Why Are the Police and Prosecutors Expanding the Application of the Crime Syndicate Organization Act? ... From Jeonse Fraud to Leading Investments

The Suwon District Prosecutors' Office indicted a total of eight individuals, including one ringleader and seven members of an organization, on charges of organizing, joining, and participating in a criminal group for embezzling a large sum of money by sending fraudulent text messages promising high returns on investments on the 6th.

They lured investors by sending messages such as "selecting stock and coin items for investment, guaranteeing a 2% daily return on transaction amounts," extorting approximately 1.25 billion KRW from 12 victims.

Seoul Seocho-dong Supreme Prosecutors' Office.

Previously, the police had transferred the case applying charges of fraud and violations of the Information and Communications Network Act, but the prosecution added charges related to organizing a criminal group, conducted further investigations, and included these charges in the indictment.

Guk Sang-woo, chief prosecutor of the Criminal Division 4 at Suwon District Prosecutors' Office, who led the investigation, stated, "This case involves separating the fraud charges against five victims and the charges of organizing a criminal group aimed at committing fraud or violations of the Information and Communications Network Act against an unspecified number of victims. Initially, the case was transferred only on fraud charges, but during the investigation, it was determined that charges related to the criminal group could be recognized. Therefore, the ringleader was indicted for organizing a criminal group, and the other members were indicted for joining and participating in the criminal group."

The Incheon District Prosecutors' Office applied charges of organizing, joining, and participating in a criminal group when indicting A, a so-called "Construction King," who owned 2,700 small-scale houses in the Michuhol District of Incheon and embezzled about 30.5 billion KRW in jeonse deposits from 372 people, along with real estate agents involved in the crime. This is the first case in which the prosecution applied the legal theory of "criminal group" to a jeonse fraud organization.

A operated several real estate agencies and managed them through a 'brokerage team,' dividing roles and ranks such as general manager, director, and team leader, and repeatedly committed jeonse fraud through systematic organizational management, including performance-based bonuses.

Criminal Groups under the Criminal Act or Criminal Organizations under the Act on the Punishment of Violent Crimes... Less Stringent Requirements than Violent Crime Organizations

The crime of organizing a criminal group is stipulated in the Criminal Act and the Act on the Punishment of Violent Crimes (Violent Crime Punishment Act). Previously, there was a provision in the Act on the Aggravated Punishment of Specific Crimes that imposed heavier penalties for groups or organizations formed for theft, but this was deleted in the 2013 amendment.

The Violent Crime Punishment Act applies to violent organizations formed for purposes such as group assault or habitual assault. An example is the 'Sunoa faction' case, where 39 members were indicted by the Seoul Central District Prosecutors' Office on the 30th of last month for causing disturbances at the Grand Hyatt Hotel in downtown Seoul.

On the morning of the 30th of last month, Shin Junho, head of the Violent Crime Investigation Division at the Seoul Central District Prosecutors' Office, announced the investigation results of the Sunoa-pa gang disturbance incident at the Hyatt Hotel at the Seoul High Prosecutors' Office.

Article 4 of the Violent Crime Punishment Act stipulates that the leader of a violent organization is punishable by "death, life imprisonment, or imprisonment for 10 years or more," executives by "imprisonment for 7 years or more," and other members by "imprisonment for 2 years or more." Due to the severity of the penalties, courts strictly examine requirements such as the organization's "manifesto" and "command and control system."

In contrast, criminal groups or criminal organizations under the Criminal Act are punished according to the statutory penalties for the crimes they were originally formed to commit.

Article 114 of the Criminal Act (Organization of Criminal Groups, etc.) states, "A person who organizes a group or organization or joins or participates as a member thereof for the purpose of committing a crime punishable by death, life imprisonment, or imprisonment for four years or more shall be punished by the penalty prescribed for the intended crime. However, the sentence may be mitigated."

For example, if a criminal group is formed for the purpose of fraud, the punishment is the same as for committing fraud: "imprisonment for up to 10 years or a fine of up to 20 million KRW."

Because the crime of organizing a criminal group is designed to punish preparatory stages before the actual commission of the intended crime, and because the penalty is equal to or even heavier than that for the actual crime, there are views that it is unconstitutional to punish conspiracy or preparation as if it were the consummated crime.

However, since organizing or joining a group for the purpose of committing crimes removes individual inhibitions and facilitates planning and execution due to the organizational structure, the prevailing view in criminal policy is that it is necessary to preemptively eliminate the special risks of organized crime.

In 2017, the Supreme Court affirmed lower court rulings recognizing the establishment of a criminal group under the Criminal Act for a voice phishing fraud organization.

