Supreme Court: Illegal interest must be confiscated even if returned

South Korea's Supreme Court has ruled that illegal interest collected by unlicensed lenders must be confiscated as criminal proceeds, even if the money is later returned to the borrower. The ruling came in the case of an unlicensed lender, identified only as "Mr. A," who was sentenced to four months in prison, suspended for one year, and ordered to forfeit 47.66 million won.

Mr. A had lent approximately 34 million won to a borrower between November 2018 and July 2019. He collected a total of 82.5 million won in principal and interest, resulting in an annual interest rate of 324%. This rate far exceeded the legal limit of 24% at the time.

The prosecution charged Mr. A with violating the Act on Registration and Protection of Financial Consumers. The initial ruling ordered the confiscation of the excess interest amounting to 47.66 million won. Mr. A appealed this decision, arguing that it was unfair to confiscate the full amount as he had returned 55 million won to the victim during the trial.

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The defendant's collection of excess interest from the borrower, which was then withdrawn as cash from an ATM and concealed or consumed, cannot be excluded from confiscation even if the defendant later returned the equivalent amount of excess interest to the borrower.

However, both the appellate court and the Supreme Court rejected his appeal. The appellate court stated that the returned interest was still considered criminal proceeds and could not be excluded from confiscation. The court emphasized that the lender's actions constituted a serious crime under the crime proceeds concealment act, and the excess interest was directly linked to this offense.

The Supreme Court affirmed the lower courts' decisions, finding no errors in their application of the law regarding criminal proceeds and confiscation. The ruling reinforces the principle that illegal gains, even if subsequently returned, remain subject to confiscation.

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The violation of the Act on Registration and Protection of Financial Consumers due to the collection of excess interest corresponds to a serious crime under the Act on the Regulation and Punishment of Criminal Proceeds Concealment, and the excess interest generated thereby falls under the category of criminal proceeds.