China Regulatory Enforcement Quarterly - May 2016

Regulatory Update


The PRC regulatory landscape remains a hotbed of activity in Q1 2016 with government regulators tackling major scandals in the financial and healthcare sectors. While government regulators and corporations continue to focus on traditional corruption investigations, major cyber/data security breaches and social engineering frauds have also come to focus. These frauds are cross-border in nature, and those facilitating the frauds are spread across many countries around the world, which makes it extremely difficult to recover stolen assets and data. Moving forward into 2016, the following trends will influence the regulatory environment in China and the rest of Asia: 

Corporate data increasingly vulnerable to breaches/attacks 

Increased corporate connectivity with the shift towards online data storage and cloud-based services has increased the potential points of vulnerability for data theft and breaches. Work-related communications and data transfers involving confidential company and customer information are becoming increasingly vulnerable to attacks. Reliance on smart connected devices is also creating numerous points of vulnerability for intelligence gathering and/or fraudulent activity. Increased connectivity and big data will present a new dimension of risks for multinational companies. 

Sophisticated international cybercrime attacks 

International cybercrime syndicates are conducting increasingly sophisticated attacks against corporations, often forming cross-border teams, transferring victims’ assets across a chain of bank accounts around the world, using offshore shell companies to evade detection, and posing as company executives to obtain key information and/or affect transfer of funds. The attacks are not limited to attempts to steal funds and other assets, such as IP and tangible commercial secrets. Recent media leaks and attacks against government entities are cases in point. 

China’s new extraterritorial influence 

Recently introduced laws, regulations and initiatives that increase Chinese authorities’ regulatory and supervisory powers are starting to have an impact in mainland China and abroad. For example, the Enterprise Credibility Information Publicity Systems (which was reported in our Q1 2015 newsletter) are increasingly being used by the Administration for Industry and Commerce (AIC) to publicly list the AIC’s decisions on administrative commercial bribery cases across China. As these bribery decisions are made public, it has increased the risk of overseas enforcement claims. Additionally, China’s new Anti-Terrorism Law coupled with its Sky Net initiative has resulted in the increased repatriation of fugitive Chinese government officials suspected of serious corruption overseas. By monitoring telecommunications activity, working with overseas law enforcement, and increasing collaboration, Chinese regulators are able to creatively find ways to exert influence in connection with enforcement initiatives beyond its mainland borders. For more information about China’s Anti-Terrorism Law, please see our Q4 2015 newsletter.

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