At that time, the first and second instance courts found the following: ▲ a clear common purpose to commit fraud; ▲ hierarchical positions among members, including ringleader, middle managers such as directors, directors, team leaders, and simple members such as counselors; ▲ a command and obedience system according to members' positions; ▲ efficient division of roles according to positions; ▲ although there was no explicit internal regulation like a manifesto seen in violent crime organizations, criminal groups can be established and maintained in various forms without requiring a clear manifesto (citing Supreme Court precedents); ▲ counselors had specific working hours and locations, continuously performed assigned fraudulent acts, and were paid based on performance, indicating internal discipline binding members; ▲ the organization maintained a command system based on economic interests; ▲ it was not a temporary group formed for a single fraud but a continuous organization targeting an unspecified number of victims, existing for over a year from late 2013 to around December 2015; ▲ the indicted members numbered 78, indicating a scale and system sufficient to be considered a group. Based on these, the court recognized guilt for organizing, joining, and participating in a criminal group.

Meanwhile, courts apply more relaxed standards to criminal groups under the Criminal Act compared to violent crime organizations under the Violent Crime Punishment Act. Notably, the 2013 amendment introduced the concept of "criminal groups" in addition to "criminal organizations" in the Criminal Act. For criminal groups, establishment is recognized if requirements such as "common purpose of committing crimes," "system capable of repeated criminal acts," and "organizational structure" are met.

Seung Jae-hyun, Senior Research Fellow at the Korea Institute of Criminology and Justice Policy.

Seung Jae-hyun, senior researcher at the Korea Institute of Criminology and Justice Policy, said, "After South Korea joined the United Nations Convention against Transnational Organized Crime on December 13, 2000, the provisions on organizing criminal groups in the Criminal Act were amended in 2013," adding, "the law was revised to allow punishment of 'criminal groups' that do not reach the level of 'criminal organizations' but pose significant risks."

He continued, "To recognize a criminal organization, internal discipline and a command system based on organized, collective decision-making are required, but criminal groups do not necessarily require internal discipline or command systems," explaining, "It is sufficient that multiple people gather to form a group and have role divisions among them."

Concurrent Crimes with Intended Crime... Sentence Increased up to Half of the Maximum Term

The crime of organizing a criminal group, originally applied mainly to organized crime cases, has gradually expanded since the 2010s to include voice phishing, drugs, jeonse fraud, and leading investment fraud.

The reason police and prosecutors increasingly apply the crime of organizing a criminal group is primarily because it allows for heavier punishment of serious offenders. A representative example is Jo Joo-bin and his group, operators of the "Doctor's Room," who distributed child sexual exploitation materials.

Under the Criminal Act, when multiple crimes are committed, there are two types: "ideal concurrence," where one act constitutes multiple crimes, and "real concurrence," where separate acts constitute multiple crimes.

Ideal concurrence occurs, for example, when driving without a license while intoxicated, where one act of driving constitutes two crimes: drunk driving under the Road Traffic Act and unlicensed driving. The Criminal Act prescribes punishment according to the heaviest penalty among the crimes.

In contrast, real concurrence applies when a perpetrator breaks into a victim's home, steals property, and commits a sexual crime. In this case, the Criminal Act allows the sentence to be increased up to half of the maximum term or fine of the heaviest crime, unless the heaviest crime's penalty is death, life imprisonment, or life imprisonment with labor.

For example, the statutory penalty for fraud is "imprisonment for up to 10 years or a fine of up to 20 million KRW," but if charges of organizing or joining and participating in a criminal group to commit fraud are added, the punishment can increase to "imprisonment for up to 15 years or a fine of up to 30 million KRW."

Application of the Act on the Confiscation and Recovery of Proceeds from Corruption... Possible Restitution to Victims

Besides enabling heavier punishment, another reason police and prosecutors expand the application of the crime of organizing a criminal group is that it helps victims recover their losses.

Senior researcher Seung Jae-hyun said, "If recognized as organizing a criminal group, under the Act on the Confiscation and Recovery of Proceeds from Corruption, the criminal proceeds can be returned to victims," adding, "For example, applying the crime of organizing a criminal group to jeonse fraud aims not only to impose heavier punishment but also to return the lost jeonse funds to young victims."

Basically, criminal proceeds are confiscated and revert to the state treasury. However, Article 6(2) of the Act on the Confiscation and Recovery of Proceeds from Corruption (Special Cases on Property of Crime Victims) stipulates that "confiscated or collected criminal victim property under this Act shall be returned to the victims."

Article 2(3) of the same Act defines "criminal victim property" as "property acquired from victims or property obtained through possession or disposition of such property in connection with criminal acts listed in the annex of this Act." Among these, item (a) lists "cases where crimes were committed by organizing a criminal group under Article 114 of the Criminal Act" as one type.

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