Is Taking Money That Changed Hands Through Crime Embezzlement, and to Whom Does That Money Return? The Protective Value of the Entrustment Relationship and the Confiscation of Property Damaged by a Crime

Question

Embezzlement is established when a person who has custody of another's property embezzles that property or refuses to return it (Article 355(1) of the Criminal Act). Sometimes, however, the money that comes into a person's custody is entangled with a crime from the outset. One example is where an account holder withdraws money that a victim remitted to an account used for telecommunications financial fraud, so-called voice phishing. Another is where a person receives certificates handed over by someone else to conceal criminal proceeds obtained through fraud, converts them into cash and spends it. If the profit amounts to KRW 500 million or more, the question of aggravated punishment under Article 3 of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (the "Specific Economic Crimes Act") also arises.

Two layers of questions overlap in such cases. At the layer of criminal liability, the issues are whether there is an entrustment relationship worthy of protection by the crime of embezzlement between the custodian and some other person, and whether ownership passed to the custodian as performance for an illegal cause under Article 746 of the Civil Act because the cause for entrusting the money was illegal. At the layer of restoring victims' losses, the issues are whether property connected with the crime can be confiscated or its equivalent value collected, and, if it is property damaged by a crime that came from the victim, which statute permits confiscation, collection of equivalent value and return to the victim, and under what requirements.

This brief examines four questions separately. First, by what standard the entrustment relationship in embezzlement is assessed. Second, against whom embezzlement is committed when the holder of an account used for fraud withdraws the victim's funds. Third, whether performance for an illegal cause prevents embezzlement from being established where a person spends property entrusted to him to conceal criminal proceeds. Fourth, on the basis of which criminal facts, and under what requirements, property damaged by a crime may be confiscated or its equivalent value collected.

This brief sets out the strands of legal doctrine only within the scope of the Issues and the Summary of Holdings of three Supreme Court judgments. It does not assess guilt or innocence, or the prospects of restoring losses, in any particular case. Because parts of the statutes on confiscation and collection of equivalent value have been amended since the judgments, the brief also notes the differences between the wording at the time of the acts and the current wording.

Material to check

First, Article 355(1) of the Criminal Act and Article 3 of the Specific Economic Crimes Act. Article 355(1) punishes a person who has custody of another's property and embezzles it or refuses to return it by imprisonment with labour for not more than five years or a fine not exceeding KRW 15 million. Article 3(1) of the Specific Economic Crimes Act imposes aggravated punishment where the profit from a crime under Article 355 amounts to KRW 500 million or more. The case in 2017Do9254 was prosecuted as a violation of the Specific Economic Crimes Act (embezzlement). The reference provision is Article 3(1), subparagraph 2 of the former Specific Economic Crimes Act as it stood before its amendment on 10 February 2012.

Second, Articles 746 and 103 of the Civil Act. Article 746 provides that where a person has delivered property or rendered services for an illegal cause, that person may not claim the return of the benefit, except where the illegal cause lies only with the beneficiary. Article 103 renders void any juristic act whose content is contrary to good morals or other social order. In criminal cases, these provisions serve as a premise for determining who owns the property held in custody.

Third, materials concerning the account and the access media. It is possible to arrange in chronological order when and in whose name the account was opened, to whom and how the access media were passed on, when the victim's funds were remitted, who withdrew them and by what means, and whether the account holder knew of the fraud. Because 2017Do17494 treated the establishment of embezzlement differently depending on whether the account holder was an accomplice to the fraud, Article 32 of the Criminal Act on accessories and Article 347 on fraud may also be checked.

Fourth, the Act on Regulation and Punishment of Criminal Proceeds Concealment (the "Criminal Proceeds Concealment Act"). Current Article 8(1) provides that criminal proceeds, property derived from criminal proceeds, and criminal proceeds, etc. related to the criminal acts under Article 3 or 4 of the same Act, among others, may be confiscated. Article 8(3) provides that such property may not be confiscated where it is property damaged by a crime, that is, property acquired from a victim through a criminal act such as a crime against property. Article 10(1) provides for collection of equivalent value where confiscation is impossible or inappropriate, and Article 10(2) provides that the value may not be collected where the property is property damaged by a crime. Because 2017Do9254 applied the former Act as it stood before its amendment on 31 March 2010, the wording in force at the time of the act must be checked separately.

