Chapter Three    Exploring Lawyers' Involvement in Criminal Compliance Work

Section One   The Role and Function of a Lawyer

  1. The Case for Lawyers' Involvement in Criminal Compliance

Criminal legal risks often largely determine the direction of a company's development. “ Life and death ” Turning points: Compared to civil litigation disputes and administrative penalty risks, criminal legal risks carry even greater significance for businesses. Therefore, criminal compliance serves as the cornerstone and ultimate safeguard of corporate compliance efforts. To strengthen the foundation of corporate compliance further, it’s essential to seek expert legal advice when implementing criminal compliance initiatives, ensuring that all potential risks are thoroughly identified. While companies can either rely on their in-house legal departments or hire external professional consultants to manage compliance tasks, a dedicated team of experienced lawyers remains indispensable—offering unique, critical advantages that no other approach can match.

First, lawyers possess extensive and diverse practical experience in compliance. Unlike in-house corporate counsel, who typically specialize in specific areas, lawyers, by the nature of their profession, have the opportunity to engage with legal matters across a wide range of industries. Through their hands-on experience handling numerous non-litigation and litigation cases, lawyers significantly hone their professional skills, equipping them with broader perspectives, more innovative thinking, heightened awareness of legal risks, and the ability to swiftly tackle complex cases. Moreover, criminal defense lawyers—who have worked extensively with corporate clients—bring invaluable insights into the legal risks and behavioral patterns associated with various offenses. These experiences prove crucial for helping businesses proactively manage and mitigate criminal legal risks. Additionally, due to the inherent nature of their practice, criminal lawyers tend to think more analytically and are naturally more attuned to the intricacies of compliance. “ Firewall ” Does it truly work effectively? Can it protect businesses from criminal disputes? The goal is to ensure that corporate compliance initiatives play a substantive role—rather than remaining merely a superficial exercise.

Secondly, lawyers possess excellent government communication skills. When it comes to interacting with government regulators and even judicial authorities, professional lawyers are at a distinct advantage. Once a company engages in illegal or non-compliant activities, it typically faces administrative investigations by government regulatory bodies as well as criminal probes initiated by the judiciary. As seasoned legal professionals, lawyers operate across a wide range of practice areas and frequently collaborate with both administrative and judicial agencies. In fact, specialized criminal compliance lawyers often need to communicate and negotiate regularly with judicial authorities at various levels and in different regions—skills that come naturally from their daily work in criminal defense. As a result, professional legal teams are better positioned to manage communication costs effectively.

Finally, compared to in-house legal teams, lawyers possess a high degree of independence. Effective compliance can only be achieved when compliance programs are rigorously implemented and properly monitored. After violations occur, companies must conduct thorough internal investigations and take corrective actions to address misconduct—regardless of the individual’s position or role within the organization. However, relying solely on internal resources for investigations and accountability often leads to significant challenges in enforcement. Internal departments may succumb to pressure from senior management or personal considerations, resulting in inadequate scrutiny of illegal activities and insufficient disciplinary measures. This, in turn, undermines the effectiveness of the company’s compliance program, leaving the organization still vulnerable to regulatory risks. In contrast, external, professional legal teams enjoy unparalleled independence—they remain untethered by internal politics or personal relationships—giving them a distinct advantage in handling sensitive internal investigations, accurately identifying violations, and ensuring that compliance measures are enforced effectively.

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

Compared to traditional practice, in criminal compliance, lawyers take on a more diverse range of roles. In addition to serving as pre-emptive compliance advisors or defense attorneys, lawyers may also assume the role of independent third-party monitors.

1. Pre-Compliance Advisor

A criminal compliance consultant is an integral part of a company’s legal advisory team, sharing similar mechanisms of operation with corporate legal counsel. At its core, the role involves diagnosing risks inherent in the day-to-day management and operations of specific enterprises within particular industries, and then building a robust criminal compliance framework to proactively prevent both the company and its employees from facing criminal legal liabilities. In essence, effective pre-emptive measures to mitigate criminal legal risks for businesses are inseparable from the active involvement of compliance consultants.

