Table of Contents

 

Chapter 1: The Origins and Current State of Criminal Compliance

Section 1: Criminal Legal Risks Faced by Private Enterprises

I. A Macro-Level Understanding of Corporate Criminal Risks

II. Two Factors That Trigger Corporate Criminal Risks

III. Common Types of Crimes Frequently Seen Among Private Enterprises

 

Section 2: Clarifying the Concept of Criminal Compliance

I. Clarifying Concepts Such as Compliance, Corporate Compliance, and Corporate Criminal Compliance

II. The Relationship Between Corporate Compliance and Corporate Criminal Compliance

III. The Significance of Criminal Compliance

 

Section 3: The Rise and Development of Criminal Compliance

I. The Trend Toward Integration of Execution and Administration

II. The Increasingly Refined Nature of Social Governance

III. Insights from the U.S. Corporate Criminal Compliance System

IV. Forms of Corporate Criminal Compliance in Practice in China

V. Collaborative Opportunities for the Legal Professional Community

 

Chapter 2: Compliance Pilot Program of the Procuratorial Organs

Section 1: Progress of the Two-Wheel Pilot Program

I. Pilot Unit Work Outline

II. Summary of the Pilot Model

III. Successful Case Studies from the Pilot Program

 

Section 2: Trends in Criminal Compliance Work Conducted by Prosecutorial Authorities in the Future

I. Institutional exploration becomes more legally grounded

II. Shifting the application of non-prosecution toward small and medium-sized enterprises

III. Limiting the Scope of Application for Compliance-Based Non-Prosecution

4. Enhance the Independent Supervisor System

5. Shift the focus from post-crime compliance efforts following a company’s alleged involvement in criminal activities to proactive, preventive compliance measures implemented before any issues arise.

6. Exploring Unified Standards for Compliance Acceptance and Evaluation

 

Chapter 3: Exploring Lawyers' Involvement in Criminal Compliance Work

Section 1: The Role and Function of Lawyers

I. Justification for the Necessity of Lawyers' Involvement in Criminal Compliance

II. The Role of Lawyers and Their Corresponding Responsibilities in Criminal Compliance

III. The Role of Lawyers in Each Stage of Criminal Compliance

IV. The Issue of Role Conflicts for Lawyers

 

Section 2: Professional Skills for Lawyers Engaging in Criminal Compliance Work

I. The Professional Structure of the Criminal Compliance Legal Team

II. The Transformation of Legal Professional Identity

 

Section 3: Guidance and Recommendations for Lawyers Engaging in Criminal Compliance Work

I. Guideline for Pre-Event Compliance Construction Processes: Launching Compliance Initiatives from a Criminal Perspective

II. Post-Event Compliance Remediation Guide: Implementing Criminal Compliance Non-Prosecution Services

III. Third-party Independent Supervisor: Fulfilling Duties in Lawyers' Emerging Compliance Roles

 

Section 4: Prevention of Practice Risks for Lawyers

I. Potential Practice Risks Involved in Handling Pre-Litigation Compliance Services for Businesses Not Facing Criminal Charges

II. Potential Practice Risks Involved in Handling Pre-Litigation Compliance Services for Enterprises Facing Criminal Charges

III. Potential Practice Risks Involved in Conducting In-Process Compliance Services as a Third-Party Supervisor

 

Chapter 2: Compliance Pilot Program of the Procuratorial Organs

 

In recent years, the Supreme People’s Procuratorate has placed great emphasis on supporting business development, issuing a series of prosecutorial policy guidelines and implementing numerous targeted initiatives. For instance, prior to the 19th National Congress, it successively released key documents such as the "Opinions of the Supreme People’s Procuratorate on Fully Leveraging Procuratorial Functions to Legally Safeguard and Promote the Healthy Development of the Non-Public Sector Economy" on February 19, 2016,[1] the "Opinions of the Supreme People’s Procuratorate on Fully Performing Procuratorial Functions to Strengthen Judicial Protection of Property Rights" on January 6, 2017,[2] and the "Notice of the Supreme People’s Procuratorate on Fully Harnessing Functional Roles to Create a Rule-of-Law Environment That Safeguards Entrepreneurs’ Legal Rights and Interests and Supports Entrepreneurial Innovation and Invention" on December 12, 2017.[3] Since the 19th National Congress report underscored the need to "unwaveringly encourage, support, and guide the development of the non-public sector economy," along with emphasizing the importance of fostering and protecting entrepreneurial spirit while encouraging more societal actors to engage in innovation and entrepreneurship, corporate compliance has steadily gained heightened attention. Beginning in 2018, the Central Committee of the Communist Party of China, the State Council, and various ministries and commissions have successively issued a series of guiding documents, including the "Opinions of the Ministry of Justice on Fully Leveraging Functional Roles to Foster a Favorable Rule-of-Law Environment for Private Enterprise Development," the "Opinions of the CPC Central Committee and the State Council on Creating a Better Development Environment to Support the Reform and Development of Private Enterprises," the "Guidelines for Compliance Management in Central Enterprises (Trial),"[4] and the "Guidelines for Compliance Management of Overseas Operations by Enterprises."[5] On January 17, 2019, the Supreme People’s Procuratorate unveiled its first batch of four landmark judicial protection cases involving private enterprises,[6] which, together with the aforementioned policy documents and exemplary cases, have collectively established a robust framework for safeguarding corporate rights and interests, as well as institutional mechanisms to bolster corporate compliance practices.

 

Section 1: Progress of the Two-Wheel Pilot Program

 

In March 2020, the Supreme People's Procuratorate launched a pilot program for corporate compliance supervision, designating the Pudong New Area People's Procuratorate and Jinshan District People's Procuratorate in Shanghai, as well as the Bao'an District People's Procuratorate and Nanshan District People's Procuratorate in Shenzhen, Guangdong Province, and the Zhangjiagang City People's Procuratorate in Jiangsu Province and the Tancheng County People's Procuratorate in Linyi City, Shandong Province, as pilot units. This marked the official commencement of China's reform initiative on the corporate compliance non-prosecution system.

