Retired Financial Authorities: Reemployment Reviews Are Ineffective

Employment Review by Public Officials Ethics Committee
Approximately 98% Approved Since 2017
Review System Virtually Ineffective

[Asia Economy Reporters Jihwan Park and Chaeun Koo] Since 2017, 97.8% of former financial regulators seeking reemployment have been approved through employment screening.

On the 5th, Asia Economy conducted a full survey of employment history disclosures posted on the Public Service Ethics System and found that from 2017 until last month, there were a total of 92 employment screening cases for retirees from the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS). Under the current Public Service Ethics Act, individuals subject to asset disclosure are prohibited from working for companies of a certain scale or larger that are closely related to their previous duties for three years after retirement. However, reemployment is allowed if the Public Service Ethics Committee confirms no employment restrictions or grants employment approval.

The number of employment screening cases for retirees from financial authorities has been increasing annually. The cases rose from 7 in 2017 to 11 in 2018, 18 in 2019, and 35 last year, a fivefold increase over three years. Up to June this year, 21 cases have occurred. By institution, the FSS accounted for 73 cases and the FSC for 19. Of the total 92 screening applications from retirees of these institutions, 90 were approved for employment. The approval rate for employment was 97.8%. The only cases of disapproval were two from the FSC (in 2018 and 2019). The FSS approved all applicants who requested screening.

Recently, attention has focused inside and outside the financial sector as a deputy director of the FSS Fintech Field Advisory Group sought to move to Upbit, a virtual asset exchange. Although virtual asset exchanges are not supervised institutions of the FSS, concerns about conflicts of interest arose. However, the Ethics Committee judged that employment as the head of customer protection at Dunamu was possible for this deputy director, considering the relevance of duties. Virtual asset exchanges have only recently become subject to employment restriction screening for retirees. In a written response to Yoon Chang-hyun of the People Power Party, a member of the National Assembly’s Political Affairs Committee, the FSC stated that virtual asset operators must undergo employment screening if they meet criteria such as capital of 1 billion KRW and annual gross transaction volume of 10 billion KRW or more. Based on this standard, Dunamu has been subject to employment screening since last year, and Bithumb since this year.

Voices are growing that the employment screening system for public officials after retirement is effectively becoming meaningless. This is because the vast majority of cases involve employment in areas highly related to previous duties, yet the approval rate exceeds 97%. In fact, looking at the employment screening applications for the FSS and FSC, the FSS cases were mostly in the financial sector (50%) and related organizations such as the Korea Financial Investment Association (16%). The FSC cases were mostly related organizations (53%) and financial companies (21%).

Professor Sangbong Kim of Hansung University’s Department of Economics pointed out, "Ethics Committee members are public officials but not experts in the relevant fields. Experts from the actual fields should participate in the judgment of related organizations, and consideration should be given to how much influence the individual might exert on financial authorities after employment." A representative from the People’s Solidarity for Participatory Democracy emphasized, "Currently, employment screening itself is conducted under the shadow of the Ministry of Personnel Management. To prevent lenient screening, an independent third-party institution should be responsible for employment screening."

Professor Taeyoon Sung of Yonsei University said, “Since issues related to virtual assets are ongoing, strict screening and appropriate review of employment should be conducted when moving from supervisory authorities.” On the other hand, Oh Jung-geun, president of the Korea Financial ICT Convergence Society, said, "If reemployment screening was conducted strictly considering the nature of the work, it would not be a big problem. In the case of virtual asset exchanges, there is likely a strong connection with the FSC or the Financial Intelligence Unit (FIU).”

This content was produced with the assistance of AI translation services.