What is fraud?
Fraud is defined in Article 347 of the Korean Criminal Act.
(1) A person who deceives another and thereby receives property or obtains pecuniary advantage shall be punished by imprisonment for up to 10 years or a criminal fine of up to KRW 20 million. <Amended Dec. 29, 1995>
(2) The same punishment as in the preceding paragraph applies to a person who, by the method described in that paragraph, causes a third party to receive property or obtain pecuniary advantage.
Types of fraud
Fraud is classified by the method and the target. These include simple fraud, computer-related fraud, quasi-fraud, unauthorized use of facilities, unjust enrichment, and habitual fraud, and the sentence is determined by the monetary scale of the fraud.
Elements of fraud
1. Deceptive act
A deceptive act means conduct that leads the other party into a mistaken belief.
2. Disposition based on the mistaken belief
Through the deceptive act, the other party is led into a mistaken belief, and the causal link to the resulting disposition is important.
3. Pecuniary gain
Through the disposition made under the mistaken belief, the offender must receive property or obtain a pecuniary gain.
4. Intent
As a general principle, all of criminal law assesses whether an offense was committed intentionally, and recognizes as a crime only those cases in which intent was present.
Because fraud falls under criminal law, it is not treated as a criminal offense in the absence of intent.
These elements are assessed in a general and objective manner, taking into account the specific circumstances of the case, such as the situation at hand and the knowledge and character of the victim and the offender.
Sentencing standards for fraud
The sentencing standards for ordinary fraud are as follows.
Where the conduct is found to be organized fraud, the sentencing standards are as follows.
The point in time used to assess fraud
Fraud is assessed based on the circumstances as they stood at the time of the conduct in question.
Taking a loan as an example, there is case law holding that if the borrower had both the intention and the ability to repay at the time of the transaction, then even if they later fail to repay, they are deemed not to have committed a deceptive act and are not prosecuted for fraud.
Supreme Court Decision 2012Do14516, decided Apr. 28, 2016
Fraud and default on debt
People often confuse the requirements for fraud with those for default on debt.
Fraud is a form of criminal liability defined under criminal law, whereas default on debt is a form of civil liability defined under civil law
Civil liability and criminal liability
In the case described above, no criminal liability for fraud arises, but civil liability for default on debt may still be established.
Fraud carries criminal liability, and if criminal liability is established it results in a criminal record, leaving a record of having been punished.
Default on debt, by contrast, carries civil liability and is defined in Article 390 of the Korean Civil Act.
Article 390 of the Korean Civil Act (Default on debt and damages) If a debtor fails to perform in accordance with the terms of the obligation, the creditor may claim damages. This does not apply, however, where performance has become impossible without any intent or negligence on the debtor's part.
The biggest difference between criminal liability and civil liability is that criminal liability carries criminal punishment, such as the death penalty, imprisonment, or a criminal fine, while, civil liability results in liability for damages.
Furthermore, when it comes to assessing intent, criminal liability does not impose punishment where intent is absent, unless there is a separate provision allowing it.
In civil liability, however, there is no distinction between intent and negligence.
Why is criminal litigation necessary?
Even if the victim prevails in criminal litigation, the offender is criminally punished but the victim gains no direct benefit.
However, pursuing criminal litigation brings several additional benefits along with it.
In fraud cases, the offender often has no ability to make repayment.
But if the offender is criminally punished, the resulting criminal record for fraud may make it more difficult for them to obtain individual rehabilitation or personal bankruptcy later on.
In addition, because criminal litigation involves mitigating factors such as the victim's expressed wish not to have the offender punished, the victim may gain a benefit through a settlement with the offender.
That said, because the elements of fraud are assessed according to the circumstances of each case, we recommend consulting a criminal defense attorney.