 

Meanwhile, in some regions, procuratorial organs—though not yet included in the pilot program—have proactively explored and innovated in the field of criminal compliance, guided by documents issued by the Supreme People's Procuratorate, such as the "Opinions on Fully Performing Procuratorial Functions to Strengthen Judicial Protection of Property Rights," the "Opinions on Fully Leveraging Procuratorial Functions to Legally Safeguard and Promote the Healthy Development of the Non-Public Sector," and the "Answers to Legal and Policy Questions Regarding How Procuratorial Organs Handle Cases Involving Private Enterprises to Provide Judicial Support for Their Growth."

 

In April 2021, the Supreme People's Procuratorate released the "Work Plan for Piloting Corporate Compliance Reform,"[7], launching the second phase of the corporate compliance reform pilot program. The scope of this second-phase pilot has expanded compared to the first, now encompassing ten provinces (and municipalities directly under the central government), including Beijing, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Hubei, Hunan, and Guangdong. Provincial-level procuratorates can independently select one to two prefecture-level city procuratorates—and their respective grassroots-level procuratorates—as pilot units, based on local conditions.

 

I. Pilot Unit Work Outline

 

During the two-phase pilot program, the pilot units have already released several relatively typical pilot work outlines, including:

 

1. The "Provisional Measures on Criminal Compliance Collaboration for Enterprises" [8] and the "Regulations on the Selection and Management of Independent Monitors for Corporate Criminal Compliance (Trial)" [9], jointly issued by the Bao'an District People's Procuratorate of Shenzhen Municipality and the Bao'an District Bureau of Justice

 

Shenzhen's Bao'an District, after carefully studying and drawing inspiration from international compliance oversight systems, has made its first attempt in China to establish a "Criminal Compliance Independent Monitor System." According to Article 2 of the *Provisional Regulations on the Appointment and Management of Independent Monitors for Corporate Criminal Compliance*, "The independent monitor for corporate criminal compliance referred to in these regulations is a law firm entrusted by the suspect enterprise to investigate, plan, and oversee the company’s criminal compliance status." The independent monitor is authorized to "investigate the enterprise’s criminal compliance practices, assist the company in developing a compliance plan and ensuring its implementation, and provide periodic written reports on the company’s compliance efforts—these reports will serve as a reference for the procuratorate when making decisions regarding how to handle the suspect enterprise." The regulation provides a detailed framework, outlining key aspects such as the principles for selecting independent monitors, their sources and eligibility criteria, the appointment process, the monitors’ core responsibilities, obligations, and the oversight mechanisms in place. While challenges may still arise—such as the limited pool of qualified monitors, unclear boundaries regarding inspection and monitoring authority, and potential conflicts between proposed inspection activities and companies’ trade secrets or employees’ personal privacy[10]—Shenzhen’s Bao’an District’s innovative approach remains highly practical and implementable. In October 2020, the Bao’an District Justice Bureau of Shenzhen publicly announced the "First Batch of Proposed List of Independent Monitors for Corporate Criminal Compliance," featuring eleven selected law firms[11].

 

2. The "Pilot Work Plan on Applying Conditional Non-Prosecution to Corporate Crime Cases (Trial)," released by the Nanshan District People's Procuratorate of Shenzhen City

 

The "Pilot Work Plan on Applying Conditional Non-Prosecution in Corporate Crime Cases (Trial)" strengthens efforts to explore the application of the non-prosecution system to businesses involved in criminal cases, helping companies establish and improve robust internal systems to promote lawful and compliant operations. The plan sets a compliance supervision and assessment period ranging from 6 to 12 months. During this probationary phase, prosecutors will regularly—typically every two months—monitor and evaluate the company’s implementation of its compliance program, providing guidance to further refine the plan and ensuring that the company submits timely compliance assessment reports to the procuratorate.

 

3. The "Implementation Measures for Relatively Non-Prosecution of Corporate Crimes" issued by the People's Procuratorate of Tancheng County, Linyi City, Shandong Province

 

The "Implementation Measures for Conditional Non-Prosecution of Corporate Crimes" clearly defines the scope of cases applicable (including key offenses and specific circumstances) as well as the entities eligible for this measure. Additionally, it takes into account factors such as corporate compliance and public interest considerations, while strengthening mechanisms like economic impact assessments, criminal compliance supervision and monitoring, and reviews of the necessity for conditional non-prosecution. This approach also establishes a new working model: "Non-Prosecution + Compliance Prosecutorial Recommendations."

 

4. The "Procedures for Compliance-Based Non-Prosecution of Enterprise-Related Cases (Trial)" [12], issued by the People's Procuratorate of Luojiang District, Quanzhou City, Fujian Province, and the "Decision on Appointing the First Batch of Compliance Supervisors for Enterprise-Related Cases at the People's Procuratorate of Luojiang District, Quanzhou City" [13]

 

In March 2021, the Luojiang District Procuratorate held a ceremony to appoint its first group of compliance supervisors for enterprise-related cases, along with an introductory training session. During the event, the procuratorate presented appointment letters to the initial 12 compliance supervisors it had recruited for such cases. Notably, unlike Shenzhen’s Bao’an District “Independent Monitors,” whose roles were limited exclusively to lawyers, the Luojiang District People’s Procuratorate in Quanzhou, Fujian Province, expanded its pool of compliance supervisors to include professionals beyond attorneys—such as accountants and tax advisors. Additionally, while Shenzhen’s approach involved law firms acting as a whole unit for these roles, Luojiang’s compliance supervisors were appointed as individual experts, thereby clearly defining accountability for third-party oversight.

