China's criminal law still lacks the foundational adjustments—or, more precisely, the integration—necessary to effectively support compliance initiatives. Only by squarely addressing and resolving this critical issue of foundational alignment or legal integration can we develop comprehensive solutions to the two key challenges in compliance building. In other words, it is only through directly confronting and tackling the need for criminal law integration that aligns with preventive measures against corporate fraud under economic criminal law that China can ultimately establish a relatively robust corporate compliance legal framework—and, as a result, elevate enterprise-wide compliance efforts from mere regulatory adherence to full-fledged criminal compliance.

The criminal law regulation of fraud-related offenses—particularly those involving group or corporate fraud—is a persistent challenge in criminal law research. Addressing fraud crimes effectively requires not only refining and clarifying specific issues, such as distinguishing between civil fraud and criminal fraud through rigorous analysis and meticulous examination, but also adopting a broader perspective to foster deeper, more innovative thinking about the legal framework governing fraud offenses. This includes conducting comprehensive, globally informed analyses and developing systematic approaches that transcend domestic boundaries.

Overview of the Development of Anti-Fraud Rule of Law in the International Community

Conceptually speaking, what the Chinese legal community—and the law itself—refers to as "fraud" or "swindling," the international community generally categorizes under the single term "fraud." Over many years of research into this behavior, the global community has developed a three-part typology of fraud: street fraud (which constitutes traditional fraud offenses), official fraud (linked to corruption crimes), and business/enterprise fraud (classified as economic crimes). Compared to street-level crime, business and enterprise fraud, along with official fraud, are both considered white-collar crimes—collectively referred to as corruption within the private sector. From a global perspective, over the past few decades, the overarching trend in fraud prevention and legal regulation worldwide has been shifting from increasingly robust efforts to combat street-level fraud toward a growing focus on controlling and criminally regulating business and enterprise fraud (i.e., economic crimes), as evidenced by the following key developments:

First, it involves mapping out a spectrum of business and corporate fraud behaviors while simultaneously strengthening legal regulations tailored to each distinct type of fraud. On one hand, the international community generally categorizes business-related fraud into subtypes such as corporate fraud, tax fraud, healthcare fraud, election fraud, marriage fraud, financial fraud, procurement fraud, identity fraud, telecom fraud, and cyber fraud, among others. On the other hand, focusing specifically on key fraud types like telecom and cyber fraud has become a widespread trend in today’s global society. For instance, since the mid-1980s, U.S. states have been implementing measures to tackle telephone marketing scams. At the federal level, the U.S. enacted the Telephone Marketing, Consumer Fraud, and Prevention Act in 1994, which significantly increased penalties for telephone marketing fraud—up to five years in prison. Additionally, the law imposes harsher sentences of up to 10 years in prison for crimes targeting individuals aged 75 or older in groups of 10 or more, or specifically targeting seniors aged 75 and older through telephone marketing schemes.

Second, both the United Nations and regional anti-corruption conventions emphasize the need to strengthen fraud prevention and control, with a particular focus on business fraud and corporate misconduct. For instance, Article 12, Paragraph 1 of the United Nations Convention Against Corruption—effective since October 2003—requires each State party to adopt measures, in accordance with the fundamental principles of its domestic law, to prevent corruption within private enterprises, while also reinforcing accounting and auditing standards tailored for the private sector. Meanwhile, Paragraph 2 of the same convention underscores the importance of fostering collaboration between law enforcement agencies and private businesses. Beyond the UN Convention, other key international and regional anti-corruption agreements—including the OECD Anti-Bribery Convention, the EU’s 1997 Anti-Corruption Convention, the Council of Europe’s 1999 Criminal Law Convention on Corruption, the OAS’s 1996 Inter-American Convention Against Corruption, and the African Union’s 2003 Convention on Preventing and Combating Corruption—also explicitly include provisions aimed at bolstering corporate fraud prevention and control. In fact, these international and regional anti-corruption frameworks not only zero in on corporate fraud as a specific form of criminal misconduct but also highlight the preventive approach and proactive regulatory strategies, thereby signaling and guiding the global community toward innovative developments in anti-fraud rule of law.

