube channels and announced it would refer cases to prosecutors. The message is clear: the era of looking the other way is over. Here's what you need to know. 1. What Is Front-Running, Exactly? Front-running means trading on information that isn't yet public — getting in before everyone else does, and profiting when the news breaks. In the Korean market, it typically shows up in three ways. The first is the stock influencer model. A YouTuber or paid trading-room operator quietly buys shares in a stock, then recommends it publicly to subscribers. Once the price jumps, they sell. Subscribers who bought on the recommendation are left holding losses. The second is the corporate insider model. An executive or employee of a listed company learns about positive news — strong earnings, a major contract, an M&A deal — before it's disclosed, and buys shares in advance. Selling before bad news goes public to avoid losses falls into the same category. The third is the financial professional model. An analyst, fund manager, or trader uses advance knowledge of large institutional orders, upcoming research reports, or trading strategies to place personal trades ahead of the market. Under Korea's Financial Investment Services and Capital Markets Act (FSCMA), all three can constitute illegal use of material non-public information, market manipulation, or fraudulent trading — carrying criminal penalties, fines, and disgorgement of profits. 2. What Does "Illegal" Actually Mean Here? Regulators look at three things together: the nature of the information (was it material and non-public?), the person's relationship to that information (did they have it through their job or position?), and the timing of the trade. Critically, it doesn't matter whether the trade was ultimately profitable. Using the information to trade — full stop — is the issue. Some specific situations that have drawn enforcement action in Korea include paid subscription services where operators recommended stocks they already owned, auto-trading bots sold without the required investment discretionary license, and YouTube channels providing ongoing investment advice without registering as an investment advisory business (유사투자자문업). One thing worth noting for foreign investors: Korean regulators have been actively cooperating with overseas financial authorities. Cross-border cases are no longer treated as out of reach. 3. If You're a Retail Investor: Protect Yourself The two risks individual investors face are being victimized and, less obviously, being mistaken for a participant. Paid trading rooms (리딩방) on KakaoTalk, Telegram, or Discord can look legitimate on the surface. An operator might post screenshots showing they're "buying along with you" — but in practice, they bought earlier, at a lower price, and are waiting for your money to push the price up before they exit. Warning signs include offers to share profits if you hand over account access, hints about "tomorrow's pick" designed to get you in early, and channels that charge tiered monthly fees (anything from a few thousand won to hundreds of thousands) for stock tips. If you've suffered losses through one of these schemes, the standard path in Korea is: file a complaint with the FSS (금감원 민원), assess the viability of a civil damages claim, and if the facts support it, file a criminal complaint (고소·고발). 4. If You Work at a Listed Company or Financial Firm Front-running isn't just a personal liability issue — it becomes a corporate governance failure the moment a senior employee is involved. For listed companies, a single suspicious trade by an executive can crater market trust and share price, and regulators have been clear that internal control systems will be scrutinized alongside the individual. Strengthened disclosure rules around insider transactions mean "we dealt with it internally" is no longer a viable response. For securities firms, asset managers, and other financial institutions, the exposure is higher because information access is higher. Analysts, PMs, traders, and sales staff are structurally positioned to know things before the market does — and that's precisely why the compliance burden is heavy. One enforcement action can trigger licensing risk, reputational damage, and regulatory scrutiny across the entire firm. 5. The Minimum Your Company Should Have in Place Whether you're a small listed company or a mid-sized asset manager, the logic of "we're too small to be a target" is exactly how firms end up making headlines. On internal policy, you need a written definition of material non-public information, clear procedures for how it's handled, mandatory account disclosure and trade reporting requirements for employees and related parties, and blackout periods around disclosure events. On training and attestation, key departments — finance, strategy, IR, research, sales — should receive regular compliance training. New hires and newly promoted staff should sign attestations acknowledging their obligations. On monitoring, periodic review of employee and related-party trading patterns, and sampling of trades around disclosure events, is the baseline. On incident response, you should have a documented procedure covering internal investigation authority, communication standards for dealing with the FSS, Korea Exchange, and prosecutors, and a protocol for board and audit committee reporting. If You've Been Affected — or Want to Get Ahead of the Risk For individual investors who suspect they've been the victim of a front-running scheme, we assess the facts and advise on the realistic options across criminal, civil, and regulatory channels. For listed companies and financial firms, we offer a structured review covering internal policy gaps, employee training design, and a full incident response manual — including FSS, Korea Exchange, and prosecutorial engagement. If a suspicious trade has already been flagged internally, we can advise from the investigation stage through to external response. You don't need to have everything figured out before reaching out. A brief initial consultation is enough to get a clear picture of where the risk sits.