 

5. The "Several Opinions of the Jiangsu Provincial People's Procuratorate on Serving and Safeguarding the Healthy Development of Private Enterprises," released by the Jiangsu Provincial People's Procuratorate

 

The "Several Opinions of the Jiangsu Provincial People's Procuratorate on Serving and Safeguarding the Healthy Development of Private Enterprises" outlines broader new prosecutorial principles, systematically summarizing the criteria for identifying certain offenses. Specifically, Article 9 states: "Gradually expand the application of discretionary non-prosecution in cases involving guilty pleas and acceptance of punishment, encouraging more minor criminal cases involving private enterprises to receive lenient treatment at the prosecution stage in accordance with the law. For private enterprise cases involving minor offenses where mitigating or reducing circumstances apply—or where the social harm is relatively low—and the enterprises have admitted guilt and accepted punishment, prosecution decisions may be temporarily deferred, while urging the companies to establish robust compliance systems. After a specified period, if the enterprise is assessed as meeting criminal compliance standards, the procuratorate may, in accordance with the law, decide not to prosecute or recommend lighter sentencing, and may also withdraw previously disclosed case information." Article 24 further emphasizes: "In conjunction with judicial proceedings, thoroughly analyze the causes, characteristics, and patterns underlying criminal activities occurring within enterprises, and precisely issue prosecutorial recommendations tailored to the specific businesses involved. These recommendations will help companies strengthen internal controls, address vulnerabilities, and implement effective criminal compliance programs." It can be said that the Jiangsu Provincial People's Procuratorate has established two parallel corporate compliance frameworks: one involves post-incident measures such as deferred prosecution, lenient treatment, and withdrawal of publicized case details following a probationary review period; the other focuses on proactive steps, including issuing preventive prosecutorial recommendations aimed at helping enterprises avoid future legal issues.

 

6. The "Opinions on Establishing a Compliance Review System for Enterprises Involved in Crimes (Trial)" issued by the Ningbo Municipal People's Procuratorate [14]

 

In October 2020, the Zhejiang Provincial People's Procuratorate launched a pilot program allowing market entities suspected of eight types of economic crimes—including smuggling and offenses disrupting the management order of companies and enterprises—to receive a decision of non-prosecution under certain conditions. Specifically, if these entities meet the prosecution criteria, voluntarily plead guilty and accept punishment, and commit to implementing compliance measures while agreeing to undergo supervision, the procuratorates may choose not to pursue formal charges. The pilot units involved include the Ningbo Municipal People's Procuratorate, Wenzhou Municipal People's Procuratorate, Cixi Municipal People's Procuratorate, Lucheng District People's Procuratorate in Wenzhou, and Yongkang Municipal People's Procuratorate. At the heart of this Zhejiang pilot initiative is the approach of temporarily withholding prosecution for specific categories of economic crimes with prescribed statutory penalties—provided that the facts of the crime are clear, the entity meets the prosecution requirements, voluntarily agrees to plea bargaining, actively works to restore any harm caused to legal interests, and commits to establishing and diligently implementing an effective criminal compliance plan. During a designated period, the procuratorates will closely monitor the company’s compliance efforts. If the company successfully fulfills its compliance obligations as outlined in the agreed-upon plan, the procuratorate will ultimately decide to issue a non-prosecution decision against the company or its responsible individuals.

 

The Ningbo Municipal People's Procuratorate has issued the "Opinions on Establishing a Compliance Examination System for Enterprises Involved in Crimes (Trial Implementation)," which limits the scope of cases to minor corporate offenses where the directly responsible individuals could legally face prison sentences of less than three years. This aligns with the judicial policy of applying leniency to minor crimes as required by law. The system introduces administrative oversight mechanisms into the compliance examination process, assigning primary responsibility for evaluating the enterprise’s compliance efforts during the examination period to relevant administrative authorities. Importantly, the outcome of the examination—specifically, whether the enterprise has successfully implemented a compliance plan—will serve as the key criterion for deciding whether to prosecute the company. Typically, if an enterprise demonstrates substantial progress in refining its governance structure, strengthening management systems, and standardizing operational practices according to its compliance plan during the examination period, it will generally be exempted from prosecution. This initiative takes place during the review-and-prosecution phase, with an examination period ranging from six to twelve months. The evaluation is conducted before the conclusion of the review-and-prosecution deadline, ensuring that all activities occur within this critical stage. Ultimately, a decision on whether to prosecute or not will be made prior to the end of the review-and-prosecution process. Some experts have noted, however, that since the entities tasked with conducting these compliance examinations are likely government administrative departments or local community/county-level government bodies where the enterprises operate, there may be significant technical challenges in assessing compliance plans, especially given the current lack of standardized templates for such plans.

 

7. The Liaoning Provincial People's Procuratorate's "Opinions on Establishing a Compliance Review System for Enterprises Involved in Crimes" [16]

 

The Liaoning Province's "Opinions on Establishing a Compliance Examination System for Enterprises Involved in Crimes" differs significantly from other guiding documents in the following key areas: First, it substantially narrows down the scope of entities eligible for the corporate compliance examination system. Specifically, an enterprise must meet at least one of the following criteria to qualify: - It must play a meaningful role in lawful tax payment, employment generation, and boosting local economic development; - It must possess independent intellectual property rights, strong brand reputation, proprietary technology, or valuable trade secrets; - It must align with current industrial policies or future industry development trends; - Its operational status must directly influence the competitiveness of its industry, upstream/downstream supply chains, and the broader regional economy; - The executives directly responsible, along with other personnel bearing direct accountability, must include the company’s top leaders, actual controllers, or core technical staff—individuals whose expertise is critical to the business’s growth and success. However, this stringent eligibility requirement has drawn scrutiny over whether it effectively serves the reform objective of safeguarding small and medium-sized private enterprises. Second, the system imposes specific conditions for applicability, such as requiring that the involved enterprise and its personnel be first-time or occasional offenders; that the criminal facts be clearly established with solid and sufficient evidence; that the executives and other directly responsible individuals could face up to three years in prison, detention, probation, or a single fine under the law; and that the enterprise and its key personnel fully acknowledge their involvement in the main criminal acts while voluntarily pledging to accept punishment and cooperate with legal proceedings. Additionally, Article 7 outlines explicit scenarios where the system would not apply—yet these stipulations present notable challenges in practical implementation. Furthermore, Liaoning Province’s "Opinions" innovatively introduce tailored compliance plan evaluation standards for different types of crimes, such as environmental pollution offenses, demonstrating a forward-thinking approach to addressing crime-specific risks.

 

8. The Shanghai Jinshan District People's Procuratorate has released the "Pilot Measures for Corporate Compliance Work" and the "Provisional Regulations on the Selection, Appointment, and Management of Third-Party Compliance Supervisors for Enterprises"[17].