Corporate criminal compliance initiatives for proactive prevention fall into two distinct categories. First, there’s the routine "criminal compliance check," which focuses primarily on identifying potential criminal risks within a company’s business models, product offerings, and daily operations. Conducted when the organization either faces no immediate criminal risks or when such risks remain unclear, this type of compliance serves as a critical safeguard to ensure smooth business operations. It involves targeted risk assessments in high-risk areas and for key positions, with preventive measures implemented through robust system-building efforts. Second, there’s the "specialized criminal risk assessment," which kicks in when a company suspects it may already be entangled in potential legal issues—though no formal investigation or charges have yet been initiated. In these cases, businesses urgently undertake a detailed review of specific situations, analyzing and evaluating the associated criminal risks. This process helps the company gain a clear understanding of its current position, enabling it to accurately assess potential liabilities for both itself and its employees. Ultimately, it equips the organization to respond swiftly and collaboratively should an official investigation arise.

For companies with varying levels of risk in terms of criminal compliance, lawyers—especially experienced criminal attorneys—can play an extremely critical role.

In day-to-day corporate criminal compliance, lawyers can leverage their case-handling experience and adopt a results-oriented approach to identify potential areas of criminal risk in a company’s operations by analyzing past criminal cases involving businesses. This enables them to help enterprises pinpoint and assess high-risk business practices, sectors, and employee roles where criminal incidents are most likely to occur. Additionally, lawyers can ensure compliance improvements are implemented for issues or positions already exposed to criminal risks, while proactively designing preventive systems for areas and roles that, though not yet at risk, remain vulnerable to future criminal liabilities.

In corporate-specific criminal compliance, since many offenses are subject to both administrative penalties and criminal sanctions, administrative enforcement often overlaps with criminal justice. For instance, Article 219 of China's Securities Law explicitly states: “ Any violation of this law that constitutes a crime shall be subject to criminal liability in accordance with the law. ” This demands that lawyers specializing in corporate criminal compliance possess both a broad perspective and a solid legal foundation. They must not only focus on the potential criminal legal risks facing a company but also remain vigilant about any existing or emerging administrative legal risks. As they meticulously assess a company’s criminal risk exposure for a specific issue, they should simultaneously review relevant administrative regulations to determine whether the organization might also encounter administrative legal challenges—beyond the immediate threat of criminal liability. By adopting this comprehensive approach, lawyers can ensure no oversight exists, enabling them to conduct a thorough, multi-layered compliance gap analysis across all applicable regulations. This, in turn, empowers companies to clearly identify and understand their administrative and criminal legal responsibilities, preparing them effectively for potential future investigations. Ultimately, it also equips lawyers to seamlessly transition from their role as corporate criminal compliance advisors into that of corporate defense counsel when the company faces possible criminal investigations or prosecutions.

2. The role of the defense counsel after a company is placed under investigation

Under the broader landscape of criminal compliance, traditional criminal defense lawyers will not only face shrinking areas of operational space but also discover new opportunities for value creation. Criminal attorneys must stay attuned to how emerging laws—shaped by new policies and regulatory frameworks—are reshaping conventional practice areas and professional habits, while simultaneously identifying potential chances to secure more favorable outcomes for the companies and employees involved. In cases where criminal compliance is a viable strategy, defense lawyers can go beyond their traditional pre-trial activities, such as client meetings and applications for bail, to assist businesses in initiating and implementing comprehensive criminal compliance assessments and programs. Throughout the process of building and maintaining robust compliance systems, defense attorneys should also maintain open communication with corporate compliance officers and independent monitors, ensuring they remain fully informed about compliance progress—and ready to swiftly resume legal proceedings if compliance standards falter, necessitating a restart of litigation.

Take the "Guiding Opinions" as an example, which outline three distinct rights or responsibilities for defense counsel. First, when the People's Procuratorate handles criminal cases involving enterprises, defense lawyers can assist the companies and individuals involved in determining whether they meet the criteria for initiating a third-party mechanism, and can even propose applying for pilot programs on corporate compliance along with requests to activate the third-party mechanism. In such cases, the People's Procuratorate is required by law to accept and review these applications. Second, during the operation of the third-party mechanism, defense counsel are entitled to file appeals, complaints, or submit relevant applications and requests. Finally, if the People's Procuratorate decides to hold a hearing for criminal cases involving enterprises—particularly when considering decisions such as rejecting arrest warrants, deciding not to prosecute, or modifying coercive measures—it allows defense lawyers to apply to participate in the hearing. At the hearing, counsel can present their views on why non-arrest, non-prosecution, or adjustments to coercive measures should be applied to the companies and individuals involved.

The rights granted to defense attorneys under the aforementioned third-party supervision and evaluation mechanism for corporate compliance provide criminal lawyers with additional avenues to safeguard the legitimate rights of companies and individuals involved in the case—but at the same time, they also place higher demands on lawyers' expertise and judgment.