Third, the international community is increasingly focusing on specialized responses to business and corporate fraud, leading to the emergence of dedicated legislation and regulatory frameworks. Key anti-corruption standards adopted by the global community specifically target corporate fraud, with notable examples including the "Basic Principles for Corporate Anti-Bribery," the "Guidelines for Good Practices in Internal Control, Ethics, and Compliance," and the "Integrity and Compliance Guidelines." Additionally, developed countries have been early pioneers in establishing comprehensive legal systems tailored to address corporate fraud. For instance, the U.S. enacted the Sherman Antitrust Act in 1890—a landmark law focused on antitrust issues—and in 1977 introduced the world’s first compliance-based legislation explicitly designed to prevent corporate corruption and fraud: the Foreign Corrupt Practices Act. Furthermore, in 1991, the U.S. issued the Federal Sentencing Guidelines for Organizations, a set of rules exclusively applicable to corporate defendants, helping to create a more robust and integrated legal framework for tackling corporate misconduct.

Innovative Elements in the Development of International Anti-Fraud Rule of Law and Their Integration with Criminal Law

As the international community progresses in developing anti-fraud legal frameworks, the innovative features and the integrated nature of criminal law in this context have become increasingly prominent. In light of this, it is essential to examine and analyze the innovative elements driving the evolution of anti-fraud legislation worldwide, as well as the integration of criminal law within these systems. Notably, the "function of criminal law integration" in regulating business and corporate fraud—specifically within economic criminal law—was first introduced by the renowned German jurist Dieterich, subsequently leaving a profound impact on the global discourse surrounding economic criminal law. In terms of content, the innovative aspects and criminal law integration in the international fight against fraud primarily manifest across three key dimensions: criminal policy, substantive criminal law, and judicial enforcement—each of which will be explored in detail below.

First, at the level of criminal policy, it is crucial to strengthen the nation’s strategic guidance on combating fraud. To begin with, business and corporate fraud prevention should be given a prominent position and recognized as critically important within the country’s broader anti-corruption strategy. Enhancing the rule of law in fraud prevention requires establishing fraud control as a core component of national anti-corruption efforts from a strategic perspective. Since the early 21st century, many countries have introduced strategic documents aimed at addressing fraud—particularly emphasizing the critical role of business and corporate fraud prevention within their national anti-corruption frameworks. Secondly, corporate compliance and criminal compliance should be firmly established as the guiding principles and key priorities for tackling corporate fraud. Recognizing that effective fraud prevention hinges on encouraging companies to proactively develop and implement robust compliance programs, nations have crafted systematic legal frameworks designed to incentivize businesses to take ownership of such initiatives. This approach is known as "corporate compliance." Once corporate compliance takes root, it naturally drives the transformation and integration of criminal law related to corporate misconduct, giving rise to "criminal compliance"—an advanced, upgraded version of traditional corporate compliance. From a global perspective, the U.S. first introduced the concept of corporate compliance legislation in 1977 with the enactment of the Foreign Corrupt Practices Act. Building on this foundation, the federal Sentencing Guidelines for Organizations issued in 1991 further elevated corporate compliance into the realm of criminal compliance. In recent years, with the emergence of international and regional conventions such as the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, corporate and criminal compliance have increasingly become global trends, shaping the way businesses worldwide address fraud risks and uphold ethical standards.

Second, at the level of substantive criminal law, efforts are being made to achieve a comprehensive integration of fraud-related regulations within the criminal legal framework. Effectively addressing business fraud and corporate fraud offenses—both classified as economic crimes—involves extensive strategic adjustments and legal harmonization. This includes the ongoing expansion of the scope of fraud-related criminal offenses alongside increasingly stringent penalties, a growing focus on preventive measures aimed at curbing corporate fraud, and the gradual emergence of mechanisms that facilitate the exoneration of entities accused of such crimes. Below, we elaborate on the latter two aspects: First, there is an increasing emphasis on preventive regulation of corporate fraud offenses. 1. **Preventive Regulation Embedded in General Provisions of Corporate Criminal Law**: The preventive regulatory framework for corporate crime must be firmly established within the foundational structures of general criminal law. In response, the international community has recognized the urgent need to shift toward a more preventive approach in defining corporate criminal liability. A prime example is Article 18(2) of the "OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions," which came into effect on July 1, 2002. According to this provision, member states are required to adopt necessary measures to hold legal persons criminally liable when corruption offenses occur due to inadequate internal oversight or control by natural persons acting in the interest of the corporation and under their authority. Clearly, this provision underscores the organizational nature of corporate criminal responsibility and prioritizes preventive considerations, rather than focusing solely on individual actors representing the entity. It reflects a deliberate move toward a preventive model of corporate accountability. 2. **Preventive Regulation Through Specific Offenses in the Special Part of Criminal Law**: Additionally, preventive measures are being integrated into the specific criminal offenses targeting corporate misconduct. 3. **Growing Importance of Preventive Assessments in Fraud Legislation**: For instance, in 2003, the European Union established a steering committee tasked with guiding risk assessments for EU-level legislation on corporate fraud. By 2006, the Transnational Crime Research Center had already begun applying its pioneering research on crime risk assessment to support the development of EU regulations on corporate fraud. To date, these preventive assessments have proven highly effective across various sectors, including corporate crime, private security insurance, international credit markets, mobile telecommunications, waste management, banking, pharmaceuticals, government procurement, and waste disposal practices. Second, there is a rising recognition of mechanisms that can lead to the exoneration of entities accused of corporate fraud. In recent years, countries worldwide have grappled with the challenge of countering the increasingly pervasive trend toward criminalizing corporate behavior. After years of intensive research and exploration, the global community has collectively identified a novel approach to achieving this goal: designing exculpatory mechanisms for corporate fraud (or business crime) centered around incentivizing robust compliance programs.

