In a case where Party A requested Party B to re-deposit the account under the name of Party B in order to manage the guarantee deposit for development permit deposited by Party B for each payer, and the Financial Services Commission requested Party C to take disciplinary measures on the fact that Party C had already died, on the ground that Party C did not perform the obligation to verify actual names, the case holding that the lower court erred by misapprehending the legal doctrine, although Party C, a financial company, cannot be deemed to have conducted financial transactions under the name of Party B, as it did not have conducted financial transactions under the name of Party B, the lower court erred by misapprehending the legal doctrine, and that the above disposition was unlawful as it deviatess from and abused discretionary power.

In a case where Party A requested Party B to take disciplinary measures against Party B, etc. pursuant to Articles 3 and 5-2 of the Act on Real Name Financial Transactions and Confidentiality (hereinafter “Financial Real Name Act”), on the ground that Party B’s employees did not perform the obligation of real name verification as to the fact that Party C had already died, the case affirmed the lower court’s determination that Party B’s bank was established under the name of Party B, not the party A, but the local government, and was already deceased, on the ground that Party B’s bank was established under the name of Party B, and that Party C did not perform its financial transaction in order to manage the cash other than the revenue and expenditure of Party B, and that Party C’s personal account was indicated as the account owner of the relevant account, or the product name of the relevant account was clearly identified as the government deposit and thus, Party C’s bank’s financial transaction was unlawful in light of the language, structure, and purpose of the relevant provisions including Article 3 of the Act on Real Name Financial Transactions and Confidentiality.

Article 2 subparag. 3 and 4, Article 3(1) and (3), Article 5-2(3)2, Article 6(1), and Article 7(1) of the Act on Real Name Financial Transactions and Confidentiality

Nonghyup Bank Co., Ltd. and two others (LLC, Kim & Lee LLC, Attorneys Kim Jong-soo et al., Counsel for the defendant-appellant)

Financial Services Commission (Law Firm Barun, Attorneys Choi Young-no et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2020Nu46310 decided November 5, 2020

All appeals are dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Case summary

A. According to the reasoning of the lower judgment, the following facts are revealed.

(1) The Plaintiff Nonghyup Bank Co., Ltd. (hereinafter “Plaintiff Bank”) entered into an agreement with the relevant market and has performed the duties of receiving, paying, keeping, etc. cash other than the revenue and expenditure at the time of discussion.

(2) On August 25, 2006, pursuant to the above agreement, Non-party 1 (the death of January 19, 2007) deposited KRW 310,000 as a separate deposit in the Plaintiff bank. On January 12, 2015, the Plaintiff bank sent an official document to the Plaintiff bank to re-deposit the principal amount of the performance bond and its interest (hereinafter “the instant deposit”) in the account under Non-party 1’s name.

On the same day, Plaintiff 2 opened the deposit account (number omitted; hereinafter “instant account”) in the name of Nonparty 1 at the request of Nonparty 2, who is a public official in charge of cash receipt and disbursement other than the revenue and expenditure in the city other than the revenue and expenditure on the same day.

(3) On June 18, 2019, the Defendant demanded the Plaintiff bank to take a disciplinary measure against the Plaintiff 2, pursuant to Articles 3 and 5-2 of the Act on Real Name Financial Transactions and Confidentiality (hereinafter “the Act on Real Name Financial Transactions and Confidentiality”), on the ground that “the Plaintiff 2 did not perform the obligation to verify the identity of Nonparty 1’s account holder, such as demanding the certificate of personal seal impression, real name verification certificate, and power of attorney, while opening the instant account, and Plaintiff 3 neglected to supervise the performance of the obligation to verify the identity of Plaintiff 2 as the team leader of the Bank and the branch office for the viewing of the Bank, etc. (hereinafter “instant disposition”).

B. The lower court determined as follows: ① In light of the developments leading up to the opening of the instant account and the details of the application for transactions, etc., the deposit contract for the instant account (hereinafter “the instant deposit contract”) was concluded pursuant to the agreement on safe business between the Plaintiff bank and the Busan City as part of the depository business prescribed in the former Local Finance Act, and it is consistent with the intent of the parties to the instant deposit contract, which entrusted the Plaintiff bank designated as the depository at the time of discussing the instant deposit deposit, which is cash other than the revenue and expenditure, to the Plaintiff bank. Therefore, the parties to the instant deposit contract are not Nonparty 1, but Nonparty 1, and it can be deemed that the Plaintiff bank fulfilled the real name verification obligation as long as it underwent the real name verification procedure as to the time when the Plaintiff bank is a party to the instant deposit contract. In addition, it is difficult to view the government deposit money as a vehicle transaction with a strict meaning as defined in the Act on Real Name Financial Transactions, and it is obviously apparent that the name of the instant account was related to the depository at the time of issue.