Fifth, the Act on Special Cases concerning the Confiscation and Return of Property Acquired through Corrupt Practices (the "Corrupt Property Confiscation Act"). Article 2, subparagraph 3 defines property damaged by a crime. It is property acquired from the victim through criminal acts such as certain fraud offences among the crimes listed in the Annexed Table, together with embezzlement and breach of trust, or property obtained through holding or disposing of such property. The fraud offences covered are the so-called specified fraud offences, limited to three cases: offences committed by organising a criminal group, deception by means of unauthorised fund-raising or multi-level marketing, and offences constituting telecommunications financial fraud. Article 3(1) provides that corrupt property may be confiscated. Article 6(1) provides that confiscation and collection of equivalent value may be ordered where restoring the victim's loss is deemed extremely difficult, such as where the victim cannot exercise a claim for return of property or a claim for damages against the offender. Article 6(2), newly inserted on 16 December 2025, provides for confiscation and collection of equivalent value of property damaged by a crime arising from specified fraud offences under the same requirements. The provision on return to victims is now in paragraph (4). The return provision cited in 2022Do8662 was Article 6(2) as then in force.

Sixth, the confiscation provisions of the Criminal Act. Article 48(1) permits the confiscation of certain things that do not belong to a person other than the offender, or that a person other than the offender knowingly acquired after the crime. These are things that were used or intended to be used in the criminal act, things produced by or acquired through the criminal act, and things acquired in exchange for them. Article 48(2) provides for collection of equivalent value where confiscation is impossible. Article 49 provides that confiscation is imposed in addition to other punishments. Where the requirements for confiscation are met, however, confiscation alone may be pronounced even if no judgment of guilt is rendered against the offender.

Possible readings

The first point of divergence is how the entrustment relationship is assessed. One reading takes a narrow view, defining the entrustment relationship by reference to contractual relations under civil law. Another reading holds that a de facto relationship suffices, and that the relationship may also arise from statutory provisions such as those on management of affairs without mandate, from custom, from sound reason (naturalis ratio) or from the principle of good faith. 2017Do17494 adopted the latter reading. It nevertheless held that the entrustment relationship is limited to one worthy of protection by the crime of embezzlement, and that it must be assessed normatively, taking into account factors such as whether the state of custody needs protection under criminal law.

The second point of divergence is on whose behalf the victim's funds in an account used for fraud are held. The majority opinion held that the account holder is in the position of a custodian of the funds for the victim. Even where there is no legal relationship underlying the remittance, the account holder acquires the deposit claim and must return the money to the remitter. The concurring opinion held that there is no entrustment relationship between the account holder and the victim, but that there is an agreement on custody between the account holder and the person who received the access media. On that view, a withdrawal by an account holder who did not know of the crime is embezzlement against that person. The dissenting opinion held that the entrustment relationship with the transferee of the access media is not worthy of protection and that there is no entrustment relationship with the victim. It therefore concluded that embezzlement is not established against anyone.

The third point of divergence is the degree of the account holder's participation. The majority opinion in 2017Do17494 held that if the account holder is an accomplice to the fraud, he merely came to hold the victim's funds as a result of an offence in which he participated. There is then no entrustment relationship with the victim, and the withdrawal is no more than an act of carrying out the fraud he himself committed. The same judgment held that, as long as the defendants were not guilty of aiding and abetting fraud, the withdrawal constituted embezzlement against the fraud victims. Under this structure, the materials showing the account holder's knowledge of the fraud decide the outcome.