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Why AI Startups in Korea Need IT Legal Counsel
Before you build, make sure your service is structured to survive legally — not just technically. The Best Time for Legal Advice Is Before You Launch Getting an AI model up and running, connecting APIs, and opening a beta service can happen surprisingly fast. But building a service that is legally sustainable — one that properly addresses data use, privacy, copyright, and liability — is an entirely different challenge. Legal counsel is most effective not after development, but at the service planning and data architecture stage. A last-minute terms review before launch is a patch, not a solution. The following questions need to be answered before you write a single line of code. What data can you legally collect, store, and use for training? Is it legally safe to use customer data for model fine-tuning? Who owns the copyright to AI-generated outputs, and who is liable when things go wrong? Building a service without addressing these questions means going to market with structural vulnerabilities already baked in. 3 Regulatory Risks Every AI Startup in Korea Must Address As of 2026, the regulatory environment for AI startups operating in Korea has crystallized around three key areas. First, Korea's AI Basic Act is now in effect, introducing formal requirements around explainability, safety, and accountability for AI services. Second, the Personal Information Protection Commission has introduced punitive fines and class action mechanisms, making data incidents an existential risk rather than a compliance footnote. Third, when your infrastructure combines third-party AI APIs with cloud and SaaS tools, failing to clearly define terms, licensing boundaries, and liability exposure means that in any dispute, the startup absorbs all the risk while platform providers walk away unaffected. If Any of These Apply to You, Get Legal Advice Now You should seek IT legal counsel if you are in any of the following situations. You are designing a data collection or AI training pipeline for a new service You are providing B2B white-label or custom solutions built on third-party AI APIs Your Terms of Service or Privacy Policy do not accurately reflect how your service actually works Your B2B contracts have unclear SLA terms, liability caps, or IP ownership provisions You have already launched but feel uncertain about your data, contract, or terms structure The assumption that "we can fix it after launch" is a costly one. The larger your service grows, the more expensive and disruptive it becomes to restructure the legal foundation underneath it. How Decent Law Firm's Corporate Legal Team Works Decent Law Firm goes beyond reviewing contracts and terms in isolation. We take an integrated approach — examining your service architecture, data flows, and business model together to identify and address legal risks before they become problems. Service structure and data flow analysis AI, privacy, and contract risk mapping Terms of Service, Privacy Policy, and internal policy review B2B and SaaS contract structure design Legal structuring for investment readiness and international expansion If you are building an AI service or have already launched but are uncertain about your legal structure, contact Decent Law Firm today.
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Setting Up a Company in Dubai: Mainland, Freezone, and Tax Structure Explained
Inquiries about setting up a company in Dubai have increased noticeably in 2026. The ability for foreigners to hold 100% ownership, a relatively streamlined incorporation process, and a wide range of Free Zone options have made Dubai a particularly attractive destination for businesses in IT, fintech, and digital assets. Mainland, Freezone, Offshore — What Is the Difference? Dubai company structures fall into three main categories. A Mainland company is essentially a standard operating entity that can trade directly in the local UAE market. A Free Zone company offers 100% foreign ownership, packaged licensing options, and bundled office and visa arrangements — making it the most popular choice among Korean businesses. An Offshore company is generally used for holding structures, investment vehicles, or asset management purposes rather than local operations, and is typically only considered when the purpose is clearly defined. Type Key Features Best For Mainland Direct access to UAE local market; local sponsor may be required depending on industry Local retail, F&B, service businesses Freezone 100% foreign ownership, tax benefits, straightforward visa processing IT, trading, consulting — most popular among Korean companies Offshore No local operations permitted; used for holding and asset management Holding companies, investment vehicles, asset management The 9% Corporate Tax Era — Are Free Zones Still Tax-Efficient? The old assumption that Dubai means zero corporate tax no longer tells the full story. The UAE has introduced a federal corporate tax of 9%, which applies in principle to all Dubai-registered companies. However, Free Zone entities that meet certain conditions may still qualify for a 0% tax rate on specific categories of income. The key point is that Free Zone status does not automatically guarantee a 0% rate. The outcome depends on which Free Zone is selected, where the revenue is generated and from which clients, and where the actual staff and office are located. This is why tax structuring should be part of the incorporation process from the outset, not an afterthought. What to Check Before Choosing a Free Zone Selecting a Free Zone based solely on cost can create serious complications down the line — particularly when it comes to license renewals and opening a corporate bank account. Industry fit: For crypto and Web3 businesses, a Free Zone with a well-developed regulatory sandbox (such as those aligned with VARA) is essential. Operational substance: Consider the office requirements, the number of visas needed, and how demanding ongoing compliance will be in practice. Scalability: Whether the business is service-based or trade-focused will determine which type of license is appropriate — and the right answer varies significantly between the two. Why Crypto and Web3 Projects Choose Dubai Establishing a Dubai entity goes beyond simply setting up an overseas company. It is closer to building a global base of operations — a hub through which to engage international partners, exchanges, and investors. In practice, a common structure involves a Korean entity handling development and operations, while the Dubai entity serves as the contracting and relationship hub for global counterparties. How the token issuance vehicle is structured will significantly affect the regulatory, tax, and governance picture, making early-stage design essential. Decent Law Firm's International Practice Team Decent Law Firm's international practice team provides integrated structural design that accounts for international tax, foreign exchange regulations, and digital asset compliance — drawing on hands-on experience with Dubai Free Zones, local banks, and regulatory authorities. This is not a filing service. We work with clients to design a structure across Korea, the UAE, and other jurisdictions that minimizes risk and maximizes utility. If you are considering a Dubai entity — even at the early idea stage — please reach out, and we will map out the options that fit your situation.