Third, at the law enforcement and judicial levels, efforts are focused on refining prosecution strategies specifically tailored to corporate fraud. The development of anti-fraud law enforcement and justice systems includes strengthening criminal justice responses to fraud-related offenses, encouraging companies to adopt self-regulatory and compliance measures as a proactive defense against corporate fraud—and ultimately facilitating a strategic shift toward pursuing criminal charges for corporate fraud. This approach also aims to provide businesses with specialized technical support for fraud prevention. At the same time, the question arises: How can the government comprehensively and systematically incentivize corporate self-regulation and compliance to effectively combat corporate fraud through top-level institutional design? This inevitably extends into the realm of corporate criminal justice and the criminal prosecution process—precisely reflecting the strategic transformation in how corporate fraud is prosecuted. Globally, countries following the Anglo-American legal system stand out for their highly representative approaches to prosecuting corporate fraud, such as the "deferred prosecution agreement" mechanism designed specifically for addressing corporate fraud offenses.

Reflections on and Strategies for Improving China's Anti-Fraud Legal Framework

The aforementioned global review of fraud prevention and criminal regulatory frameworks—along with its analysis of innovative elements and the integrated meaning of criminal law—provides valuable insights for examining and refining China's own fraud prevention and criminal regulatory systems, based on an understanding of international trends and best practices. Drawing on China's unique context in fraud prevention and criminal regulation, we will now explore appropriate strategies across three key dimensions: policy approaches, criminal law regulations, and law enforcement and judicial practices.

Strengthening China's policy strategies for tackling fraud requires focused refinement. First, business and corporate fraud should be recognized as critical areas for anti-corruption efforts and a primary focus for establishing conditional non-criminality under criminal law. As some scholars have noted, the United Nations Convention Against Corruption has already brought private-sector corruption within its regulatory scope, while countries like the United States and Singapore have established robust legal frameworks and enforcement systems to address such issues. Yet in China, internal corruption within private enterprises remains largely overlooked—there’s a notable lack of systematic research from both legislative, judicial, and preventive perspectives, leaving this issue as an "overlooked corner" of our anti-corruption framework. As China continues its ongoing societal transformation, economic crimes—particularly those involving business and corporate fraud—are on the rise. This underscores the urgent need to position the fight against these offenses as a central pillar of the nation’s anti-corruption strategy. Meanwhile, China’s criminal legislation is increasingly grappling with how to develop effective mechanisms for excluding liability from criminal charges as crime patterns evolve. Drawing inspiration from international practices since the early 21st century, which have increasingly treated business and corporate fraud as key areas for conditional non-criminality, China should prioritize these forms of fraud as both focal points for anti-corruption initiatives and strategic pathways toward conditional non-criminality. By doing so, we can foster a more scientifically sound and comprehensive approach to combating corruption across the country. Second, prevention, regulation, and corporate compliance must be elevated as the cornerstone institutional approaches to addressing corporate fraud. Internationally, incentivizing companies to adopt and implement robust compliance programs has proven to be an effective and systemic method for preventing fraudulent behavior. Today, corporate compliance in China is rapidly advancing within the rule-of-law framework. On one hand, there is growing awareness across society about the necessity and urgency of promoting corporate and even criminal compliance. On the other hand, China’s procuratorial bodies are actively exploring ways to integrate criminal compliance into their handling of enterprise-related cases. Based on China’s current context and informed by global best practices, I believe it is essential to firmly establish preventive regulation, along with corporate and criminal compliance, as the primary institutional orientations for tackling corporate fraud and corruption. At the same time, we must clearly define the conceptual framework, core principles, and strategic priorities of corporate and criminal compliance. First, we must lay a solid institutional foundation for corporate compliance, beginning with legally binding measures—such as enacting legislation—that mandate companies to develop and implement comprehensive compliance programs. Simultaneously, we should provide clear, authoritative guidelines and standards to ensure the effectiveness of these programs, along with practical operational tools to assist businesses in their implementation. Second, we must simultaneously promote both *ex-post* and *ex-ante* compliance models. While prosecutorial authorities may choose not to prosecute companies that demonstrate strong compliance efforts (known as "compliance-based non-prosecution"), it’s equally important to involve independent third-party evaluators—such as the State-owned Assets Supervision and Administration Commission (SASAC) or the All-China Federation of Industry and Commerce—to assess and validate compliance initiatives. Third, we should expedite the introduction of additional policy measures designed to encourage corporate compliance. For instance, firms demonstrating exceptional compliance performance could receive enhanced incentives in areas such as financing, tax benefits, and government recognition programs. Finally, we must accelerate the development of a mature legal framework for criminal compliance. As an advanced and upgraded version of traditional corporate compliance, criminal compliance demands targeted institutional enhancements. For example, national policies, legislation, and guidance should be introduced to encourage prosecutors to expand the application of non-prosecution measures for companies that meet stringent compliance criteria. Additionally, operational standards for implementing criminal compliance-based non-prosecution should be refined and clarified. By clearly defining the conceptual and institutional foundations of corporate and criminal compliance, we can ensure a deeper understanding of these frameworks while accelerating their adoption and evolution across Chinese society.