The fourth point of divergence is the relationship between performance for an illegal cause and embezzlement. One reading holds that criminal law should protect the state of custody regardless of whether a claim for return is available under civil law. Another reading holds that if, under Article 746 of the Civil Act, the person who made the performance cannot even claim return based on ownership, then ownership vests in the recipient. The property is therefore not another's property, and embezzlement is not established. 2017Do9254 adopted the latter reading, treating bearer certificates of deposit delivered to conceal criminal proceeds, etc. as things delivered for an illegal cause. The same judgment, however, drew the scope of performance for an illegal cause narrowly. It held that 'illegality' exists only in cases such as where the act underlying the performance not only violates good morals or other social order but is also markedly antisocial, unethical or immoral, or where the performance was made in violation of a mandatory provision but ordering its return would instead fail to serve the purpose of the norm.

The fifth point of divergence is the confiscation of property damaged by a crime and the collection of its equivalent value. The Criminal Proceeds Concealment Act bars confiscation and collection of equivalent value of property damaged by a crime. The Corrupt Property Confiscation Act, by contrast, provides a route for confiscation, collection of equivalent value and return to the victim, but only for specified crimes and only where restoring the loss is extremely difficult. 2022Do8662 narrowed the scope of application of this special rule. It held that the criminal facts giving rise to it are limited to those charged in the indictment, and that property damaged by a crime is limited to property acquired from the victims of those charged facts, and the like. At this point, a reading that puts the effectiveness of restoring losses first meets a reading that puts first the principle of no adjudication without an indictment.

Read together, the three judgments show that the handling of money entangled with crime follows different standards at the layer of criminal liability and at the layer of restoring losses. Even where embezzlement is not established, the question of restoring the victim's loss remains. Even where embezzlement is established, confiscation and collection of equivalent value are not automatically permitted. Which conclusion to reach at which layer is left for the reader to decide after checking the individual record.

What the decisions held

Supreme Court Judgment 2017Do9254, rendered on 26 October 2017, interpreted the purport of Article 746 of the Civil Act as follows: "a person who has made such a performance not only may not claim the return of unjust enrichment from the other party by asserting that the underlying act is legally void, but also may not claim return based on ownership by asserting that ownership of the delivered thing remains with him; ultimately, therefore, ownership of that thing vests in the other party who received the performance." The defendant had received bearer certificates of deposit, which were criminal proceeds, etc. obtained through a financial multi-level marketing fraud, in order to conceal those proceeds. He then exchanged them for cash and spent it arbitrarily. The Court upheld the lower court's finding that the certificates were things delivered for an illegal cause, that ownership vested in the defendant, and that embezzlement was therefore not established. It further held that even property subject to collection of equivalent value under the former Criminal Proceeds Concealment Act "may not have its value collected under Article 10(2) of the same Act where it is property damaged by a crime as defined in Article 8(3) of the same Act." In the operative part, the part of the judgment below convicting the defendant was reversed and remanded to the Daegu High Court, and the prosecutor's appeal was dismissed.

Supreme Court en banc Judgment 2017Do17494, rendered on 19 July 2018, held that a de facto relationship suffices for the entrustment relationship in embezzlement. Such a relationship may arise not only from contract but also from statutory provisions such as those on management of affairs without mandate, from custom, from sound reason or from the principle of good faith, but "that entrustment relationship is limited to one worthy of protection by the crime of embezzlement." The majority opinion held as follows. Where an account holder acquires a deposit claim despite the absence of any legal relationship underlying the remittance or transfer, the money is of a character that must be returned to the remitter, so embezzlement is established if the account holder withdraws it with intent to appropriate it. The same doctrine applies where a victim remits or transfers fraud proceeds to an account used for telecommunications financial fraud. The Court also stated that "the account holder's withdrawal does not constitute embezzlement in relation to the perpetrator of the telecommunications financial fraud." The defendants had transferred the access media for their deposit accounts to members of a voice-phishing organisation and then withdrew part of the victims' funds. The Court held that, as long as aiding and abetting fraud was not established, embezzlement against the fraud victims was established. It reversed the part of the judgment below concerning embezzlement and remanded it to the Seoul Southern District Court.