 

The Shanghai Jinshan District People's Procuratorate, jointly with the District Justice Bureau and the District Federation of Industry and Commerce, has established the Enterprise Compliance Supervision and Management Committee. Ten other organizations, including the District Public Security Bureau and the District Taxation Bureau, serve as members of the committee. Together, they are tasked with evaluating the performance of third-party supervisors, assessing companies' compliance efforts, investigating and addressing related disputes, and exploring the development of a robust third-party supervision mechanism. To operationalize this initiative, the procuratorate, in collaboration with the District Justice Bureau, has jointly issued guidelines. Under these guidelines, the District Justice Bureau will publicly select law firms to form a roster of qualified third-party supervisors. The procuratorate will then draw from this roster to appoint specific supervisors who will collaborate closely with investigators, ensuring thorough corporate assessments and rigorously overseeing the implementation and evaluation of compliance plans for businesses involved in criminal activities. Throughout the process, the procuratorate conducts comprehensive investigations to thoroughly understand the circumstances of the companies under scrutiny, as well as their broader societal impact. Leveraging advanced big data analytics, it compiles detailed enterprise investigation reports that accurately assess the compliance value of each company involved. In its ongoing efforts, the procuratorate has developed two distinct compliance models: the "Standard Model" and the "Simplified Model." For larger enterprises with higher compliance requirements, the procuratorate follows the full "Standard Model," meticulously guiding these companies through legally mandated compliance procedures while maintaining strict oversight throughout the process. Meanwhile, for smaller, micro, and medium-sized enterprises with less stringent compliance needs, the procuratorate adopts the "Simplified Model," issuing targeted prosecutorial recommendations focused on key compliance areas. These recommendations outline clear directions for improvement, and the procuratorate subsequently evaluates the companies' progress based on their responses, taking appropriate action accordingly.

 

9. The "Opinions on Implementing a Legal Benefit Restoration Review Period for Criminal Cases Involving the Private Economy (Trial)" issued by the People's Procuratorate of Longhua District, Shenzhen Municipality

 

The "Opinions on Implementing a Legal Benefit Restoration Review Period for Criminal Cases Involving the Private Economy (Trial)" primarily introduces a system of legal benefit restoration review periods under corporate compliance conditions. Specifically, for cases involving the private economy that are transferred for review and prosecution, if the suspect demonstrates a genuine willingness to restore the damaged legal interests, the Longhua District Procuratorate may, in accordance with the principle of combining punishment with education, establish a legal benefit restoration review period within the statutory timeframe for reviewing and prosecuting the case. As a general rule, suspects who do not require detention can be released on bail or subjected to other lenient coercive measures. Under this framework, the suspect would submit a compliance plan aimed at repairing the infringed legal interests. Depending on factors such as the extent of benefit restoration, the suspect's attitude toward admitting guilt and showing remorse, the procuratorate may decide to refrain from prosecution altogether or recommend a lighter sentence.

 

10. The "Criminal Compliance Procedures for Enterprise-Related Cases (Trial)" issued by the People's Procuratorate of Daishan County, Zhejiang Province

 

The Daishan County People's Procuratorate, in its interpretation of the "Procedures for Handling Criminal Compliance in Cases Involving Enterprises (Trial)", outlined ten key features of the "Daishan County People's Procuratorate Procedures for Handling Criminal Compliance in Cases Involving Enterprises (Trial)": 1. Expanded scope of applicability—criminal compliance now extends beyond private and state-owned enterprises to include collectively owned and partnership enterprises. 2. First integration of criminal proceedings with compliance commitments—introducing a prosecutor-led process specifically designed for handling criminal compliance cases involving enterprises. 3. Full-process approach for the compliance remediation phase—breaking away from the traditional focus solely on the review-and-prosecution stage, ensuring comprehensive oversight throughout. 4. Standardization of remediation plan content—detailing specific requirements for crafting effective compliance strategies. 5. Enhanced regulatory incentives for compliance remediation—facilitating coordinated efforts in cases where criminal and administrative penalties overlap. 6. Diversified roles for compliance supervisors—for the first time, this includes both specialized compliance experts and general compliance monitors. 7. Clear outcomes for successfully completed remediation—establishing definitive measures such as decisions not to prosecute, recommendations for suspended sentences, reductions in fines, or installment payment plans. 8. Addressing recidivism among compliant enterprises—for the first time, guidelines are provided for handling cases where companies re-offend, including options like extending the compliance period or pursuing arrest and prosecution. 9. Systematic case management of criminal compliance—structuring the process into five distinct stages: case acceptance, preliminary investigation, compliance commitment, remediation implementation, and final evaluation and disposition. 10. Clearly defined duration of the compliance remediation period—ranging from six months to two years.

 

Notably, the personnel composition of compliance supervisors in Daishan County is more diverse. Professional compliance supervisors are selected from firms such as law offices, accounting firms, tax consulting firms, environmental tax advisory firms, and architectural firms—specifically through consultations between the market regulatory authorities, the county Federation of Industry and Commerce (Chamber of Commerce), and the county Bureau of Justice. Companies involved in cases have the right to recommend professional compliance supervisors, while candidates for general compliance supervisors are determined through discussions among the county Federation of Industry and Commerce (Chamber of Commerce), the Bureau of Justice, and local townships, ensuring they come from among government officials. Additionally, companies implicated in cases can nominate compliance supervisors, and the procuratorial authorities should carefully review and consider these nominations, while also seeking input from relevant regulatory bodies.

 

II. Summary of the Pilot Model

 

Currently, in China's practice of compliance-based non-prosecution reforms, there are primarily two models: "prosecutorial recommendations" and "conditional non-prosecution" [18].

 

First, the prosecutorial recommendation model. During the review and prosecution process, if a company involved in a crime is found to have committed minor offenses and has voluntarily admitted guilt and accepted punishment, the procuratorate, after deciding not to prosecute formally, may issue a prosecutorial recommendation mandating the company to establish a compliance management system. This approach—using prosecutorial recommendations to encourage companies to build robust compliance frameworks—is a key institutional model adopted by most prosecutors' offices exploring the use of compliance-based non-prosecution measures. Prosecutorial recommendations serve as a primary tool through which the procuratorate fulfills its legal oversight duties, actively engages in social governance, helps prevent and reduce illegal and criminal activities, and safeguards both national interests and the public good.

