“Doubling Down” On Corruption: China Revises Filing Standards for Prosecuting White Collar Crimes
China recently revised the filing standards for prosecuting an array of white-collar crimes. The revised standards halve the monetary thresholds for prosecuting crimes of offering or accepting bribes involving non-state functionaries. These revisions signal China’s determination to crack down on bribery and corruption. Given recent aggressive enforcement against bribe-givers and the robust handling of corruption cases targeting non-state functionaries by the Chinese authorities, multinational companies operating in China are strongly advised to assess their current compliance and operational strategies and implement effective compliance policies.
On April 29, 2022, the Supreme People’s Procuratorate (the SPP) and the Ministry of Public Security (the MPS) jointly issued the Regulations on the Standards for Filing Criminal Cases Under the Jurisdiction of the Public Security Organs for Investigation and Prosecution (II) (the Revised Standards), which revised or refined the previous filing standards, supplemental regulations, and judicial interpretations issued between 2010 and 2016.
The Revised Standards cover 78 types of white-collar crimes - the filing standards for prosecuting 61 types of crimes, including securities and futures-related crimes, illegal business operations, bribery, embezzlement, financial fraud, insurance fraud, loan fraud, money laundering, and tax evasion, have been revised or refined. The filing standards for the remaining white-collar crimes remain unchanged.
In particular, the Revised Standards halve the monetary thresholds triggering the prosecution of the crimes of accepting bribes by a non-state functionary, offering bribes to a non-state functionary1, embezzlement, and misappropriating funds, from CNY60,000 (or CNY100,000 under certain circumstances) to CNY30,000 (or CNY50,000 under certain circumstances) (see below table).
|Private Sector Crime||Criminal Threshold (2016)||Revised Standards Triggering Prosecution (2022)|
|Acceptance of bribes by a non-state functionary (Article 163, the PRC Criminal Law)||CNY60,000 (CNY20,000 if there are aggravating factors)|| |
|Offering bribes to a non-state functionary (Article 164 (1), the PRC Criminal Law)|| |
CNY60,0002 (CNY20,000 if there are aggravating factors)
CNY30,000 (CNY200,000 for entity crime)
|Embezzlement (Article 271, the PRC Criminal Law)||CNY60,000 (CNY20,000 if there are aggravating factors)||CNY30,000|
|Misappropriating funds (Article 272, the PRC Criminal Law)||CNY60,000 (CNY100,000 if funds are not returned within three months or funds are used to conduct for-profit activity)||CNY30,000 (CNY50,000 if funds are not returned within three months or funds are used to conduct for profits activity)|
The higher thresholds were initially set forth in the Interpretation of Several Issues Concerning the Application of Law in Handling Criminal Cases of Corruption and Bribery, published by the SPP and Supreme People’s Court (SPC) in 2016. It is anticipated that the SPP and SPC may issue additional judicial interpretations in alignment with the Revised Standards in the near future.
The Revised Standards reflect China’s determination to crack down on corruption, and echo the trend we have seen in recent government enforcement actions in China. Specifically:
- The Revised Standards anticipate aggressive investigation and prosecution of bribe-givers, even though enforcement against recipients of bribes has traditionally been the focus.
- The Revised Standards demonstrate robust prosecution of bribery targeting non-state functionaries. The four private sector crimes listed in the table are among the few in the Revised Standards, for which monetary thresholds triggering prosecution are lowered compared to the previous standards. Chinese Criminal Law punishes bribery targeting both non-state functionaries (i.e., private sector bribery) and state functionaries (i.e., public sector bribery). The Revised Standards lower the monetary thresholds creating individual liability for private sector bribery to the same level as public sector bribery, even as punishment for the latter-related offenses is generally more severe.
Companies should assess their policies and procedures and enhance internal controls to mitigate corruption risks as they enter an era of vigorous enforcement of anti-corruption laws in China. Anticipating and remediating risks posed by interactions with public officials is no longer sufficient.
1 Under Chinese law, “state functionaries” consist of government officials and anyone who performs public service in state-owned enterprises and organizations. The scope of a “state functionary” is not identical to “government officials” as defined in the US Foreign Corrupt Practices Act (the FCPA). For example, healthcare providers (HCPs) such as physicians and pharmacists at public hospitals in China are regarded as “government officials” under the FCPA. However, HCPs at public hospitals who solicit or accept bribes when prescribing drugs are considered “non-state functionaries” according to the SPP’s and SPC’s judicial interpretations.
2 It is disputed whether the CNY60,000 threshold applies to entity crime as the 2016 judicial interpretation does not explicitly clarify this.