Supreme Court Judgment 2022Do8662, rendered on 17 November 2022, held that to pronounce confiscation on the basis of the proviso to Article 49 of the Criminal Act, the requirements for confiscation must relate to the facts charged in the indictment, and "it is not permitted, as a violation of the principle of no adjudication without an indictment, for the court to find separate criminal facts that have not been charged and to pronounce confiscation or collection of equivalent value in respect of them." The Court noted a contrast with the Criminal Act, which does not permit confiscation or collection of equivalent value of property damaged by crimes against property. The Corrupt Property Confiscation Act, by contrast, provides for confiscation, collection of equivalent value and return to the victim of property damaged by specified crimes where restoring the loss is extremely difficult. The Court then held that, in light of that Act's legislative purpose and the purport of the return procedure, the criminal facts giving rise to confiscation or collection of equivalent value are limited to the criminal facts charged in the indictment. Property damaged by a crime is likewise limited to property acquired from the victims of those charged facts, and the like, and "confiscation and collection of equivalent value should be regarded as permitted only where restoring the loss of those victims is deemed extremely difficult." In the operative part, the part of the judgment below concerning the confiscation of seized articles from Defendant 2 was reversed and remanded to the Seoul Eastern District Court.

Practical checklist

This section is not advice but a set of questions that may be asked when checking a record. First, the circumstances of custody may be examined. It is possible to set out separately by what route the money or certificates in question reached the custodian, and what relationship existed in each case between the custodian and the original right-holder, between the custodian and the person who sent the money, and between the custodian and the person who led the offence.

Second, the custodian's knowledge and participation may be examined. The materials can show whether the custodian knew of the fraud, and if so from when, and whether the transfer of the access media or the receipt of the certificates can be assessed as aiding and abetting, or joint commission of, the offence. The structure of 2017Do17494 is that whether embezzlement is established, and who its victim is, may differ depending on whether the custodian was an accomplice.

Third, the nature of the underlying act may be examined. It is possible to distinguish whether the cause for handing over the property was markedly antisocial, as with the concealment of criminal proceeds, whether it amounted only to a violation of a mandatory provision, and whether the illegal cause lay only with the recipient. Whether there are circumstances calling for the proviso to Article 746 of the Civil Act may also be checked.

Fourth, the route for restoring losses may be examined. It is possible to set out whether the property in question is property damaged by a crime, and whether it came from the victims of the criminal facts charged in the indictment. Other points are whether there are circumstances in which the victim cannot exercise a claim for return of property or a claim for damages, whether the applicable statute is the Criminal Proceeds Concealment Act or the Corrupt Property Confiscation Act, and what the provisions in force at the time of the act were. This is strictly a list of materials to check, and the conclusion is for the reader to reach.

Glossary

Entrustment relationship refers to the relationship that must exist, for the crime of embezzlement, between the custodian of property and its owner (or other holder of the underlying right). 2017Do17494 recognised that it may be a de facto relationship, but limited it to one worthy of protection by the crime of embezzlement.

Performance for an illegal cause refers to the delivery of property or the rendering of services for an illegal cause. The person who made the performance may not claim the return of the benefit, except where the illegal cause lies only with the beneficiary (Article 746 of the Civil Act). 2017Do9254 held that in such a case ownership of the delivered thing vests in the other party who received the performance.

Property damaged by a crime refers to property acquired from a victim through a criminal act, or property obtained through holding or disposing of such property. Article 8(3) of the Criminal Proceeds Concealment Act and Article 2, subparagraph 3 of the Corrupt Property Confiscation Act each contain a definition, and the range of crimes they cover differs.

Access media is the term the judgment uses for the means linked to a deposit account and used for transactions. 2017Do17494 held that a person who receives access media merely becomes able, in practice, to exercise the account holder's claim for return of the deposit, and does not acquire the deposit itself.

Sources and limitations

The statutory sources are the current texts on the National Law Information Center. The following were checked on 16 October 2026: Articles 32, 48, 49, 347 and 355 of the Criminal Act (effective 2 October 2026, Act No. 22007); Articles 103 and 746 of the Civil Act (effective 17 March 2026, Act No. 21454); Article 3 of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (effective 20 March 2018, Act No. 15256); Articles 8 and 10 of the Act on Regulation and Punishment of Criminal Proceeds Concealment (effective 4 January 2022, Act No. 18672); and Articles 2, 3 and 6 of the Act on Special Cases concerning the Confiscation and Return of Property Acquired through Corrupt Practices (effective 2 October 2026, Act No. 21490).

