Among the three regulatory models mentioned above, I believe the independent third-party approach is the most viable, as it enables regulatory bodies to operate in a market-oriented manner. On the other hand, the administrative model is less advisable, since it could inadvertently create opportunities for rent-seeking by companies involved in the process. And under no circumstances should we allow the judicial system to become economically driven—specifically, by having judicial authorities establish, indirectly set up, or even take equity stakes in fee-based compliance监管机构.

On the afternoon of July 10, 2021, the 11th "Criminal Defense Ten-Person Forum" and the Symposium on Lawyers' Involvement in Corporate Compliance were held in Beijing. The forum was jointly organized by the "Criminal Defense Ten-Person Forum" and the Research Center for Corporate Criminal Risk Prevention at China University of Political Science and Law, with Beijing Xinglai Law Firm serving as the host organization.

At this forum, discussions centered on the theme of "Lawyers' Involvement in Corporate Compliance," delving into key topics such as "The Institutional Framework for Lawyers' Participation in Criminal Compliance," "Criminal Compliance vs. Criminal Defense," "Challenges and Risks Associated with Lawyers Engaging in Criminal Compliance," and "Relevant Issues for Lawyers Expanding Their Criminal Compliance Practices."

In addition to the full attendance of the "Ten Criminal Defense Experts," the forum also specially invited Dr. Gao Jingfeng, Director of the Policy Research Office at the Supreme People's Procuratorate; Professor Zhao Tianhong, Director of the Research Center for Corporate Criminal Risk Prevention at China University of Political Science and Law; Professor Li Hong, Director of the Center for Commercial Crime Studies at Tsinghua University; and Professor Zhao Jun from the Entrepreneurial Crime Research Center at Beijing Normal University to serve as panelists.

Here is the speech delivered by Zhu Yonghui, Director of Beijing Kyoto Law Firm and a prominent lawyer, at the forum—organized and shared for your benefit.

Zhu Yonghui

Director of Beijing Kyoto Law Firm

Thank you, moderator, and thank you to Star Law Firm for organizing this Criminal Defense Forum with Ten Experts. Criminal compliance is currently a hot topic, even beginning to overshadow traditional criminal defense work. As a criminal defense lawyer, I warmly welcome the pilot program allowing "non-prosecution based on compliance." I believe that at its core, criminal compliance remains an extension of criminal defense—and it will require the active involvement of defense attorneys. In practicing criminal compliance, I think there are certain areas where we can proactively engage, while others demand caution or outright avoidance. With that in mind, let me share a few of my initial, albeit modest, thoughts on the matter.

I. Regarding Scope of Application and Eligibility Criteria

From the perspective of scope, current pilot programs across various regions apply only to minor offenses. I believe that in the future, we could explore extending the criminal compliance system to serious crimes, potentially offering leniency to companies involved—though it’s unlikely that companies charged with major offenses would avoid prosecution altogether. Still, if a company successfully implements compliance reforms and demonstrates its commitment to rectifying issues, future legislation might consider this as a valid statutory mitigating or even extenuating factor.

From the perspective of eligibility criteria, I’ve noticed that in these pilot programs, most regions emphasize that the system can only be applied if the companies involved have already pleaded guilty and agreed to cooperate. But this raises a question for me: Could compliance-based non-prosecution still be considered for companies that refuse to plead guilty or cooperate? After all, in some cases, whether a crime has actually been committed remains disputed during the review-and-prosecution phase. Such companies might vigorously defend their innocence and reject plea deals, yet at the same time, they may still be willing to commit to comprehensive compliance reforms. In my view, the core purpose of the compliance-based non-prosecution system is to prevent crime and help struggling businesses turn things around through robust compliance measures. So, regardless of whether a company initially pleads guilty, as long as its compliance efforts meet our rigorous standards and effectively deter future offenses, we should be able to grant it non-prosecution—even if it hasn’t formally admitted guilt. Why should we insist that companies must first plead guilty before considering compliance-based non-prosecution?

