With less than a month until South Korea abolishes its Prosecution Service and launches a new Public Prosecution Office and a Serious Crimes Investigation Agency, major financial crime cases have fallen into a transitional gap, leaving victims increasingly confused. Because success in financial crime investigations hinges on rapid account tracing and search-and-seizure operations, a delay in opening cases while jurisdiction remains unsettled could hamper the gathering of evidence. Concerns are also mounting over whether specialized personnel and investigative expertise will be properly transferred to the new agency, which takes over jurisdiction for serious financial crimes starting next month.
Confusion over which body will handle large financial crime cases has emerged ahead of the Prosecution Service's abolition, legal sources said on the 13th. Even when complaints are filed with prosecutors, practical constraints make it difficult to open new direct investigations with less than a month left before the organization is dissolved. Referring cases to the special judicial police unit at the Financial Supervisory Service is another option, but because the system under which prosecutors direct that unit's investigations is changing along with the end of prosecutorial investigative powers, swift case handling may prove difficult during the transition.
Passing cases to the Serious Crimes Investigation Agency would not immediately close the gap either. Investigations could be delayed by at least three weeks until the agency opens. Even after it begins operating, it remains unclear whether it will be able to immediately launch compulsory measures such as large-scale raids and account tracing if its offices, computer networks and case management systems are not sufficiently in place.
Financial and securities crimes in particular can suffer greater harm from investigative delays than ordinary criminal cases. In market manipulation, unfair trading and large-scale financial fraud, the key is tracing fund flows quickly and securing account and electronic records early. If cases drift for long periods, funds may be moved or records may disappear, making it far harder to prove wrongdoing.
The recent move by investors in a 32 billion won ($23 million) Joongang Group bond case to demand a direct prosecution investigation illustrates the situation. On the 8th, 319 investors filed a complaint with the Seoul Southern District Prosecutors' Office against 20 people, including Joongang Holdings Chairman Hong Seok-hyun, Joongang Group Vice Chairman Hong Jung-do and other members of the controlling family as well as officials at financial firms, alleging violations of the Capital Markets Act. The investors argue that prosecutors should handle the case directly given its scale and unusual nature, and that if opening an investigation proves unrealistic, the case should be swiftly referred to the FSS special judicial police so that compulsory measures such as raids can proceed.
Lee Bok-hyun, the former FSS governor who leads the investors' legal team, said financial crime cases involving large numbers of victims have typically been taken up by prosecutors or the FSS on their own initiative, but that did not happen this time. "As the judicial system undergoes major change and investigative authority is scattered across multiple agencies, the range of matters victims must handle themselves has widened," Lee said.
Legal experts say that even after the new agency launches, it will not be easy to inherit the Prosecution Service's financial crime investigation capacity in a short period. The biggest problem cited is a shortage of specialists in financial investigations. A lawyer who formerly worked at the joint investigation unit for financial and securities crimes said assessments suggest that few of the prosecution personnel who applied to move to the new agency have extensive experience investigating financial cases.
Another variable is that some existing financial investigation personnel are moving to the FSS rather than the new agency. Amid expectations that the center of gravity in financial investigations will shift to the FSS special judicial police after the Prosecution Service is abolished, specialists are being dispersed across multiple institutions. In the FSS's recruitment of specialist and experienced hires at grades 4 and 5 last month, six people from the prosecution were selected. A number of investigators from the Seoul Southern District Prosecutors' Office, which has specialized in financial crime investigations, also applied and took part in interviews.
Some worry that if specialized personnel and accumulated investigative expertise are not sufficiently transferred to the new agency, the capacity to investigate large-scale economic crime could weaken. After a joint investigation team for financial and securities crimes was disbanded in 2020, the average number of people indicted and detained on related charges fell to 1.6 in 2020 from 5.2 in 2018 and 2019.
One legal official said there are concerns even among prosecution personnel who applied to move to the new agency that financial investigation units will become a demanding posting with a heavy workload. "It could take considerable time for the agency to build capital markets crime investigation capacity at the level prosecutors have now," the official said.