The judgment sources are the Issues, the Summary of Holdings and the operative parts of Supreme Court Judgments 2017Do9254, 2017Do17494 and 2022Do8662 as published on the National Law Information Center. The Summary of Holdings of 2017Do17494 reproduces the concurring and dissenting opinions at length. This brief sets out only their conclusions and principal reasoning.

This brief did not check against the original texts the provisions of the Special Act on the Prevention of Loss Caused by Telecommunications Financial Fraud and Refund for Loss, the Electronic Financial Transactions Act, or the Enforcement Decree of the Corrupt Property Confiscation Act. Nor did it check the wording of the former Criminal Proceeds Concealment Act. The criminal facts and the specific seized articles in the case in 2022Do8662 do not appear in the Summary of Holdings and are therefore not described.

Points left open

2017Do17494 recognised embezzlement against the victim on the premise that aiding and abetting fraud was not established. How the withdrawal should be assessed where the account holder is found to have aided and abetted the fraud merits further examination, together with what the Summary of Holdings says about accomplices.

Whether a mistaken remittance and a remittance to an account used for fraud can be governed by the same doctrine is a point on which the majority, concurring and dissenting opinions in 2017Do17494 differed. How this difference will operate in other types of cases in which a third party intervened in the circumstances of the remittance remains an open question.

It also remains open how far the doctrine of performance for an illegal cause in 2017Do9254 extends to underlying acts other than the concealment of criminal proceeds. How the judgment's narrow standard for 'illegality' is to be applied to individual underlying acts may be contested case by case.

Article 6(2) of the Corrupt Property Confiscation Act, newly inserted on 16 December 2025, now provides for confiscation and collection of equivalent value of property damaged by a crime arising from specified fraud offences. How the requirements laid down in 2022Do8662, namely the limitation to the facts charged and the extreme difficulty of restoring losses, will be applied in practice under that provision remains to be confirmed.

When to reconsider

This white paper will be rewritten if the embezzlement and confiscation provisions of the Criminal Act, the Act on the Regulation and Punishment of the Concealment of Criminal Proceeds, or the Act on Special Cases concerning the Confiscation and Return of Property Acquired Through Corrupt Practices are amended, or if a new ruling of the Supreme Court emerges concerning the protectability of an entrustment relationship or the confiscation and collection of equivalent value of property damaged by crime.

When that happens, the layer of criminal liability and the layer of victim recovery will be separated and reorganized within the scope stated by the Holdings and Summary of Decision of the original judgment text.

Statutes referred to

• 형법 제32조, 제48조, 제49조, 제347조, 제355조
• 민법 제103조, 제746조
• 특정경제범죄 가중처벌 등에 관한 법률 제3조
• 범죄수익은닉의 규제 및 처벌 등에 관한 법률 제8조, 제10조
• 부패재산의 몰수 및 회복에 관한 특례법 제2조, 제3조, 제6조

Decisions referred to

• 대법원 2017. 10. 26. 선고 2017도9254 판결 · Decision ledger
• 대법원 2018. 7. 19. 선고 2017도17494 전원합의체 판결 · Decision ledger
• 대법원 2022. 11. 17. 선고 2022도8662 판결 · Decision ledger

Verification status

The cited provisions (Article 32, Article 48, Article 49, Article 347, and Article 355 of the Criminal Act; Article 103 and Article 746 of the Civil Act; Article 3 of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes; Article 8 and Article 10 of the Act on Regulation and Punishment of Criminal Proceeds Concealment; and Article 2, Article 3, and Article 6 of the Act on Special Cases of the Confiscation and Recovery of Corrupt Property) were compared with the current original text on the Korea Law Information Center on October 16, 2026. The cited decisions (Supreme Court Decision 2017Do9254, Supreme Court Decision 2017Do17494, and Supreme Court Decision 2022Do8662) were compared with the Holdings, Summary of Decision, and Order of the original judgment texts on the Korea Law Information Center.