First, for the companies and individuals involved in the case to qualify for the third-party mechanism, they must meet certain conditions: They must admit guilt and accept punishment, and they must also voluntarily agree to participate. Whether it’s admitting guilt and accepting punishment or voluntarily opting into the third-party mechanism, both require the involved entities to fully recognize and acknowledge the criminal illegality of their actions—as well as the fact that these actions deserve penal sanctions. Additionally, a genuine attitude of remorse is essential, along with a strong commitment to long-term reform and ongoing oversight. From the perspective of those unfamiliar with criminal risks, each of these requirements may initially feel challenging to accept—after all, no one wants to face criminal consequences. Yet, over time, individuals and organizations typically come to understand and embrace these principles as part of the process toward accountability and reform. Throughout this journey, the ability—and effectiveness—of criminal lawyers in communicating with their clients will undoubtedly be put to the test. Equally critical is the level of trust clients place in their lawyers’ professional judgment. As stewards of their clients’ interests, criminal lawyers must carefully craft criminal defense strategies that align with their clients’ best interests, based on sound legal analysis. Only by ensuring their clients fully grasp, trust, and actively cooperate can lawyers truly maximize the protection of their clients’ rights and objectives.

Secondly, during the operation of the third-party mechanism, the legitimate rights of the parties involved must also be safeguarded. As the defenders—acting as custodians of these parties—they should step forward without hesitation to fulfill this critical responsibility. Since the specific implementation details of the third-party mechanism have yet to be released, many uncertainties may arise in practice. Consequently, there is a real possibility that the regulated parties could find themselves unexpectedly placed in a passive position at any time. In such circumstances, defenders must place even greater emphasis on their own role and uphold their due responsibilities toward their clients. On one hand, they should closely monitor whether the client’s lawful rights are being infringed upon during the period of regulatory oversight. If any violations are identified and confirmed, defenders must proactively leverage the legal rights granted to them by law to file formal appeals or complaints with the relevant authorities or institutions. On the other hand, defenders should maintain open and constructive communication with their clients throughout the oversight process, promptly assisting them in submitting legitimate and reasonable requests or applications. Finally, when the People’s Procuratorate convenes hearings to deliberate on decisions such as refraining from arrest, deciding not to prosecute, or modifying coercive measures, defenders are not only expected to provide legal opinions grounded in criminal law regarding the application of the aforementioned rules to the parties involved but also to actively assess and articulate their views on the likelihood of reoffending for the specific charges at issue. By doing so, defenders can help their clients comprehensively and objectively highlight the positive outcomes achieved during the regulatory period, while firmly asserting the rights they are entitled to under criminal law.

In short, for criminal lawyers to effectively fulfill their role as defenders and fully leverage their functions in the new context, they must firmly uphold the principle of safeguarding their clients' interests—balancing this core responsibility with the traditional duties of criminal defense and, at the same time, addressing the needs of regulated entities at each stage. “ Night vigil ” Responsibilities.

3. Third-party Independent Compliance Supervisor

An independent supervisor is a professional organization commissioned by the entity suspected of criminal activity to investigate, plan, and oversee the company's criminal compliance efforts. 2020 Year 8 Month 28 The Shenzhen Bao'an District Justice Bureau has issued the "Provisional Regulations on the Selection and Management of Independent Compliance Monitors for Corporate Criminal Compliance," clearly stipulating that law firms will serve as independent criminal compliance monitors, assisting companies facing criminal risks in strengthening their corporate compliance efforts. Lawyers appointed as independent regulators must uphold obligations of honesty, integrity, diligence, and neutrality, conducting compliance oversight independently, objectively, and fairly in accordance with the law. Their key responsibilities include: first, monitoring and helping enterprises identify vulnerabilities in their criminal risk management systems, and supporting them in establishing robust internal controls designed to prevent, detect, and effectively address illegal or criminal activities; second, regularly reporting compliance monitoring progress to the local People's Procuratorate; and finally, promptly reporting any newly identified non-compliant behaviors within the client company and urging timely corrective actions.

2021 Year 6 Month 3 On [date], the Supreme People's Procuratorate, jointly with eight other departments including the Ministry of Justice, issued the "Guiding Opinions," aimed at establishing and improving a third-party supervision and evaluation mechanism for corporate compliance in cases involving enterprises. Under these "Guiding Opinions," lawyers can now join the roster of third-party supervision and evaluation organizations selected by the Third-Party Mechanism Steering Committee—established collaboratively by the Supreme People's Procuratorate, the State-owned Assets Supervision and Administration Commission of the State Council, the Ministry of Finance, the All-China Federation of Industry and Commerce, along with the Ministry of Justice, the Ministry of Ecology and Environment, the State Taxation Administration, the State Administration for Market Regulation, and the China Council for the Promotion of International Trade—as professional experts.

