Excess Interest Forfeiture in Unregistered Moneylending (South Korea)
Supreme Court of Korea Decision 2025Do13550
Table of Contents
- 1. What did the Supreme Court of Korea decide in 2025Do13550?
- 2. Why is excess interest from unregistered moneylending criminal proceeds in South Korea?
- 3. Can a lender avoid forfeiture by repaying all the excess interest?
- 4. How has this forfeiture rule developed in Korean courts since 2023?
- 5. Is forfeiture mandatory or discretionary under Korean law?
- 6. What does this mean for foreign businesses in the IFEZ?
- 7. Frequently Asked Questions
A moneylender who had charged interest exceeding 300 percent per year, facing a criminal trial, returned every won of the excess interest to the borrower and signed a settlement. He may have assumed there was nothing left for the state to take. The courts of South Korea saw it differently.
The issue was forfeiture. Forfeiture exists to ensure that an offender does not keep the unlawful gains of a crime. But if the money has already been returned to the borrower, can the state still order the same amount forfeited? The Supreme Court of Korea answered that question in June 2026, building directly on a line of authority it first set out in 2023. This article explains how the forfeiture rule for excess interest in unregistered moneylending took shape in South Korea, with Supreme Court Decision 2025Do13550 at its center.
What did the Supreme Court of Korea decide in 2025Do13550?
On the facts, the defendant operated as an unregistered moneylender in South Korea. Between roughly November 2018 and July 2019 he lent about KRW 34 million to a borrower and was repaid KRW 82.5 million in principal and interest (an annual rate of roughly 324 percent or more). In the process he collected excess interest of KRW 47,658,712, exceeding the statutory ceiling under the Interest Limitation Act (then 24 percent per year).
The trial court sentenced the defendant to four months’ imprisonment, suspended for one year, and ordered forfeiture of KRW 47,658,712. After the appellate court dismissed the appeal, the Supreme Court of Korea, in Decision 2025Do13550 (June 5, 2026), upheld the order forfeiting the full excess-interest amount and dismissed the defendant’s appeal.
Why is excess interest from unregistered moneylending criminal proceeds in South Korea?
Excess interest taken by an unregistered moneylender above the statutory ceiling is property acquired through a violation of the Act on Registration of Credit Business, and therefore qualifies as criminal proceeds subject to forfeiture in South Korea.
Article 2(2)(a) of the Act on Regulation and Punishment of Criminal Proceeds Concealment defines criminal proceeds as property arising from, or received as reward for, a serious crime. The Supreme Court of Korea has held that “property arising from a criminal act” covers not only property newly created by the crime but also property obtained through it (Supreme Court Decision 2004Do5652).
Although an interest agreement above the statutory ceiling is void and the overpaid interest must be applied to principal and any remainder returned to the borrower (Act on Registration of Credit Business Article 8(4)-(5); Interest Limitation Act Article 2(3)-(4)), ownership of money transferred as a form of payment ordinarily passes to the recipient. The lender therefore acquires ownership of the excess interest and bears only a civil obligation to return it, which is why the excess interest is treated as forfeitable criminal proceeds (Supreme Court Decision 2023Do10700).
Can a lender avoid forfeiture by repaying all the excess interest?
No. Repaying the borrower in full does not bar forfeiture, because the lender has already acquired and spent the excess interest as criminal proceeds.
In 2025Do13550 the defendant, during the first-instance trial, repaid the borrower about KRW 55 million and settled — an amount equal to the full principal claimed in the borrower’s civil action for unjust enrichment. He argued that this repayment should limit forfeiture.
The Supreme Court of Korea rejected that argument. Returning the excess interest in full, it held, was merely returning criminal proceeds after they had been spent. Even taking the proportionality principle into account in applying the discretionary forfeiture provision of Article 10(1) of the Act on Regulation and Punishment of Criminal Proceeds Concealment, the order forfeiting the full excess-interest amount was lawful. The significance is clear: unlawfully collected excess interest remains forfeitable even after the lender repays the borrower in full.
How has this forfeiture rule developed in Korean courts since 2023?
The rule was first articulated by the Supreme Court of Korea in 2023, applied by lower courts including the Incheon District Court, and then refined in 2026 by Decision 2025Do13550.
The starting point is Supreme Court Decision 2023Do10700 (November 2, 2023). There, an unregistered moneylender collected excess interest totaling KRW 187.47 million between October 2021 and June 2022. The appellate court declined to order forfeiture on the view that the gain had not substantially accrued to the defendant, but the Supreme Court reversed and remanded, holding that the court must decide forfeiture on the premise that such excess interest is subject to it, and confirming that the offense is a serious crime under the former Act on Regulation and Punishment of Criminal Proceeds Concealment.
Lower courts followed. In Incheon District Court Decision 2024No4433 (September 3, 2025), after the first-instance court had declined to order forfeiture, the appellate court reversed and imposed a fine of KRW 7 million together with forfeiture of KRW 8,888,000 in excess interest.
Decision 2025Do13550 (June 5, 2026) then added the holding that full repayment does not bar forfeiture, refining the rule that had been developing since 2023. The three decisions form a consistent line: excess interest from unregistered moneylending is criminal proceeds subject to forfeiture in South Korea.
