LH to Appoint Compliance Officer Starting Next Month

Direct Audit and Supervision Investigation of Employee Real Estate Transactions

[Asia Economy Reporter Kangwook Cho] A compliance officer system, which professionally monitors illegal and unfair transactions and speculation by employees of Korea Land and Housing Corporation (LH) involved in land speculation allegations, will be implemented starting from the 2nd of next month. The compliance officer has the authority to directly monitor, supervise, and investigate all real estate transactions of LH employees.

The Ministry of Land, Infrastructure and Transport announced that the amendments to the Enforcement Decree of the Korea Land and Housing Corporation Act and the Enforcement Decree of the Special Act on Public Housing, which include provisions for preventing and monitoring speculation by LH employees and investigating violations using undisclosed information such as public housing district designations, passed the Cabinet meeting on the 22nd and will be enforced from the 2nd of next month.

First, the amendment to the Enforcement Decree of the Korea Land and Housing Corporation Act establishes a legal basis for appointing external experts with expertise in audits and investigations as LH compliance officers, enabling them to independently monitor and detect real estate speculation by LH employees.

The compliance officer is responsible for verifying whether LH employees own real estate and their transaction activities, investigating whether speculation occurred using development information during the public development project process, and disclosing the results. They also support anti-corruption education aimed at preventing illegal and unfair real estate transactions and speculation.

In particular, the compliance officer is granted the authority to request statements and submission of related materials from employees and others for verifying real estate transactions and investigating speculation by LH employees, and to conduct on-site investigations. If employees or others do not comply with such requests, the compliance officer can request disciplinary action from the LH president. Compliance officers are selected through an open recruitment process targeting external experts such as public officials of grade 5 or higher with more than five years of audit or investigation experience, judges, prosecutors, or lawyers.

The amendment to the Enforcement Decree of the Special Act on Public Housing includes detailed provisions on the scope and methods of investigating violations such as real estate transactions using undisclosed information related to the designation and proposal of public housing districts. Notably, penalties for violators have been significantly strengthened. Those involved in public housing projects who engage in real estate speculation using undisclosed information related to district designation will face imprisonment of five years or more or fines amounting to three to five times the profit gained. If the profit exceeds 5 billion KRW, aggravated punishment up to life imprisonment may be imposed, and the financial gains will be confiscated or recovered.

Regular and ad hoc investigations on real estate transactions by workers involved in the projects will also be conducted. The investigation scope includes whether undisclosed information related to the designation and proposal of public housing districts has been leaked, provided, or wrongfully acquired, and the transaction history of real estate by current or former employees of related institutions or companies such as national, local governments, and public housing project operators.

These two amendments also establish the basis for handling resident registration numbers necessary for investigations into violations during district development projects under 300,000 square meters, conducted by the relevant city or provincial governor, as well as regular investigations of LH employees’ real estate transactions conducted by the Minister of Land, Infrastructure and Transport.

Kim Hyung-seok, Director of Land Policy at the Ministry of Land, Infrastructure and Transport, stated, "With this amendment to the enforcement decree, the compliance officer is granted investigative authority over the ownership and acquisition of real estate by employees, significantly strengthening the monitoring function of real estate transactions. Since the Minister of Land, Infrastructure and Transport conducts annual regular investigations into LH employees’ real estate transactions to re-verify illegal and unfair activities, speculation by LH employees will be eradicated."