According to the "Guiding Opinions," if the People's Procuratorate, after review, determines that a corporate crime case meets the criteria for applying the third-party mechanism, it may request the local Third-Party Mechanism Steering Committee to initiate the mechanism. The Third-Party Mechanism Steering Committee should, based on the specific details of the case and the type of company involved, randomly select members from the pool of qualified professionals to form a third-party organization, and publicly announce this selection. Specifically, as outlined in the "Guiding Opinions," the responsibilities of the third-party organization include:

First, the involved companies are required to submit compliance plans—either a single plan or multiple ones—clearly outlining the committed completion deadlines. Additionally, the feasibility, effectiveness, and comprehensiveness of the companies' compliance plans will be reviewed, with suggestions for revisions provided, ultimately determining the duration of the compliance assessment period. Second, during the review period, monitor whether the companies involved have overlooked any additional offenses or committed new crimes. If so, suspend the supervision and evaluation process, and promptly report the situation truthfully to the People's Procuratorate handling the case. Third, during the compliance monitoring period, a comprehensive inspection and evaluation of the implementation of the involved company’s compliance plan should be conducted. A written compliance assessment report must then be prepared and sent both to the Third-Party Mechanism Steering Committee and to the People’s Procuratorate handling the case. Fourth, once the compliance review period concludes, a comprehensive inspection, evaluation, and assessment of the completion status will be conducted. A written review report will then be prepared and submitted to both the Third-Party Mechanism Steering Committee and the Procuratorate. Fifth, you are invited to attend relevant hearings and provide your corresponding opinions.

Currently, the legislation does not clearly address whether lawyers appointed as compliance supervisors are entitled to review case files. According to the Lawyers Law, defense attorneys do have the right to access case materials. However, as an independent third party assisting the procuratorate in deciding whether to prosecute the companies involved, the role of a compliance supervisor is inherently incompatible with that of a defense attorney. Therefore, under现行 legal provisions, compliance supervisors are not granted the statutory right to review case files. Nonetheless, in practice, gaining insight into the relevant details of the cases involving the companies is essential for compliance supervisors to effectively carry out their oversight and guidance responsibilities. As such, this issue remains to be clarified further through legislative amendments.

Currently, the legislation does not clearly address whether lawyers appointed as compliance supervisors are entitled to review case files. According to the Lawyers Law, defense attorneys do have the right to access case materials. However, as an independent third party assisting the procuratorate in deciding whether to prosecute the companies involved, the role of a compliance supervisor is inherently incompatible with that of a defense attorney. Therefore, under现行 legal provisions, compliance supervisors are not granted the statutory right to review case files. Nonetheless, in practice, gaining insight into the relevant details of the cases involving the companies is essential for compliance supervisors to effectively carry out their oversight and guidance responsibilities. As such, this issue remains to be clarified further through legislative amendments.

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

The severity of criminal penalties and the gravity of their consequences underscore the critical need for a robust criminal compliance program that permeates every stage of a company’s lifecycle—from its inception to its growth. Consequently, criminal compliance lawyers must play a proactive, ongoing role—providing guidance and oversight before, during, and after potential legal challenges arise.

First, establish a compliance prevention system in advance. Criminal compliance lawyers are primarily involved in two key areas: 1. Developing corporate supervision and management systems—specifically, creating a set of operational rules and employee guidelines based on the administrative regulations and criminal legal standards applicable to both general and specialized areas relevant to the company’s business operations. 2. Designing robust job roles—right from the company’s inception, clearly defining and assigning responsibilities related to criminal compliance, such as conducting training sessions, internal investigations, and other critical functions. Additionally, these personnel undergo functional planning and pre-employment training to ensure they are fully equipped for their roles.

Second, identify specific legal risks as they arise. Lawyers should promptly conduct internal compliance investigations within the company during its day-to-day operations, ensuring a thorough understanding of the details surrounding transactions and business activities. Additionally, they should regularly perform comprehensive compliance check-ups to proactively assess and pinpoint potential risk areas in the company’s operations—along with the corresponding criminal offenses and possible penalties. Finally, lawyers are also tasked with delivering ongoing criminal compliance training and providing timely guidance and answers to employees on a regular basis.