 

Second, the "conditional non-prosecution" model. During the review and prosecution process, the procuratorate sets a probationary period during which enterprises suspected of criminal activity are temporarily exempted from prosecution. Instead, the procuratorate monitors and evaluates the company’s implementation of criminal compliance measures. At the end of the probationary period, based on the progress made in establishing a robust compliance management system, the procuratorate will decide whether to proceed with prosecution or ultimately choose not to prosecute.

 

III. Successful Case Studies from the Pilot Program

 

1. Illegal Business Operation Case by a Certain Company [19]

 

Due to the impact of the pandemic, the company aimed to retain its new customers by producing packaging bags for a certain medical-grade nursing mask—despite lacking the necessary authorization documents. The amount involved in the company’s suspected illegal business activities is only 20,000 yuan. However, if criminal enforcement measures are taken against the company’s principal, Ning, it could lead to a production halt, potentially leaving nearly 100 employees at risk of losing their jobs. After visiting the company and gathering feedback from the affected business, the handling prosecutor decided to apply the "legal benefit restoration review period" system to the company in question, allowing the material packaging firm to develop and implement a comprehensive compliance plan addressing its criminal risks within the designated legal benefit restoration timeframe.

 

The company not only submitted a detailed compliance plan during the review period, focusing on business contracting and financial management, but also voluntarily became an informant, reporting potential infringement clues related to this well-known publicly listed enterprise. Following a subsequent site visit and evaluation, the handling prosecutor determined that the restoration of legal interests had already been effectively achieved. After seeking the opinion of the renowned publicly traded company, a decision was made to drop the prosecution against the materials packaging firm.

 

2. Y Pipe Manufacturing Co., Ltd. and Tang's Case of Issuing False Special VAT Invoices [20]

 

Company Y primarily engages in the manufacturing, processing, and sales of precision seamless steel pipes and high-pressure oil tubes. From January to November 2016, Company Y and Tang Mou, with the intent to fraudulently obtain tax refunds, illegally obtained 27 fraudulent special VAT invoices through third parties—despite having no actual transportation business. The total amount of falsely declared taxes exceeded RMB 186,000, and all these invoices were subsequently used to claim legitimate tax deductions. Following the discovery of this scheme, Company Y promptly paid back the full amount of taxes owed, while Tang Mou voluntarily turned himself in to public security authorities, fully confessed to his criminal actions, and expressed remorse by agreeing to accept legal consequences.

 

The procuratorial authorities conducted an impact assessment of the case from the following perspectives: First, from the perspective of legal interests harmed, although the actions of Company Y and Tang Mou allegedly constituted the crime of issuing false special VAT invoices, thereby infringing upon the state’s tax administration system, the circumstances of the crime were relatively minor. Moreover, after the incident, both parties proactively turned themselves in, admitted their guilt, accepted punishment, and promptly paid the outstanding taxes, effectively mitigating the damage to the affected legal interests. Second, from the standpoint of the company’s survival, field visits to relevant departments such as Zhangjiagang Municipal Tax Bureau, the Safety and Environmental Protection Bureau, and the Social Security Bureau revealed that Company Y has a registered capital of 8.2 million yuan, pays annual taxes exceeding 2 million yuan, and employs more than 100 people. However, due to the combined impact of the pandemic and ongoing legal proceedings, the company is now facing severe operational and financial difficulties, raising significant concerns about its potential bankruptcy. Finally, from the perspective of the company’s long-term development, the investigation uncovered several internal business issues at Company Y, including irregularities in financial management and non-compliant handling of hazardous waste. In response, the authorities have urged the company to strengthen its internal controls, establish robust compliance systems, and implement necessary improvements—practices that will not only address immediate challenges but also lay a solid foundation for the company’s sustainable growth in the future.

 

On January 14, 2020, the procuratorial authorities, after thoroughly assessing the impact of the case, issued a prosecutorial recommendation to Company Y, advising it to strengthen its criminal compliance framework—specifically in areas such as financial systems, hazardous waste management, and daily operations—by drawing on the SASAC’s "Guidelines for Compliance Management of Central Enterprises (Trial)." The recommendation gave the company three months to implement these improvements. Upon receiving the recommendation, Company Y promptly engaged a team of expert lawyers to serve as independent compliance review specialists, tasked with conducting a comprehensive compliance assessment of the company. As a result, Y established and refined over 20 robust internal policies and procedures, covering five key areas: corporate governance, production and operations, financial and tax reporting, environmental protection practices, and emergency management systems. On April 8, 2020, Company Y formally submitted a written response to the procuratorial authorities, detailing the progress made in addressing the recommendations and including a complete set of documents outlining its newly implemented criminal compliance management system. In response, the procuratorial authorities collaborated with specialized departments such as taxation and environmental protection to evaluate both the company’s corrective actions and the successful execution of its criminal compliance plan. Ultimately, they concluded that Company Y had met all applicable criminal compliance standards.

 

On April 27, 2020, the Zhangjiagang City Procuratorate held a public hearing on its decision not to prosecute, inviting representatives from public security authorities, people's supervisors, and special prosecutors to attend. After deliberation, the hearing panel unanimously concluded that the procuratorate’s proposed decision not to prosecute both the company and the individual was legally and factually justified. The panel also noted that the decision carefully considered the company’s current operational challenges, which would facilitate its resumption of work and production while contributing to social stability. Furthermore, the panel commended the procuratorate’s innovative approach of promoting corporate criminal compliance through case handling. The following day, the procuratorate publicly announced its legally mandated decision not to prosecute Company Y and Tang Mou.

 

3. Case of a company forging special VAT invoices [21]

 

In 2015, a company facing severe cash flow difficulties urgently needed to apply for a loan. To do so, it purchased a large number of counterfeit special VAT invoices to demonstrate the value of its collateral, successfully fraudulently obtaining a loan (and subsequent renewal) worth over 4 million RMB from a bank. Due to the forgery of special VAT invoices and the fabrication of collateral, not only was the company placed under criminal investigation, but the employees involved were also referred to the procuratorial authorities for review.

