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  • The Impact of the 12th Amendment to the “Criminal Law” on Anti-fraud policies of Foreign-funded Enterprises

    The Impact of the 12th Amendment to the “Criminal Law” on Anti-fraud policies of Foreign-funded Enterprises

    The 12th Amendment to the “Criminal Law” was reviewed and approved by the Standing Committee of the National People’s Congress on December 29, 2023, and will come into effect on March 1, 2024. This revision will bring a significant impact on anti-fraud policies of foreign-funded enterprises.

    1. To add liabilities to the crime of offering bribes, which may curb this crime, but also may reduce the possibility to persuade the bribers to provide evidence.

    It is very difficult to find evidence of bribery, because of its concealment. Many bribes are in cash, or transferred to a third party by which the person who accept bribes could not be directly found. For a long time, in order to break the alliance between the two parties and find the person who accept bribes, the public security organs have to implement the plea-bargaining system, by which the briber could be turned as a “tainted witnesses” by providing evidence. Therefore, although there are explicit provisions in the “Criminal Law” for the crime of offering bribes, compared to a large number of criminal punishments related to the party who receiving bribes, the criminal punishment related to the briber are rare.

    The 9th Amendment to the “Criminal Law”, introduced in 2015, added a fine penalty to the crime of offering bribes, strictly imposed lenient punishment conditions, and expanded the scope of subjects, which reflected an increased crackdown on the crime of offering bribes. In the following year, the ” Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Issues Concerning Application of Law in Handling Criminal Cases of Corruption and Bribery” further clarified the amount, circumstances, and target subject of bribery in the crime of offering bribes. In recent years, with the development of information networking, the public security organs could use the big data technology to search for evidence. Meanwhile, since the liabilities of the crime of offering bribes is not as severe as the crime of accepting bribes, the bribery crimes are still very common.

    Under such circumstance, the 12th Amendment further increases the punishment for offering bribes, which are as follows:

    Key point Article Details
    To add 7 circumstances for implementing a heavier punishment 390 Under any of the following circumstances, the party who offering bribes shall be given a heavier punishment:

    (1) offering bribes more than once or offering bribes to more than one person;

    (2) offering bribes to a state functionary;

    (3) offering bribes in key engineering works or major projects of the state;

    (4) offering bribes for the purpose of obtaining promotion or adjustment to position or rank;

    (5) offering bribes to any supervisory, administrative law enforcement or judicial personnel;

    (6) offering bribes in the fields of ecological environment, public finance, work safety, food and drug, disaster prevention and relief, social security, education, medical treatment and other fields, by which carrying out illegal criminal activities; and

    (7) using illegal income for bribes.

    To aggravate the punishment to the crime of offering bribes to entities 391 In the current provision, the punishment to such circumstance is a fixed-term imprisonment of no more than 3 years or criminal detention, in combination of fines. The amendment has added a punishment for a serious circumstance, and the sentence shall be fixed-term imprisonment of no less than 3 year but no more than 7 years, in combination of fines.
    To aggravate the punishment to the crime of offering bribes by entities 393 In the current provision, the punishment to such circumstance is a fixed-term imprisonment of no more than 5 years. The amendment has adjusted the punishment as a fixed-term imprisonment of no more than 3 years or criminal detention, in combination of fines; if the circumstance is particularly serious, the sentence shall be a fixed-term imprisonment of no less than 3 years but no more than 10 years, in combination of fines.
    Remark The above serial numbers are quoted from the “Criminal Law” inserted with the 12th Amendment.

    From the legislative evolution of briberies and the state’s anti-corruption trends, the crackdown on briberies is becoming more severe. In view of this, even the foreign-funded enterprises promise to waive the liabilities of the bribers, those bribers may still have worries due to the statutory punishment. Therefore, it would be more difficult for the foreign-funded enterprises to find evidence.

    However, the 12th Amendment has brought some benefits to the bribers. Paragraph 3, Article 390 is amended as, “”Any briber who, before he/she is prosecuted, voluntarily confesses his/her act of offering bribes may be given a lighter punishment within the stipulated range, or mitigated punishment. To be specific, if the offence is relatively minor, or the briber has played a key role in breaking through the investigation or detecting major cases, or if the briber has any major meritorious performance, he/she may be given a mitigated punishment or exempted from punishment. ”

    1. The scope of subject of the crime of illegal engaging in similar businesses, illegal seeking profits for relatives and friends, and practicing favoritism by converting shares or selling assets at low prices, has been expanded to private enterprises outside of state-owned enterprises.