Finally, post-incident litigation and compliance remediation are essential. Currently, China’s criminal compliance system is still in its early stages of exploration, with a primary focus on combining post-offense compliance reforms—such as plea bargaining and acceptance of punishment—with efforts to address the underlying issues. Moreover, policies vary significantly across different regions during the pilot phase. As a result, it is crucial for criminal compliance lawyers to swiftly establish tailored compliance frameworks that meet the requirements of the procuratorates within prescribed timeframes. Additionally, if the remediation ultimately fails, these lawyers must promptly develop effective litigation strategies to navigate the next steps.

IV. The Issue of Role Conflicts for Lawyers  

As previously mentioned, in criminal compliance work, lawyers may assume three distinct roles: the pre-emptive compliance advisor hired by companies, the defense counsel representing companies involved in criminal proceedings, and the member of the third-party oversight and assessment organization appointed by the Third-Party Mechanism Steering Committee (i.e., an independent third-party compliance monitor). Regarding whether lawyers can simultaneously hold multiple roles, the following answers may apply:

1. Pre-Compliance Advisor and Advocate

Lawyers can simultaneously serve as both pre-emptive compliance advisors and defense counsel. When companies hire lawyers as their legal advisors to help implement compliance initiatives, the pre-emptive compliance advisor shares the same interests as the company. Similarly, when a lawyer acts as the company’s defense counsel, they again align closely with the organization’s objectives. Since these two roles do not create any conflict of interest, there is no issue with a lawyer holding both positions concurrently. Moreover, in practice, because compliance advisors are typically more familiar with the company’s internal compliance landscape, it often makes sense for them to take on the role of defense counsel during litigation—this arrangement is particularly beneficial in safeguarding the interests of the company involved. Meanwhile, defense attorneys, who have a deep understanding of the company’s risks, can also serve as external legal advisors, enabling them to provide more targeted guidance and support to the company as it works to address compliance gaps and implement necessary corrective measures.

2. Defense Attorney and Third-Party Independent Monitor

Lawyers cannot simultaneously serve as both a defense counsel and an independent compliance supervisor for a third party. The roles of a defense lawyer and an independent compliance supervisor are inherently incompatible: while the defense counsel aims to help the company legally maximize its interests, the independent compliance supervisor is tasked with ensuring the company maintains neutrality and assists the prosecution in determining whether to pursue charges. Thus, these dual roles create a conflict of interest.

3. Pre-Compliance Advisor and Third-Party Independent Supervisor

As for whether lawyers can simultaneously serve as both pre-emptive compliance advisors and independent third-party compliance monitors, there is currently debate. The root of the controversy stems primarily from the fact that an independent third-party compliance monitor also acts as a: “ Supervision ” With “ Guidance ” The dual role attribute.

The view that lawyers can simultaneously serve as independent compliance supervisors for third parties is gaining support. “ Guiding ” The role believes that a pre-compliance advisor, who has a deeper understanding of the company’s compliance implementation, can provide more targeted guidance when later serving as an independent third-party compliance supervisor. This expertise enables them to offer tailored advice on the compliance plans and corrective measures submitted by the company, helping businesses effectively address their issues and ultimately achieve the goal of genuinely preventing misconduct.

Meanwhile, those opposing the idea of lawyers also serving as corporate counsel emphasize the need for an independent third-party compliance monitor. “ Supervisory ” Roles, particularly under the Guidance, require third-party independent compliance supervisors to fulfill a reporting obligation: During the supervision period, they must assess whether the company involved has overlooked any additional offenses or committed new crimes. If such cases are identified, the supervisor must immediately halt the supervision and assessment process and truthfully report the findings to the People’s Procuratorate handling the case. Moreover, if a lawyer simultaneously serves as both the company’s appointed compliance advisor and the third-party independent compliance supervisor, they may face a conflict of interest when deciding whether to report criminal activities discovered within the company. This dual role could compromise the supervisor’s ability to maintain impartiality and independence as an objective third-party monitor. In response, this viewpoint underscores that third-party independent compliance supervisors must strictly avoid any potential conflicts of interest with the companies under scrutiny, ensuring there is no collusion of interests. Additionally, they should remain free from any legally prohibited relationships—whether with the company itself or with the prosecuting authorities—to uphold their integrity and neutrality in fulfilling their critical oversight responsibilities.

Both viewpoints make sense, and whether lawyers can simultaneously serve as both pre-emptive compliance advisors and independent third-party compliance monitors ultimately depends on further legislative clarification.