 

After accepting the case, prosecutors visited the company and the bank multiple times and learned that the business was already struggling. Moreover, the individuals involved in the case are key company leaders and core business personnel. If criminal charges were filed, it would inevitably disrupt the company’s operations and access to financing, putting employees at risk of losing their jobs.

 

After receiving the commitment letter, the Daishan County Procuratorate convened a public hearing on the proposed decision not to prosecute, inviting citizen supervisors to participate in the case review. Recently, the Daishan County Procuratorate made a decision of relative non-prosecution for both the companies and individuals involved, officially announcing it to the public.

 

4. Case of Environmental Pollution Involving Company L, Zhang Moujia, and Others [22]

 

Jiangsu Zhangjiagang City L Chemical Machinery Co., Ltd. (hereinafter referred to as "L Company") is a provincial-level, privately owned high-tech enterprise specializing in the research and development and production of stainless steel products. Zhang Moujia serves as the company's General Manager, Zhang Mouyi as Deputy General Manager, and Lu Moumou holds the position of Administrative Director. In the second half of 2018, L Company constructed an acid pickling tank without obtaining the necessary environmental impact assessment approval from the ecological environment authorities. Furthermore, in February 2019, the company illegally installed hidden pipes to discharge acid-washing wastewater—containing heavy metals such as nickel and chromium—directly into the domestic sewage system, resulting in severe environmental pollution. In June 2020, Zhang Moujia, Zhang Mouyi, and Lu Moumou voluntarily turned themselves in to the Zhangjiagang Public Security Bureau, fully confessed to their criminal actions, and expressed their willingness to accept legal consequences and cooperate with the investigation.

 

After investigation, L Company was identified as a provincial-level high-tech private enterprise, annually paying over 4 million yuan in taxes, employing more than 90 people, and holding over 20 patents—some of whose products have even broken through foreign monopolies. Should the company and its key management personnel be convicted, it would significantly impact China’s domestic technology sector. In light of this, in October 2020, the procuratorial authorities delivered an "Enterprise Criminal Compliance Notice" to L Company. In response, the company promptly submitted a written compliance commitment along with supporting documents demonstrating its industry standing, research capabilities, tax contributions, and commitment to social responsibility.

 

5. Case of Company A, Company B, and Guan [Name] for Issuing False VAT Special Invoices

 

By launching compliance initiatives, Company L has achieved rapid transformation and development, gradually establishing a comprehensive management system encompassing production operations, financial management, and internal compliance controls. This shift has fundamentally transformed the company’s previously rough-and-tumble growth model. In the first quarter of 2021, Company L saw its sales revenue increase by 275% year-on-year, while tax payments surged by 333%, making it the fastest-growing enterprise in its region.

 

5. Case of Company A, Company B, and Guan某某 for Issuing False Special VAT Invoices

 

The defendant entities, Shanghai A Medical Technology Co., Ltd. (hereinafter referred to as Company A) and Shanghai B Technology Co., Ltd. (hereinafter referred to as Company B), were both under the actual control of the defendant, Guan Moumou. Between 2016 and 2018, while managing the operations of Companies A and B, Guan Moumou, without any genuine goods transactions, arranged through intermediaries to have others issue false special VAT invoices for the two companies in exchange for invoice fees. A total of 219 such invoices were issued, involving a combined value and tax amount exceeding 28.87 million yuan, of which over 4.19 million yuan in taxes had already been declared and deducted. In October 2019, after voluntarily surrendering to authorities, Guan Moumou truthfully confessed to the aforementioned criminal activities and subsequently paid the outstanding tax liabilities related to the case. The procuratorial authorities visited the companies involved to assess their business operations and also consulted with local government officials regarding their tax compliance and employment contributions. Investigations revealed that these companies are leading enterprises in a key technological sector in China and are recognized as high-tech enterprises in Shanghai, boasting robust scientific and technological capabilities. They have made significant contributions to regional economic development and job creation. Moreover, the company’s management team and employees generally hold advanced educational qualifications, demonstrating strong acceptance of compliance management practices and excellent execution capabilities. This makes corporate compliance not only feasible but also highly desirable. Based on this assessment, the procuratorial authorities urged the companies to commit to implementing compliance measures and initiated the necessary steps to establish a compliant organizational framework. Simultaneously, the prosecutors conducted on-site inspections at multiple tax authorities across various regions to verify the tax documents submitted by the companies and confirm the timely repayment of the disputed tax amounts. Additionally, during the review and prosecution phase, the authorities independently pursued further investigation into a tip for potential meritorious service provided by Guan Moumou, ultimately determining that he indeed qualified for such recognition. In November 2020, the procuratorial authorities formally filed public charges against Companies A and B, as well as Guan Moumou, on suspicion of the crime of issuing false special VAT invoices, applying the lenient sentencing policy for defendants who admit guilt and accept punishment. In December of the same year, the Baoshan District People’s Court in Shanghai fully endorsed the prosecution’s sentencing recommendations, imposing penalties as follows: Company A was fined 150,000 yuan, Company B received a fine of 60,000 yuan, and Guan Moumou was sentenced to three years in prison, suspended for five years.

 

After the court ruling, the procuratorate, in collaboration with the tax authorities, conducted an on-site follow-up visit and discovered that the involved company still needed to further improve its compliance framework. As a result, they issued a prosecutorial recommendation to the company and publicly announced it, advising the business to strengthen its awareness of legal and compliant operations, tighten its business oversight processes, and enhance its capabilities in tax planning and cost control. Following receipt of the company’s response to the prosecutorial recommendation, the procuratorate promptly organized a "look-back" review of the company’s compliance efforts. During this review, it was confirmed that the company has gradually implemented robust compliance mechanisms, including compliance audits, internal investigations, and whistleblower systems. Additionally, the firm has hired industry experts for tax planning, leading to significant reductions in production and operational costs—and ultimately boosting its market share.

