Corporate Card Misuse Detection and Legal Response: Complete Guide for South Korea

K&P Law Firm has accumulated expertise in this field by handling numerous cases of breach of trust involving corporate card misuse by company CEOs in South Korea over the past several years. The cases we have handled fall into two main categories. First, cases where shareholders, investors, or directors prosecute corporate CEOs, and second, cases defending CEOs who have been prosecuted. We also have cases where we analyzed corporate card usage records at the request of company shareholders, uncovered illegal activities, and led to the voluntary resignation of the CEO.

1. Legal Meaning of Corporate Card Misuse in South Korea

Corporate card misuse goes beyond simple accounting errors or moral lapses and can constitute breach of trust, a serious criminal offense under South Korean law. With increasing demands for ESG management and corporate transparency, this issue has emerged as a key risk in corporate governance.

Definition of Corporate Card Misuse

Corporate card misuse refers to the use of a corporate credit card for personal purposes unrelated to company business. This has the following characteristics:

• Subject: Employees with corporate card usage authority (mainly CEOs and executives)
• Object: Company assets (corporate card credit limit)
• Action: Card usage for personal purposes
• Result: Financial damage to the company

Related Laws in South Korea

Criminal Act Article 356 (Breach of Trust in Business)
A person who processes affairs of another and obtains property benefits or causes a third party to obtain such benefits in violation of his duties, thereby causing damage to the principal, shall be punished by imprisonment for not more than five years or by a fine not exceeding 15 million won.

2. Methods for Securing Corporate Card Usage Records

To prove corporate card misuse, securing specific usage records is absolutely critical. No matter how much suspicion exists, legal action is impossible without objective usage records. K&P Law Firm has actual experience in securing corporate card usage records through various methods.

Direct Request as Shareholder

K&P Law Firm has cases where we requested and received card usage records from joint-stock companies as investors and shareholders, analyzing them accordingly. This method is most efficient when the company maintains a cooperative attitude.

Key points when requesting as a shareholder:

• Specific presentation of justifiable reasons: Present reasonable grounds for suspicion, not mere curiosity
• Limit to minimum necessary scope: Restrict scope to specific periods and specific items
• Duty of care of a prudent manager: Emphasize that this is legitimate exercise of supervisory rights as a shareholder

Compulsory Acquisition Through Courts

K&P has experience in securing credit card usage records by applying to the court for “provisional disposition for inspection and copying of account books” as part of shareholders’ right to inspect account books (Commercial Act Article 466) when companies do not voluntarily provide corporate card usage records.

Key Points When Applying for Provisional Disposition

• Right to be preserved: Shareholders’ right to inspect account books
• Need for preservation: Concerns about data concealment or evidence destruction
• Specific evidence: Present specific grounds for reasonable suspicion, not mere doubts

Utilization of Internal Whistleblowing and Tips

K&P has numerous experiences where usage records were secured through tips from internal employees:

• Conscience declarations by accounting staff
• Eyewitness testimony from fellow employees
• Discovery during internal audit processes

In such cases, whistleblower protection and ensuring evidence legitimacy are crucial.

3. Actual Detection Cases and Analysis by Type

Through cases actually handled by K&P Law Firm, we will examine in detail the types of corporate card misuse that frequently occur.

Education Fee-Related Misuse

K&P Case: A case where a CEO used a corporate card to pay for their child’s English academy fees over an extended period

Legal Issues:

• Education fees are clearly personal expenses
• No business relevance whatsoever
• Intent clearly demonstrated through continuous and repeated use

Personal Office Supply Purchases

K&P Case: A case where high-end printers, personal laptops, desks, etc. were purchased with a corporate card and delivered to a home address

Legal Issues:

• While remote work justification is possible, actual place of use is important
• Personal address delivery suggests personal use
• Criteria for distinguishing between business and personal use

Proof Points:

• Confirmation of delivery records
• Proof of actual place of use
• Review of business necessity

Personal Shopping During Business Trips

K&P Case: A case where a personal luxury watch was purchased at a duty-free shop during a business trip abroad

Legal Issues:

• Even during business trips, purchasing personal luxury items constitutes personal use
• Need for clear distinction between business-related expenses and personal expenses
• Differentiation from entertainment expenses or business supplies

Family-Related Expenses

K&P Case: A case where corporate cards were continuously used for personal family gatherings, birthday parties, ancestral rites, etc.

Legal Issues:

• Distinction between business entertainment expenses and personal family meal expenses
• Importance of participant composition and purpose
• Relevance to company business

Family Travel Expenses

K&P Case: A case where round-trip airfare for four family members for a Jeju Island family trip was paid with a corporate card

Legal Issues:

• Clear distinction between personal travel and business trips
• Accompanying family travel expenses are clearly personal use
• Business relevance of travel purpose and schedule

Common Pattern Analysis

Common characteristics of these cases handled by K&P:

1. Continuity and repetition: Continuous patterns, not one-time mistakes
2. Clear intent: Intentional use, not mistakes or errors
3. Concealment attempts: Vague or false recording of usage purposes
4. Post-hoc rationalization: Forced claims of business relevance after detection

4. Key Elements of Legal Proof

There is a significant difference between mere suspicion and legal proof. Courts require specific and objective evidence.