Additionally, I believe that the application of compliance-based non-prosecution should emphasize the voluntary nature of the companies involved. Currently, compliance-based non-prosecution is still in the pilot phase. If it’s incorporated into law during future legislative reforms and rolled out more broadly, could it end up being promoted—perhaps even adopted by 80 to 90 percent of companies involved—in a manner similar to how the plea-bargaining system has been widely implemented? In my view, we need to proceed with caution.

II. On the Compliance Regulatory Model

Based on the current pilot programs, the compliance supervision models adopted by different regions vary. Some areas have implemented a supervision model led by the procuratorate, where the procuratorial authorities directly hire professional institutions to serve as external supervisors. Others have opted for an independent supervisor model, under which companies involved in cases are required by the procuratorate to independently engage external professional firms to act as impartial monitors. Meanwhile, certain regions place greater emphasis on the role of relevant administrative departments, integrating administrative agencies, the Federation of Industry and Commerce, local subdistrict offices, or other similar bodies into the compliance oversight structure.

Among the three regulatory models mentioned above, I believe the independent third-party approach is the most viable, as it allows regulatory bodies to operate in a market-oriented manner. On the other hand, the administrative model is less advisable, as it could inadvertently create opportunities for rent-seeking by companies involved in the process. And under no circumstances should we allow the judicial system to become economically driven—specifically, by having judicial authorities establish, indirectly set up, or even take equity stakes in fee-based compliance监管机构.

III. Prohibited Areas for Conducting Compliance-Related Activities

Compliance building aims to decriminalize behavior, ensuring that companies involved in cases no longer engage in criminal activities—this is about prevention, not covering up past crimes or, worse still, attempting to evade detection and prosecution of future offenses by law enforcement agencies. In compliance work, it’s absolutely unacceptable for compliance professionals to collaborate with the companies under investigation in any way that facilitates criminal activity, such as devising strategies to hide evidence, fabricating false testimony, or forming collusion networks. These actions would lead straight down the path to criminal liability—and are a dead end for effective compliance practice!

IV. Regarding Compliance Assessment Standards and Methods

In cases of compliance-based non-prosecution, it is crucial to establish clear standards for determining whether the companies involved have met the required remediation measures. Feasible compliance standards should be developed, ensuring they are well-defined and transparent. At the same time, compliance review processes must avoid excessive interference that could disrupt normal business operations—or even infringe upon a company's legitimate civil rights, such as its autonomy in management and protection of trade secrets.

Currently, the approach in the pilot programs for examining compliance-based non-prosecution decisions is almost always to publicly disclose the outcomes, making them transparent and subject to societal oversight—thus enhancing the credibility of these non-prosecution results. However, I believe this could inadvertently lead to an "institutional death" for the companies involved, even though they still need to continue operating and striving for survival. Therefore, I suggest we consider a more humane approach: instead of publicly announcing non-prosecution decisions, we could adopt a "privacy-focused" strategy to safeguard the companies' reputations and protect sensitive business secrets. Additionally, it’s crucial to ensure that these companies aren’t unfairly penalized in areas like social credit assessments or bank loan applications after receiving a non-prosecution ruling.

V. On the Responsibilities of Compliance Supervisors

Compliance initiatives should establish scientifically sound and reasonably structured acceptance criteria and procedures, ensuring that responsibility isn’t unfairly shifted entirely onto compliance supervisors when issues arise. Supervisors act as independent third parties providing professional services, earning compensation for their involvement in helping companies build compliant systems. Importantly, compliance supervisors are not the decision-makers who determine whether a company involved in legal matters will face prosecution or not. Instead, their role is to assess whether the company’s compliance efforts meet established standards. I believe their opinions on compliance performance should be regarded as expert assessments—unless there’s deliberate falsification, such subjective judgments shouldn’t lead to accountability, especially criminal liability. Currently, several civil lawyers have already fallen victim to fraudulent litigation or predatory loan schemes involving criminal fraud. We certainly don’t want to see criminal defense attorneys encountering similar pitfalls while handling compliance-related cases.

These are just a few of my initial thoughts—thank you, everyone!

Author: Zhu Yonghui

Source: Ten Conversations on Criminal Defense