Highly emphasizing the integration of criminal law in addressing fraud within China, it is crucial for our country to prioritize the integration of criminal law measures tailored to corporate fraud compliance. The historical evolution of international socio-economic criminal law underscores that integrating criminal responses to economic crimes primarily involves transforming preventive mechanisms within corporate-related criminal statutes. This transformation encompasses three key areas: first, the preventive adaptation of general principles governing corporate criminal liability; second, the preventive reform of specific statutory provisions targeting corporate offenses; and third, the restructuring of criminal justice systems designed to address enterprise-related cases. Currently, China’s corporate compliance framework is rapidly advancing, with the Supreme People’s Procuratorate actively promoting pilot initiatives to foster corporate compliance. Yet, significant challenges remain—namely, the substantial investment required for compliance efforts versus the limited incentives available, as well as the constrained timeframe for compliance assessments alongside the ongoing need for sustained implementation. In my view, a critical factor contributing to this situation is the absence of foundational adjustments—or, more precisely, the lack of comprehensive criminal law integration—that could effectively support the development of robust compliance systems. In other words, only by squarely addressing and resolving these fundamental gaps in criminal law integration can we ultimately provide holistic solutions to the two central challenges in corporate compliance today. Alternatively stated, until we tackle the issue of aligning preventive criminal responses specifically designed to combat corporate fraud with broader criminal law reforms, China will struggle to establish a fully integrated and sophisticated legal framework for corporate compliance—and thus prevent the transition from basic corporate compliance toward true "criminal compliance."

Efforts are being focused on exploring criminal prosecution strategies to address corporate fraud. A critical issue in China’s enforcement and judicial efforts against corporate fraud is the urgent need to study and prioritize effective criminal prosecution approaches for companies involved in fraudulent activities. Currently, China’s rule-of-law principles and corporate compliance frameworks are rapidly advancing within a legal system that increasingly emphasizes integrity and accountability. At the criminal justice level, the Supreme People’s Procuratorate is actively pioneering initiatives to promote both corporate compliance and criminal compliance. Building on last year’s pilot program involving six grassroots procuratorates, this year the initiative will expand significantly, covering approximately 100 grassroots procuratorates nationwide. The author argues that corporate compliance, as a proactive, prevention-oriented legal framework, should fully embody the systemic logic of preventive regulation. Specifically, in the context of criminal justice dealing with corporate fraud offenses, it is essential to develop a robust criminal justice system that incentivizes businesses to design and implement effective, tailored compliance programs—particularly by integrating the concept of "corporate prosecution strategy" into the broader framework of preventive regulation. In other words, from the perspective of long-term corporate governance and compliance development, it is crucial to structure corporate prosecution strategies around the goal of fostering meaningful, specialized compliance plans. In fact, with the guiding principle of a dedicated corporate prosecution strategy, China’s criminal justice system for corporate compliance can gain clearer conceptual direction, enabling deeper institutional evolution and expansion in the years ahead.

Author: Zhao Chi, Professor at the Shiliang School of Law, Changzhou University, and Director of the Compliance Research Center

Source: Academic Edition, Procurator Daily, June 24, 2021