Is forfeiture mandatory or discretionary under Korean law?
Forfeiture under the Act on Regulation and Punishment of Criminal Proceeds Concealment is discretionary, but courts order it where a defendant would otherwise retain the unlawful gain.
Whether to order forfeiture of qualifying property rests with the court, as forfeiture under Article 10(1) is discretionary (Supreme Court Decision 2018Do16700). Yet because the purpose of forfeiture is to strip an offender of unlawful gains (Supreme Court Decision 2007Do2451), forfeiture is warranted where the defendant would otherwise retain the benefit of the excess interest.
2025Do13550 went further, holding the full forfeiture lawful even under the proportionality principle. Procedurally, where an appellate court reverses because the lower court failed to order forfeiture, it cannot isolate and reverse only the forfeiture portion; it must reverse the relevant count in full and re-sentence (Supreme Court Decision 2005Do5822; Supreme Court Decision 2023Do10700; Incheon District Court Decision 2024No4433).
What does this mean for foreign businesses in the IFEZ?
For foreign-invested companies and investors in the Incheon Free Economic Zone (IFEZ), the key lesson is that criminal forfeiture in South Korea operates separately from civil settlement.
The IFEZ — comprising the Songdo International Business District, Cheongna International City, and Yeongjong International City — hosts many foreign-invested companies that deal with lending, debt collection, and cross-border financial arrangements. Under South Korean law, criminal forfeiture of unlawful gains can be ordered in addition to, and independently of, any civil settlement or repayment.
Practically, repaying or settling with a counterparty may be relevant to sentencing, but it does not by itself remove the risk of forfeiture in a related criminal case. Where lending, excess interest, and unjust-enrichment claims overlap, the criminal and civil tracks move together and should be assessed jointly from an early stage. As a firm focused on white-collar criminal defense in South Korea, Atlas Legal reviews matters in which forfeiture and civil restitution intersect.
Frequently Asked Questions
Q. Does repaying all the excess interest prevent forfeiture in South Korea?
A. No. In Decision 2025Do13550 (June 5, 2026), the Supreme Court of Korea held that even where the defendant returned the entire excess interest to the borrower during trial, this was merely returning criminal proceeds after they had been spent. Even considering the proportionality principle under Article 10(1) of the Act on Regulation and Punishment of Criminal Proceeds Concealment, ordering forfeiture of the full excess-interest amount was lawful, and the defendant’s appeal was dismissed.
Q. Why does South Korean law treat excess interest as criminal proceeds?
A. Excess interest taken by an unregistered moneylender above the statutory ceiling is property acquired through a violation of the Act on Registration of Credit Business, so it qualifies as ‘property arising from a criminal act’ under Article 2(2)(a) of the Act on Regulation and Punishment of Criminal Proceeds Concealment. The Supreme Court of Korea has treated property obtained through, not merely created by, a crime as falling within this definition (Supreme Court Decision 2004Do5652; Supreme Court Decision 2023Do10700).
Q. Is forfeiture automatic under the Korean Proceeds of Crime Act?
A. No. Forfeiture under Article 10(1) of the Act on Regulation and Punishment of Criminal Proceeds Concealment is discretionary, so whether to order it rests with the court (Supreme Court Decision 2018Do16700). However, because the purpose of forfeiture is to strip an offender of unlawful gains (Supreme Court Decision 2007Do2451), courts find forfeiture warranted where the defendant would otherwise retain the unlawful benefit.
Q. What is the current statutory interest-rate ceiling in South Korea?
A. Article 2(1) of the Interest Limitation Act caps the contractual interest rate within a range not exceeding 25 percent per year, to be set by Presidential Decree; the current ceiling is 20 percent per year (effective July 7, 2021). At the time of the conduct in 2025Do13550 (2018-2019), the ceiling was 24 percent per year, while the defendant charged roughly 324 percent or more.
Q. How does criminal forfeiture differ from civil restitution in Korea?
A. They are separate. An interest agreement exceeding the statutory ceiling is void, and overpaid interest is applied to principal with any remainder recoverable by the borrower (Interest Limitation Act Article 2(3)-(4); Act on Registration of Credit Business Article 8(4)-(5)). Criminal forfeiture, however, proceeds independently of civil restitution, and a defendant who repaid the borrower is not excluded from forfeiture (Supreme Court Decision 2025Do13550).
Q. Should foreign-invested companies in the IFEZ be concerned about this ruling?
A. Foreign-invested companies and investors operating in the Incheon Free Economic Zone (IFEZ) — covering the Songdo International Business District, Cheongna International City, and Yeongjong International City — should note that in South Korea criminal forfeiture of unlawful gains can be ordered on top of, and independently of, any civil settlement. Settling or repaying a counterparty does not, by itself, remove the risk of forfeiture in a related criminal case.
Matters involving unregistered moneylending, excess-interest forfeiture, and unjust-enrichment claims in South Korea move along both criminal and civil tracks, so an integrated review from an early stage is important. For a review of a related matter, you may contact Atlas Legal.