 

6. The case of Wang Moumou, Lin Moumou, and Liu Mouyi bribing non-state employees

 

Shenzhen Y Technology Co., Ltd. (hereinafter referred to as "Y Company") is the supplier of audio equipment for Shenzhen H Intelligent Technology Co., Ltd. (hereinafter referred to as "H Company"). Wang, a sales representative at Y Company, allegedly paid bribes totaling 250,000 yuan to Liu, a purchasing officer at H Company, in exchange for preferential treatment during H Company's selection of audio equipment. Additionally, under Liu’s subtle suggestion, Wang offered an additional bribe of over 240,000 yuan to Chen, the Technical Director at H Company. To facilitate the bribery scheme, Wang arranged for Y Company to enter into a procurement contract with Shenzhen A Digital Technology Co., Ltd. (hereinafter referred to as "A Company"), transferring the funds directly into A Company’s account. After A Company deducted its own fees, the remaining amount was then transferred to an account designated by Chen. Following internal audits conducted by Liu Yi, Vice President of Y Company, and Lin, the company’s CFO, Wang ultimately received the bribe payments from the company to carry out the corrupt act.

 

In April 2020, the procuratorial authorities decided not to prosecute Wang Moumou under Article 177, paragraph 2, of the Criminal Procedure Law, and decided not to prosecute Lin Moumou and Liu Mouyi under Article 177, paragraph 1, of the same law. Meanwhile, Chen Mou and Liu Moujia were formally charged in the Nanshan District Court of Shenzhen for allegedly committing the crime of bribery as non-state functionaries. Later that month, the Nanshan District Court of Shenzhen handed down a six-month prison sentence to defendant Liu Moujia and a five-month detention order to defendant Chen Mou for the same offense. Following the court’s verdict, the procuratorial authorities signed a compliance supervision agreement with Company Y in July 2020, providing assistance to the company in establishing and strengthening its compliance framework.

 

During the course of judicial proceedings, the procuratorial authorities learned that Company Y is a key enterprise in Nanshan District, Shenzhen, slated for an upcoming public listing. The company holds a leading position in China's professional audio industry and has already begun pre-IPO advisory services. However, this case highlighted significant vulnerabilities in Y's institutional development and daily management practices. Following the signing of a compliance supervision agreement between the procuratorial authorities and Company Y, a comprehensive plan was developed to address critical issues—such as the company’s internal governance structure, regulatory frameworks, and personnel management—that are closely tied to commercial bribery offenses. This plan aims to establish robust compliance management standards, build an effective compliance organizational framework, and strengthen mechanisms for reporting and mitigating compliance risks. These measures are designed to close existing gaps in the company’s systems and oversight processes, preventing the recurrence of similar illegal or criminal activities. In response, Company Y has since revamped its internal structure and staffing, initiating the creation of a series of regulations—including guidelines on anti-fraud initiatives and measures to prevent commercial bribery—and bolstering its dedicated compliance team to ensure ongoing adherence to high ethical and legal standards.

 

7. Series of Collusive Bidding Cases Involving Construction Firms Such as Company J in Xintai City

 

Since 2013, six construction companies, including J Engineering Co., Ltd. of Xintai City, Shandong Province (hereafter referred to as "Company J"), have been coerced into participating in bid-rigging schemes orchestrated by Li Moumou— a key member of Zhang’s mafia-like organization. Li, who serves as the manager of Xincheng Construction Engineering Company and was sentenced to 1 year and 6 months in prison for the crime of collusive bidding, secretly manipulated the process by uniformly preparing tender documents and controlling bid prices. As a result, Xincheng Construction Engineering Company secured contracts for 13 major city-wide construction projects in Xintai, including pipeline energy-saving renovations, road repairs, and residential building projects. This case, which emerged from the broader investigation into Zhang’s mafia-like organization, has uncovered five separate instances of bid-rigging involving one private enterprise, two state-owned enterprises, and three collectively owned businesses in the city. Notably, all six companies implicated are leading local players in the construction industry, making this a high-profile scandal with far-reaching social implications.

 

The prosecutor urged the company to strengthen its compliance efforts, advising it to prepare a Compliance Commitment Letter and clearly outlining the rights, obligations, and legal implications during the remediation period. Following this guidance, the company promptly enlisted a professional legal team to draft and submit the "Corporate Compliance Plan" and the "Corporate Development Plan," while also revising its internal rules and regulations. Additionally, the company intensified its employee education and legal awareness initiatives to reinforce crime prevention measures. Throughout the整改 (rectification) period, the company remained fully engaged in R&D and business operations, securing several new international hydropower projects. After the decision not to prosecute was made, the company swiftly resumed normal operations and even landed contracts worth over 20 million yuan.

 

The procuratorial authorities learned that six companies have been consistently awarded key city-wide projects over the years, generating annual tax revenues exceeding 10 million yuan each. Among them, one company alone has contributed more than 100 million yuan annually to the local economy, making outstanding contributions to boosting regional economic growth, advancing urban and rural development, and creating employment opportunities for the workforce. However, if prosecution were pursued, these six companies would be barred from participating in any bidding processes for three years and would be added to banks' loan blacklists, severely impacting their business operations, employment prospects, and the overall economic and social stability of the city. In May 2020, the two-level procuratorial organs of Tai'an City invited representatives from various sectors, including people's supervisors, to hold an open hearing. Attendees unanimously agreed to drop charges against Company J and the other five companies, as well as their respective leaders. Following the hearing, the procuratorates publicly announced the decision not to prosecute on the spot and, in accordance with the law, submitted prosecutorial recommendations to the housing and construction authorities, urging them to impose administrative penalties on the six companies. At the same time, the prosecutors advised conducting a thorough and meticulous review of recent bidding practices in the construction industry, aiming to clean up and improve the bidding environment within the sector. Additionally, the procuratorates issued specific prosecutorial recommendations to the six companies involved, urging them to strengthen compliance measures related to the charges they faced and the broader areas of their operations. The authorities also committed to closely monitoring the companies' progress in implementing these recommendations. To ensure accountability, a public meeting was held later to review the companies' compliance efforts and formally accept the results. During this compliance process, the six companies voluntarily paid administrative fines totaling over 1.71 million yuan and made strategic personnel adjustments to their supervisory boards, enhancing their mechanisms for managing significant legal risks. Since then, these six companies, now no longer subject to prosecution, have actively expanded their hiring efforts, creating job opportunities for more than 2,000 individuals. They have also secured contracts for over 20 major public welfare projects, with total contract values surpassing 2 billion yuan.