2. Whether the obligation of real name transaction under the Real Name Financial Transactions Act is violated;

A. Article 3(1) of the Act on Real Name Financial Transactions provides for the Real Name Financial Transactions, namely, the real name, the name on the resident registration card, the name on the resident registration certificate, or any other name prescribed by Presidential Decree (Article 2 subparag. 4). A financial company, etc. shall conduct financial transactions under the real name of a trader (Article 3(1)). No person shall conduct financial transactions under the real name of another person for the purpose of concealing illegal property under subparagraph 3 of Article 2 of the Act on Reporting and Using Specified Financial Transaction Information, evading money laundering under subparagraph 4 of Article 2 of the same Act, raising terrorism under subparagraph 5 of the same Article, evading compulsory execution, or evading other evasion of law (Article 3(3)). Any person who violates Article 3(3) may be punished by imprisonment with prison labor for not more than five years or by a fine not exceeding 50 million won (Article 7(1)), and any person who violates Article 3(2) of the Act may be subject to dismissal from office of a financial company, etc. under the said Article 2(3).

B. Of the lower judgment, the part that deemed the party to the instant deposit contract as the commencement of argument is acceptable in light of the relevant legal doctrine (see Supreme Court Decision 2019Da267204, Dec. 10, 2020), but the part that deemed that there was no ground for disposition since it cannot be deemed that the trader violated the obligation to conduct financial transactions under the real name of the trader, and thus, it is difficult to accept as is

In light of the language, structure, purpose, etc. of the relevant provisions including Article 3 of the Act on Real Name Financial Transactions, given that the instant account was established in the name of Nonparty 1, who was already deceased, rather than the closing price, the Plaintiff bank, a financial company, cannot be deemed to have conducted financial transactions under the real name of the trader. The same applies to cases where a local government, for the convenience of business affairs to manage cash other than the revenue and expenditure for each payer, made the name of the payer indicated in the relevant account as the deposit account holder, or made it clear that the product name of the relevant account falls under the treasury of the

Nevertheless, the lower court erred by misapprehending the legal doctrine regarding the real name transaction under the Act on Real Name Financial Transactions, while determining that even if the instant account was opened in the name of Nonparty 1, not in the name of the party to the transaction, but in the name of the party to the transaction. However, as seen infra, the lower court was justifiable to have concluded that the instant disposition was unlawful as it deviates from and abused discretion, and thus, did not affect the conclusion of the lower judgment.

3. Whether the discretionary authority is deviates or abused;

The lower court determined that the instant disposition was unlawful on the following grounds, even if the grounds for the instant disposition exist: (a) Plaintiff 2 and Plaintiff 3 violated the discretionary authority; (b) based on the following provisions: (c) Articles 4(2) and 6 of the former Regulations on Handling of Government Deposits (amended by Ordinance of the Ministry of Strategy and Finance No. 703, Dec. 28, 2018); (d) joint bank proposals prepared by the Federation of Banks; (e) Plaintiff Bank’s procedures for handling Government Deposits; and (e) Article 8(1) of the Agreement on Handling of Treasury Operations between the Plaintiff Bank and Sosan City; and (e) opened the instant account to manage the instant deposit upon the request of the Plaintiff Bank and Sosan City; and (b) there was no unlawful purpose or motive in performing such business affairs; and (b) there was no specific provision or guidelines to demand the payer’s personal seal impression, real name verification certificate, and power of attorney in managing cash other than the revenue and expenditure for a fixed deposit; and (c) there was no possibility that such business affairs will be any problem prior to this.

Examining the reasoning of the lower judgment in light of the relevant legal principles, the lower court did not err by misapprehending the legal doctrine on deviation and abuse of discretion, contrary to what is alleged in the grounds of

4. Conclusion

The Defendant’s appeal is dismissed in entirety as it is without merit, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Noh Jeong-hee (Presiding Justice)