Financial Crime World

Procuratorial Proposal Work of People’s Procuratorates

The Supreme People’s Procuratorate (SPP) has recently published a procuratorial proposal work report outlining the progress made in promoting corporate compliance through a pilot program.

Role of the SPP

Under China’s current legal framework, the SPP plays a crucial role as the country’s highest prosecuting agency, with public prosecution as its primary duty. Unlike the Department of Law in the United States, China’s procuratorate is separate from the administrative branch of government and reports directly to the National People’s Congress.

Pilot Program for Corporate Compliance

The pilot program aims to explore incentives for corporate compliance by utilizing bail periods as a substitute for deferred prosecution agreements (DPAs) during the experimental phase. The Criminal Procedure Law of China states that the bail period should not exceed 12 months, but experts believe this timeframe is insufficient for procurators and suspected companies to achieve their goals in complex cases.

Corporate Compliance Mechanisms

The pilot program has introduced corporate compliance mechanisms, including:

  • Administrative Settlement: aims to encourage companies to adopt effective compliance systems and take responsibility for any misconduct.
  • Criminal Non-Prosecution Agreements (NPAs): seeks to promote companies’ commitment to compliance and prevent criminal punishment.

Changes in China’s Business Landscape

In recent years, China’s business landscape has undergone significant changes. The concept of corporate social responsibility is becoming increasingly important, with many companies recognizing the value of compliance in doing business. A culture of compliance is welcome by most Chinese companies, which see it as a way to:

  • Gain trust in the market
  • Improve corporate governance
  • Control administrative and criminal punishment risks

The legal profession has also started to adapt to these changes. Corporate compliance is no longer limited to international practices, and law firms are shifting their focus towards domestic corporate compliance. Compliance officers have become a new occupation in the legal market.

Future Outlook

As China continues to push forward with its corporate compliance efforts, it is expected that more civilian companies will join the trend. The SPP’s procuratorial proposal work report highlights the importance of exploring mechanisms to encourage civilian companies to create a compliance culture and adopt effective compliance systems.

Conclusion

While there are still challenges ahead, the era of corporate compliance has arrived in China. With its unique blend of traditional business philosophy and modern legal practices, China is poised to become a leader in corporate compliance.