 

8. A company smuggling case [23]

 

A certain company assisted cross-border e-commerce businesses in smuggling goods and evading taxes by employing the practice of "brushing orders" (such as using stolen identity information to order overseas products). The Shenzhen Municipal Procuratorate has actively engaged with customs anti-smuggling authorities, gaining a deeper understanding of how the free trade zone regulates cross-border e-commerce. At the same time, the procuratorate carefully examined the feasibility of helping logistics companies establish compliant operations. Through interviews with the Shenzhen headquarters of two involved firms, the procuratorate thoroughly assessed the courier companies' administrative structures, management systems, and operational practices. Additionally, prosecutors held discussions with company management teams to gather insights directly from business leaders, fully respecting the voluntary nature of compliance initiatives undertaken by the accused enterprises. To further validate their findings, investigators also conducted on-site inspections of key operational locations managed by the courier companies. In April 2021, the Shenzhen Municipal Procuratorate issued prosecutorial recommendations to the two logistics firms, stating: "…the aforementioned practices highlight significant shortcomings in your companies’ oversight mechanisms for affiliated courier partners, product monitoring processes, and awareness of relevant laws and regulations. As such, your corporate compliance frameworks urgently require enhancement…" Both logistics companies took these recommendations seriously and promptly collaborated closely with the procuratorate to implement comprehensive corrective measures. Moving forward, the Shenzhen Municipal Procuratorate plans to combine its established third-party supervision and evaluation mechanism for corporate compliance—with involvement from the implicated businesses—alongside public hearings. These hearings will feature five expert panelists drawn from the Customs Anti-Smuggling Bureau, the Postal and Telecommunications Administration, the Courier Industry Association, the Customs Bonded Logistics Division, and a leading law firm, ensuring a transparent and impartial review process.

 

9. Yu's Case of Illegally Issuing Special VAT Invoices

 

In 2016, Yu engaged in fictitious transactions and paid invoicing fees—without any actual business dealings—in order to have others issue false special VAT invoices under the company’s name, which were then used to offset taxes. After the case came to light, Yu voluntarily turned himself in to the public security authorities and promptly paid back the full amount of taxes owed, along with late-payment penalties, while also turning over all illegally obtained profits. In April 2020, the public security authorities referred the case to the procuratorial organ for review and prosecution. The People’s Procuratorate of Xiwu District, Wuxi City, immediately activated its case impact assessment mechanism, thoroughly evaluating how the legal proceedings might affect the company. Notably, the company is an innovative, privately-owned enterprise specializing in water conservancy project construction, boasting numerous independent intellectual property rights and having participated in several key infrastructure projects, making it a significant player in the industry. Additionally, Yu himself holds nine patented inventions and is a well-known expert in his field.

 

The prosecutor urged the company to strengthen its compliance efforts, guiding it to prepare a Compliance Commitment Letter and clearly outlining the rights, obligations, and legal implications during the remediation period. Following this, the company promptly engaged a professional legal team to draft and submit the "Corporate Compliance Plan" and the "Corporate Development Plan," while also revising internal rules and regulations. Additionally, the company stepped up its efforts in employee education and legal awareness campaigns to bolster crime prevention measures. Throughout the整改 period, the company remained actively engaged in R&D and business operations, securing several new international hydropower projects. After the decision not to prosecute was made, the company swiftly resumed normal operations and even landed contracts worth over 20 million yuan.

 

[1] Supreme People's Procuratorate Document No. 2 of 2016

[2] Supreme People's Procuratorate Document No. 1 of 2017

[3] Supreme People's Procuratorate Document No. 12 of 2017

[4] SASAC Document on Regulations [2018] No. 106

[5] NDRC Foreign Investment [2018] No. 1916

[6]https://www.spp.gov.cn/spp/xwfbh/wsfbh/201901/t20190117_405684.shtml

[7]https://www.spp.gov.cn/spp/zxjy/qwfb/201901/t20190117_405695.shtml

[8] http://www.baoan.gov.cn/basfj/gkmlpt/content/8/8046/post_8046165.html#5162

[9] http://www.baoan.gov.cn/basfj/gkmlpt/content/8/8040/post_8040099.html#5161

[10]https://www.lexology.com/library/detail.aspx?g=74cc68a3-cc3d-4f59-b71d-57663a937a98

[11] http://www.baoan.gov.cn/basfj/gkmlpt/content/8/8205/post_8205559.html#5161

[12] https://xw.qq.com/cmsid/20210203A0996A00

[13] Quanluo Inspection and Issuance [2021] No. 4 http://fj.sina.com.cn/news/b/2021-04-01/detail-ikmyaawa3336450.shtml

[14] http://www.legaldaily.com.cn/Finance_and_Economics/content/2020-09/23/content_8314597.html

[15] https://www.thepaper.cn/newsDetail_forward_9355991

[16] Liaoning Inspection Document No. [2020]15

[17]https://www.spp.gov.cn/spp/zdgz/202104/t20210413_515526.shtml

[18] Chen Ruihua, "The Compliance-Incentive Model in Criminal Procedure," published in *Chinese Journal of Law*, No. 6, 2020, p. 227.

[19]https://www.spp.gov.cn/zdgz/202106/t20210621_521906.shtml

[20] http://sz.jsjc.gov.cn/tslm/dxal/202012/t20201216_1144695.shtml

[21]https://mp.weixin.qq.com/s?__biz=MzIwMTY1ODk1NQ==&mid=2651053360&idx=1&sn=43bdee5a6d2b0fa50f10e57978a9138e&chksm

[22] The following four cases are all sourced from https://www.spp.gov.cn/spp/xwfbh/wsfbh/202106/t20210603_520232.shtml

[23] Both cases below are from https://mp.weixin.qq.com/s/foCnalI9uTGUtuT9qDWlxw