    The corresponding provisions for these three crimes are Article 165, 166, and 169 of the “Criminal Law”. The constituent elements and penalties for personnel related to general enterprises are as follows:

    Crime Constitutive requirements Punishment
    The crime of illegal engaging in similar businesses Ø  Subject: director, supervisor or senior executive.

    Ø  Behaviors: to violate any law or administrative regulation, and takes advantage of his/her position to operate a business by himself/herself or any other persons which is similar to that conducted by the company or enterprise in which he/she holds the position and obtains any illegal interests, with huge amount involved.

    Ø  Consequences: to cause any serious losses to the interests of the company or enterprise.

    Ø  With huge amount involved, he/she shall be sentenced to a fixed-term imprisonment of no more than 3 years or criminal detention, in combination of fines, or the sentence can be fines alone.

    Ø  With the amount involved is particularly huge, he/she shall be sentenced to a fixed-term imprisonment of no less than 3 years but no more than 7 years, in combination of fines.

    The crime of illegal seeking profits for relatives and friends Ø  Subject: employee.

    Ø  Behaviors: to violate any law or administrative regulation and commits any of the following acts,

    (1) turning management of the profitable business of the employer over to his/her relatives or friends;

    (2) purchasing commodities or accepting services from the entity managed by his/her relatives or friends at a price obviously higher than the market price, or selling commodities or providing services to such entity at a price obviously lower than the market price;

    (3) purchasing or accepting commodities or services that are not up to standard from the entity managed by his/her relatives or friends.

    Ø  Consequences: to cause any serious losses to the interests of the company or entity.

    Ø  With any serious losses to the interests of the company or entity, he/she shall be sentenced to a fixed-term imprisonment of no more than 3 years or criminal detention, in combination of fines, or the sentence can be fines alone.

    Ø  With any particularly serious losses to the interests of the company or entity, he/she shall be sentenced to a fixed-term imprisonment of no less than 3 years but no more than 7 years, in combination of fines.

    The crime of practicing favoritism by converting shares at low prices or selling assets Ø  Subject: any person directly in charge.

    Ø  Behaviors: to practice favoritism by converting the assets of a company or entity into stocks at a low price or selling them at a low price.

    Ø  Consequences: to cause any serious loss to the interests of the company or entity.

    Ø  With any serious loss to the interests of the company or entity, he/she shall be sentenced to a fixed-term imprisonment of no more than 3 years or criminal detention.

    Ø  With an extremely serious loss to the interests of the company or entity, he/she shall be sentenced to a fixed-term imprisonment of no less than 3 years but no more than 7 years.

    It should be noted that the crime of illegal engaging in similar businesses and the crime of illegal seeking profits for relatives and friends are quite special.

    Firstly, both crimes have a prerequisite, which is “violating the provisions of laws and administrative regulations.” The specific interpretation and application of this prerequisite should be further clarified by judicial interpretations.

    Secondly, the criteria for docketing and prosecution of two crimes are not clear. According to the “Criteria for Docketing and Prosecution of Criminal Cases under the Jurisdiction of Public Security Authorities (II) ” (Gong Tong Zi [2010] No. 23, which has been repealed on May 15, 2022), the case regarding the first crime shall be placed on the docket for legal action for gains over CNY100,000; and the case regarding the second crime shall be placed on the docket for legal action under any of the following circumstances: a) to cause over CNY100, 000 direct economic losses to the state; b) to bring over CNY200, 000 illegal gains to their relatives or friends; c) to cause the organization concerned to be bankrupt or stop production or businesses for more than 6 months, or be revoked of license and business license, or be ordered to be closed, cancelled or dissolved. The foregoing criteria are applicated to the state-owned enterprises. However, the “Implementation Regulations of the Supervision Law”, which is implemented on 20th Sep. 2021, stipulates that those two types of cases should be supervised by the supervision organs instead of the public security organs. In addition, the revised “Criteria for Docketing and Prosecution of Criminal Cases under the Jurisdiction of Public Security Authorities (II) “, which is implemented on 15th May 2022, has deleted the two crimes. Therefore, the criteria for docketing and prosecution of the two crimes are still a question mark in practice.