Part II. Evaluation of Current Situation of Corruption and Money-laundering Questionnaire Survey results of Korea The 10 th ASOSAI Research Project April 24, 2013 Na Young Kim Researcher of Research Institute Board of Audit and Inspection of Korea

Overview ◆ Views of Previous Survey Results - Corruption perception Index (TI) ◆ Questionnaire Survey Results(ASOSAI) - Corruption & Money Laundering ◆ Conclusion & Limitation ◆ Q & A session

Sources ◆ Questionnaire Survey Results Corruption - Ministry of Justice (X3) - Board of Audit and Inspection (X1) Money laundering - Financial Intelligence Unit (X1) ◆ Previous Survey Results CPI: Corruption Perception Index - Transparency International (

Views of Previous Survey Results ◆ Current Situation of Korea from IO TI’s CPI of Korea on korea has scored 56 out of but ranked 27 th out of 34 OECD nations - declining two years in a row Limitation of CPI: - perceptions toward public based on private sector

Survey results on corruption (1) 1. prevalence –Moderate (x2) –moderate and widespread among public sectors (x2) 2. compare with previous years –about the same (x3) –slightly higher than previously 3. Transparency International's-Corruption Perception Index fairly reflect –Yes(x2) –No (x2) 4. the Global Integrity Index fairly reflect –Yes (x2) –No (x2)

Survey results on corruption (2) 5. tolerance level of population –Moderately intolerant towards corruption 6. strength of steps –Moderate (x2) –Strong –Weak 7. dealing pattern –moderately predictable (x2) –unpredictable but benefitting few top leaders 8. most frequent occurrence –equally in private and public (x2) –in private entities –in public entities

Survey results on corruption (3) 9. prevalent types of corruption –corruption at enterprise level (x3) –petty corruption 10. prevalence of petty corruption –Moderate (x3) –high 11. involved personnel –high-level management (x2) –rank and file employees –public 12. main patterns of petty corruption –varies and hard to tell –the specific field –teachers, builders

Survey results on corruption (4) 13. prevalence of grand corruption –moderate (x2) –low (x2) 14. involved personnel in grand corruption –elected officials and their personal favorites (x3) –specific business interests and/or political groups 15. most common types –Kickback (x2) –Bribery (x2) * usually between $50K~$100K

Survey results on corruption (5) 16. most vulnerable to corruption –judiciary –legislature –law enforcement/police –taxation 17. greatest occurrence probability –electoral irregularities (x2) –licensing –revenue collection 18. monies and assets gained used –investing in real estate (x2) –leisure, social activities (x2)

Survey results on corruption (6) 19. root cause –culture and cumbersome administrative procedures (x2) –complicated and cumbersome administrative procedures –culture, customs and habits of giving bribes 20. "main cause is derived from the patronage- client system" –Agree 21. "weak accounting practice are conditions favorable" –Agree

Survey results on corruption (7) 22. prioritize monitoring the situation –medium priority (x3) –essential 23. prioritize complaints –medium priority (x3) –essential 24. role of whistle blower –very important (x2) –moderately important (x2) 25. whistle blowing effective –Effective (x3) –very effective

Survey results on corruption (8) 26. government's budget damage –Serious (x3) –somewhat serious 27. private sector damage –Serious (x3) –somewhat serious 28. citizen damage –Serious (x3) –somewhat serious 29. corruption during budget formulation is primarily grand or political corruption –Agree

Survey results on corruption (9) 30. unchecked and excessive executive discretion create opportunities for political corruption –Agree 31. public financial management system weakness increase the risk –Agree 32. significant incidences past 5 years –N/A (x3) –Bribery (x1) 33. more to add –N/A 34. any other remarks –N/A

Survey results on Money laundering (1) 1. seriousness –Not serious 2. tends to increase –partially agree 3. more sophisticated –Agree 4. main pattern –mostly in private sectors

5. the highest risk –1. finance, banking –2. trade –3. construction –4. international trade, foreign investment 6. common method –1. cash transaction –2. business –3. stock market –4. through financial institutions –5. casino Survey results on Money laundering (2) - 6. Project - 7. Through internet - 8. disguised loan - 9. Real estate Money exchange

7. favorable environments –international economic integrating 8. associated offences –embezzlement 9. main reason for criminals –evading taxes 10. consequences –compromised economy and private sector 11. economic and social consequences –Serious Survey results on Money laundering (3)

12. negative impact on national security, international reputation, weaken the economy and economic reforms –Serious 13. significant incidences from 2007 to N/A 14. usual styles in our country –tax evasion and stock price manipulation 15. general assessment –Economic crimes such as tax evasion and embezzlement pose serious threat –Korea’s AML/CFT mechanism plays important role in deterring overall corruption Survey results on Money laundering (4)

Conclusion & Limitation Previous surveys did not reflect perceived ideas from insiders based on realities: actual data, so it couldn’t provide implication of policy correctly. And we tried to survey insiders of public sector; only competent agencies. - involved personnel in grand corruption : elected officials and their personal favorites - most vulnerable to corruption : Judiciary, legislature, law enforcement/police, taxation - useful institute: Whistle blowing act and AML/CFT This result has its benefits, but has its limitations because this is purely based on perceptions of insiders, therefore more respondents would have ensured more accurate result. Further surveys based on actual data should follow-up.

Conclusion & Limitation One of the most persistent problems for the past generation’s anti-corruption reform movement has been a lack of detailed measurements and feedback. Corruption is largely a clandestine activity without immediate victims who might file reports; as a consequence, it is impossible to measure corruption directly with any validity, reliability, and precision.

Q & A Thank you very much! Questions and Comments