in recent years, South Korea has faced a series of high-profile security breaches across telecommunications, financial, and platform companies. KT's breach of micropayments through illegal miniature base stations, Lotte Card's massive personal information leak, SKT's hacking of cell phones, and the Yes24 ransomware attack have created a serious sense of anxiety that the personal information of millions of South Koreans could be exposed at any time. As important as companies' response to the incidents and determining the cause, the fundamental question is, "What compensation can victims actually receive?"

current compensation measures in Korea are often minimal, such as refunds and replacements, leaving consumers seeking redress for emotional damages and potential future risks. this report diagnoses the structural problems of Korea's security incident compensation system, compares it to overseas examples, and explores institutional turning points that can strengthen consumers' information sovereignty.

the Korean corporate response: The penalty controversy and the dilemma of '100,000 won compensation'

KT micropayment case tests boundaries of accountability

recently, KT admitted to mismanagement and announced measures such as refunds, cell phone replacements, and free insurance for affected customers after an incident of micropayment infringement through illegal tiny base stations (femtocells). However, consumers were lukewarm, especially those who wanted to port their numbers, and the company lost their trust when it delayed waiving the penalty.

the issue has sparked a debate about the extent to which companies should accept responsibility for security incidents, as SKT, which suffered a similar hack earlier, admitted to breaching its responsibility as a carrier to provide secure communications and waived penalties. the National Assembly and the government have also pointed out that if KT is found to have violated its obligation to provide secure communications, it should be exempt from penalties. KT's passive response has been seen as an attempt by companies to limit their liability for security incidents to "mere monetary damages," adding to policy pressure to expand the scope of corporate liability across service contracts.

consistent court precedent: undervaluing the value of information

the judgment of domestic judicial systems in large-scale data breach cases has long shown consistent limitations. in major cases, such as the 2014 Card 3 breach and the 2016 Interpark breach, the courts recognized corporate negligence, but only awarded compensatory damages (mental damages) of around 100,000 won per victim in cases where no actual property damage was identified.

while courts have acknowledged as a rule of thumb that sensitive information, such as social security numbers, can cause emotional distress, the 100,000 won award is an extremely low valuation of the non-property and future damages that individuals suffer as a result of a large-scale data breach, such as anxiety, risk to their credit, and efforts to prevent identity theft. This makes it unprofitable for victims to sue, and has become a symbol of a systemic failure that makes it extremely difficult for companies to pay for their security mismanagement.

the institutional shift to real compensation: beyond the barriers of proof

there are strong calls for class action and punitive damages to be fully implemented in order for consumers to receive real redress beyond simple refunds.

punitive damages at the heart of the deterrence debate

punitive damages are a system that imposes liability that is much higher than actual damages in order to deter wrongful behavior and prevent it from happening again. in the financial sector, the introduction of such a system is expanding, with legislation to impose up to three times the amount of damages for credit information leaks.

however, current proposals suffer from a fatal limitation. punitive damages require proof of "willfulness or gross negligence" on the part of the company, which is often impossible for individual victims to prove. in domestic legal environments that lack robust procedures such as the U.S. discovery system, this burden of proof is a significant barrier to the effectiveness of punitive damages.

introducing class actions: enforcing business ethics

class actions eliminate the inefficiency of multiple victims having to sue individually and dramatically improve consumer access by making litigation more economical. while the business community fears that indiscriminate litigation will chill business activity, advocates argue that it will penalize bad actors who skimp on security investments and create a desirable business ecosystem that rewards "good actors" for their commitment to compliance.

beyond collectively enforcing consumers' rights, class actions are the most powerful means of establishing market discipline that forces companies to view security investments as a survival strategy, not just a cost.

international case study: implications of the Equifax 700 billion won settlement

the limitations of the domestic system contrast starkly with examples from developed countries abroad, most notably the case of US credit rating agency Equifax.

a new paradigm for compensating future risks

in 2017, Equifax suffered a hack that compromised the core personal information (SSNs, credit card numbers, etc.) of approximately 140 million people. The incident resulted in a settlement with the Federal Trade Commission (FTC) and others, which paid up to $700 million in damages.

the qualitative difference in the form of compensation is noteworthy. in addition to cash compensation, affected citizens received 10 years of free credit management servicesand were compensated for the time they spent restoring and investigating their personal information at a rate of $25 per hour. Unlike South Korea's "100,000 won alimony," the Equifax case represents an advanced compensation paradigm that maximizes the value of personal information by including in the scope of damages both the **10 years of potential risk (credit monitoring) caused by the breach and the **time and effort (opportunity cost) that consumers invested in restoring their information.

furthermore, in addition to the settlement, Equifax was also forced to take mandatory security enhancement measuresto further strengthen its own cybersecurity and data security. Foreign regulators exert a powerful deterrent power in that they go beyond mere monetary sanctions and compel companies to make fundamental system improvements and efforts to prevent recurrence as a condition of a judicial settlement.

direction and future challenges of Korea's comprehensive information protection measures

in response to the recent spate of hacking incidents at telecommunications and financial companies, the government is expected to announce a cross-ministerial "Comprehensive Information Protection Plan" in late September, which will mark an important turning point in shifting corporate responsibility away from minimal measures.

punitive fines and top management accountability

the comprehensive plan will include the imposition of punitive fineson companies that repeatedly breach personal information. Instead of punitive damages, which are difficult to prove in civil lawsuits, the government will directly impose large monetary sanctions, which is a powerful tool to deter companies from avoiding security investments.

the law will also clarify that the ultimate responsibility for personal information management rests with the head of the company, which will elevate security investments from a cost issue for the business unit to a key decision-making area at the top of the organization.

the final roadmap to reform

at the end of the day, the blame for security incidents needs to shift to a paradigm where organizations are no longer "victims" of hacking, but rather "information security officers" entrusted with information. only by creating a sense of crisis that companies will lose trust if they neglect security will effective security investments and institutional improvements be possible.

in order for South Korea to realize real remedies, the following institutional complements are essential. first, punitive finesmust be imposed immediately and heavily through administrative enforcement; second, the class action systemmust be expanded to dramatically improve consumer access and litigation economics; and third, the obligation for companies to submit data on their implementation of information security stability measures must be strengthened to ease the burden of proof.

all eyes will be on the government's soon-to-be-announced comprehensive measures to compensate for "future risks," as in overseas cases, and to hold companies accountable for fundamental system improvements rather than monetary refunds.