A Reflection on the Preventive Measures Against Damages of Unlawful Fund Raising -With a Focus on the Deterrence Theory-

Policy
By. Seungdon Yang, Kangmin Lee, Geumseok Doh Views. 841

Abstract

Purpose: The economic crimes targeting an unspecified majority are beyond imagination in terms of economic development and the extent of their damages incurred. Among the typical examples is the crime of unlawful fund raising. Despite the continuous crackdowns and punishments at the pan-government level, it threatens the economy of the commoners. The most unlawful fund raising companies are not subject to financial supervision, yet promise to pay a fixed interest rate or high dividends several dozen times larger than the financial institutions as a bait of high returns. However, there is no source of income, and it is just a ‘Ponzi scheme’ which preserves the profits of existing investors with the investment of new investors. This is a method through which the unlawful fund raising companies guarantee the principal and interest from an unspecified number of people without authorization, permission, registration, or reporting. Furthermore, defrauding multi-level investment by paying referral allowances or commissions when introducing sub-investors is a typical behavior of the unlawful fund raising crimes.

Method: This study reviews previous studies through the literature study, and examines the actual situation via the empirical studies along with theoretical review of unlawful fund raising act, which is deceived by high returns, and deceptive behavior through multi-stage investment.

Results: This study based on the gravity of the crime of unlawful fund raising, the latest trends in the crime types including the impersonation of financial companies and virtual currencies are analyzed. Sanctions against those who engage in an unlawful fund raising act should be strengthened, and good traders should be protected.

Conclusion: Furthermore, the gravity of punishment in the deterrence theory for the crime prevention is presented as a theoretical grounds. As a measure to prevent damages, it is necessary to raise the criminal punishment, and introduce punitive damages and a special judicial police officer system.

Keywords: Unlawful Fund Raising, Financial Crime, Investment Fraud, Deterrence Theory, Ponzi Scheme



References

[4] Lee CH & Kim JY & Im JO. People's Livelihood and Economic Crimes, Korean Institute of Criminology. Policy Research Report, 106, 39-40 (2009).
[5] Toh JJ. A Study on the Finance Fraud in Korea, Korean Institute of Criminology. Policy Research Report, 2(25), 138-182 (2002).
[6] Park CS & Hwang JT & Yang SD. A Study on the Types and Treatment of the Investment Fraud. Korean Criminological Review, 10(25), 24-27 (2010).
[8] Lee KS. Crime Environment for Conducting Fund-raising Business without Permission and Legislative Countermeasure. Police Journal, 16(48), 99-123 (2016).
[9] Kim HS. The Horizon of Illegal Structure and Type Analysis of Conducting Fund-rasing Business Crime. Korean Criminological Review, 2(3), 97-136 (2017).
[10] Tunnell KD. Choosing Crime: Close Your Eyes and Take Your Chances. Justice Quarterly, 7(4), 673-690 (1990).
[16] Jo S. Changes in Security Environment Following Crimes of Leaking the Republic of Korea's Industrial Technologies and Directions for Introducing Detective System. International Journal of Police and Policing, 3(2), 35-42 (2018). [Read More]
[17] Koenig T & Rustad M. Crimtorts’ as Corporate Just Deserts. University of Michigan Journal of Law Reform, 31, 289-297 (1998).
[25] Han BK. New Understanding on Act on the Regulation of Conducting Fund-rising Business without Permission -From Criminal Law Perspective to Law on the Regulation of Finance Innovation Perspective, Korea Financial Law Association, 17(2), 151-201(2020).
[26] Sung YE. Social Realities and Its Impact on the Criminal Case of Law Enforcement Processes. International Journal of Criminal Study, 1(1), 26-32 (2016). [Read More]
[27] Jang JC & Lee EO. Acceptability of Concept of Punitive Damages. Chungang Journal of Legal Studies, 39(3), 377-379 (2015).
[28] Park HH. Police Activities in the Age of Big Data Utilization. International Journal of Protection, Security & Investigation, 3(1), 14-17 (2018). [Read More]
[30] Park SY & Park MW. Policy Reference for Improving Community Safety: Factors That Determine the Citizen Satisfaction with Police Service in Korea and the U.S. International Journal of Crisis & Safety, 2(3), 9-17 (2017). [Read More]



[11] Lee SR & Kwak DK & Park JS. Modern Society & Crime. Chungmok (2019).
[12] Akers RL & Sellers CS & Jennings WG. Criminological Theories: Introduction Evaluation, and Application. Oxford (2020).
[13] Nagin DS & Cullen FT & Jonson CL. Deterrence, Choice, and Crime. Contemporary Perspectives (2018).
[19] Wennerlind C. Casualties of Credit. Harvard University (2011).
[20] Husak D. Overcriminalization: The Limits of the Criminal Law. Oxford University (2008).
[21] Arner DW. Financial Stability, Economic Growth, and the Role of Law. Cambridge University (2007).
[22] Buell SW. Capital Offenses: Business Crime and Punishment in America's Corporate Age. Norton & Company (2016).
[23] Steven P. Crime Prevention Approaches, Practices, and Evaluations. Routledge (2018).
[24] Sutton A. Crime Prevention. Cambridge University (2016).
[29] Bernard E. Harcourt. The Illusion of Free Markets. Harvard University (2011).



[7] Yang SD. The Study on the Illegal Multi-level Marketing. Dongguk University, Doctoral Thesis (2009).



[1] Grounds for Confiscation of Profits of Frauds Said to be Prepared 4 Years Ago...Still Not Available. Financial News (2020).
[2] Article 2 of the Act on the Regulation of Conducting Fund-raising Business without Permission (Hereinafter, Unlawful Fund Raising Act) (2021).
[3] Article 5 of the Unlawful Fund Raising Act (2019).
[14] Shadow of Unlawful Fund Raising, Probation for KRW 67 Billion Swindler..Light Punishment Causes Repeat Offenses. E-daily (2018).
[15] Key Proposal by Honorable Byungdoo Min, Proposal of a Partial Amendment for the Act on the Regulation of Unlawful Fund Raising Act. Agendum No. 2005754 (2017).
[18] Financial Supervisory Service, The 2017 Characteristics of the Companies Suspected of Unlawful Fund Raising and Cautions for Consumers: Investment Fraud using High Returns as Bait - Never Trust Them (2018).



? Source: n.news.naver.com