Objective Proof of Personal Use

Analysis of Purchased Item Nature:

• Whether items are clearly for personal use
• Relevance to company business
• Objective judgment of business necessity

Timing and Location of Use:

• Use outside working hours or on holidays
• Use at locations unrelated to business

Delivery and Receipt Information:

• Delivery to personal addresses rather than company
• Personal receipt cases
• Relationship between delivery time and working hours

Proof of Lack of Business Relevance

Review of Business Necessity:

• Whether the expense was necessary for company business
• Whether there are past expense cases for similar business
• Whether alternative company assets were available

Absence of Approval Procedures:

• Compliance with prior or post-approval procedures
• Proper procedure implementation according to company internal regulations
• Approval from relevant departments or superiors

Appropriateness of Accounting Treatment:

• Whether processed under correct account titles
• Whether usage purpose was accurately recorded
• Whether related supporting documents were properly attached

Elements Proving Intent

Recognizability:

• Situations where personal use could be sufficiently recognized
• Expenses clearly unrelated to business
• Cases judgeable by common sense

Repetition and Continuity:

• Continuous use, not accidental mistakes
• Certain patterns or periodicity

5. Response Strategies for Victims

We will examine systematic response measures from the perspective of companies or shareholders who have suffered corporate card misuse damage.

Evidence Collection Phase

Systematic Usage Record Analysis:

• Pattern identification through chronological analysis
• Distinction between suspicious and normal transactions
• Classification analysis by amount, industry type, and time period

Related Supporting Document Acquisition:

• Detailed credit card usage statements
• Receipts or slips for individual transactions
• Delivery records, courier receipts
• Payment approval text messages
• Email or messenger conversation content

Witness and Reference Person Acquisition:

• Eyewitness statement acquisition
• Testimony from related employees
• Statements from transaction counterparts (when necessary)

Legal Response Phase

Sending Certified Mail:

• Request for fact verification
• Request for damages compensation and restitution
• Request for cooperation in additional investigation
• Notice of legal action

Criminal Complaint Preparation:

• Organization of specific suspected facts
• Attachment of related evidence materials
• Calculation and specification of damage amount
• Preparation and submission of complaint

Damage Recovery Phase

Civil Lawsuit Filing:

• Preparation of damages compensation lawsuit
• Accurate calculation of damage amount
• Review of delay damages and consolation money claims

Preservation Disposition Application:

• Prevention of asset concealment through attachment application
• Identification of target assets including real estate, deposits, salaries
• Ensuring effectiveness through prompt procedure progress

Strengthened Accounting Audit:

• Establishment of internal control systems for recurrence prevention
• Establishment of regular audit systems
• Revision of corporate card usage regulations

6. Defense Strategies for the Accused

We will examine defense strategies when prosecuted for corporate card misuse.

Initial Response Strategy

Immediate Restitution Measures:

• Priority restitution of damage amount even if disputed
• Securing favorable sentencing factors
• Keeping open possibility of settlement with victims
• Expression of sincere repentance

Accurate Organization of Facts:

• Distinction between objective facts and subjective interpretations
• Chronological organization of accurate circumstances
• Collection and preservation of related evidence materials
• Securing witness or reference person statements

7. Corporate Prevention and Internal Control Measures

We will examine preventive measures and internal control methods to fundamentally prevent corporate card misuse.

Establishment of Institutional Mechanisms

Codification of Corporate Card Usage Regulations:

• Specific specification of usable scope and purposes
• Clear enumeration of prohibited usage items
• Clear regulations on approval procedures and authorities
• Specification of disciplinary and punishment standards for violations

Introduction of Prior Approval System:

• Mandatory prior approval for usage above certain amounts
• Hierarchical distribution of approval authority
• Post-approval procedures for emergency use
• Appeal procedures when approval is denied

Regular Audit Implementation:

• Monthly or quarterly comprehensive usage record investigation
• Random sampling survey implementation
• Independent audit through external accounting firms
• Transparent disclosure of audit results

Usage Limit and Restriction Settings

Differential Limit Settings by Position and Department:

• Daily and monthly usage limit settings
• Usage restrictions for specific industries or time periods
• Separate approval procedures for overseas use

8. Conclusion and Practical Advice

Corporate card misuse is a serious matter that can lead to severe criminal punishment beyond simple moral lapses. Particularly, breach of trust using one’s official position receives heavier punishment than general crimes, requiring special attention.

Corporate-Level Response

Prevention is the best countermeasure. Companies should establish clear regulations and thorough monitoring systems, focusing on fundamental prevention through regular education and cultural improvement.

Prompt and decisive response when incidents occur is necessary. Systematic and professional approaches from evidence collection to legal measures are important.

Individual-Level Precautions

When using corporate cards, one should always ask oneself “Is this really for the company?” If there is any doubt, it is safer to refrain from use and obtain company approval in advance when necessary.

Importance of Expert Assistance in Legal Response

Corporate card misuse cases are complex matters requiring professional knowledge and experience from evidence collection to legal interpretation and defense strategies. Whether on the victim’s side or the accused’s side, initial response greatly influences case outcomes, making professional attorney assistance important.

K&P Law Firm has experience successfully handling numerous breach of trust cases involving corporate card misuse by corporate CEOs in South Korea. In particular, we have both cases where we analyzed corporate card usage records at shareholders’ requests, uncovered illegal activities, and led to CEO voluntary resignation and cases where we defended prosecuted CEOs and secured lenient treatment, enabling us to provide optimal legal services tailored to case characteristics and client positions.