The Guangdong-Hong Kong-Macao Greater Bay Area (GBA) is the most vibrant and prosperous region for China’s private economy. Private enterprises inevitably accumulate certain criminal risks over years of development. As the business environment continues to improve, corporate criminal compliance services are becoming increasingly common and urgent. Pure criminal compliance can no longer meet the legal service needs of different business areas, especially for enterprises involving new productive forces. The author practices in Guangzhou and deeply feels the importance and urgency of corporate criminal compliance work. Although my knowledge and ability are limited, I hope this article can contribute to the exploration of criminal compliance in the GBA.

I. Current Status Through Data

(1) Status of Procuratorial Organs in Corporate Compliance Rectification

According to the 2023 work report of the Supreme People’s Procuratorate (SPP) to the National People’s Congress, since the exploration of the涉案 enterprise compliance reform pilot program began in 2020, a total of 5,150 related cases have been handled, with 1,498 enterprises having passed rectification and 3,051 responsible persons having been granted non-prosecution. Another 67 enterprises failed to rectify properly, and 243 responsible persons were prosecuted accordingly.

According to the 2024 SPP work report, the national procuratorial system handled 3,866 related cases in 2023, deciding not to prosecute 1,875 enterprises and 2,181 responsible persons that had passed rectification, and recommending lenient sentencing for 415 responsible persons at the time of prosecution. Forty-two enterprises failed to rectify properly and were prosecuted along with their responsible persons. The compliance rectification pass rate was as high as 97%. Procuratorial organs have been steadily advancing the corporate compliance rectification reform.

For data comparison: In 2023, the national procuratorial system decided not to prosecute 498,000 persons for minor criminal offenses where punishment was not necessary or could be exempted. Compliance non-prosecution accounted for approximately 0.44%. Excluding a large number of natural person crime non-prosecution cases, from a national perspective, there is still significant room for change in the procuratorial system’s compliance rectification work.

Specifically in Guangdong Province, according to the work reports of various local procuratorates, the Guangdong procuratorial system handled a total of 178 compliance cases in 2023. Prefecture-level cities did not use uniform data standards in their work reports. Several representative cities: Guangzhou had 30 enterprises that passed rectification; Shenzhen handled 166 compliance rectification cases; Foshan applied the compliance reform mechanism to 18 involved enterprises. Compared with the national total of 3,866 cases handled in 2023, and considering that the Guangdong procuratorial system accounts for about 7% of the national total of various cases, there is still significant room for improvement in the compliance rectification work for involved enterprises in Guangdong Province, and the corresponding demand for legal services will continue to expand.

In April 2022, the then Procurator-General of the SPP, Zhang Jun, required at a meeting on implementing the spirit of the two sessions that “in principle, procuratorates at or above the county level with conditions should handle several enterprise compliance cases.” China has 333 prefecture-level administrative divisions and 2,844 county-level units. Comparing this with the 2023 national figure for handling compliance cases, many procuratorates at or above the county level have probably not yet participated in the reform. Guangdong has 21 prefecture-level cities and 122 county-level units, compared with 178 cases handled in 2023. Considering that economically developed regions handle more enterprise compliance cases, both nationally and within Guangdong, there are still many county-level procuratorates that have not handled enterprise compliance cases.

(2) Status of Judicial Organs in Corporate Compliance Rectification

According to the 2024 work report of the Supreme People’s Court (SPC) to the National People’s Congress, in 2023, criminal compliance procedures were applied to 658 involved private enterprises. While granting lenient punishment, the third-party supervision mechanism was fully utilized to promote compliant operations. Specifically, in the first half of 2023, courts nationwide handled a total of 508 enterprise-related compliance cases, of which 495 were at the first-instance stage and 13 at the second-instance stage. The court reform pilot is very promising, demonstrating that criminal compliance rectification procedures can also be applied at the second-instance stage.

Recently, the SPC released the main data on judicial trial work for the first quarter of 2024: criminal compliance rectification was carried out in 245 cases in criminal proceedings, a year-on-year increase of 158.62%. Comparing one quarter to one-third of the full year 2023, it is evident that the court system’s compliance rectification work is accelerating.

(3) Status of Public Security Organs in Corporate Compliance Rectification

As the main investigative authority for enterprise-related crimes, public security organs play a crucial role in promoting the initiation of the supervision and inspection process for involved enterprises and achieving lenient compliance outcomes. With the deepening of reform and their elevated status, public security organs have gradually shifted from passive participation to active cooperation in corporate compliance rectification work. Although currently no public information shows cases where public security organs have taken the lead in adopting compliance rectification for enterprises during the investigation stage, it is believed that in the near future, public security organs will follow the pace of reform and explore operational procedures for enterprise compliance rectification suitable for the investigation stage in enterprise-related crimes.

II. Current Status Through Procuratorial Compliance Cases

By the end of 2023, since the reform pilot began, national procuratorial organs had cumulatively handled 9,016 enterprise compliance cases, deciding not to prosecute 3,373 enterprises and 5,232 responsible persons that had passed rectification. Another 109 enterprises had failed to rectify properly and were prosecuted along with their responsible persons. Over 97% of involved enterprises undergoing compliance rectification passed the compliance inspection and acceptance under the supervision of procuratorial organs or third-party organizations. The SPP has published four batches of typical enterprise compliance cases, clearly demonstrating the following reform spirit:

(1) Enterprise compliance non-prosecution can be applied to serious crime cases, but natural persons should still be strictly assessed according to statutory sentencing standards for non-prosecution eligibility

In the first batch of cases published in June 2021, a case involving fraudulent issuance of special VAT invoices with declared tax credits of over RMB 4.19 million was handled. After the enterprise passed compliance rectification, the Shanghai procuratorial authorities did not issue a non-prosecution decision. Instead, the court, under the procuratorate’s sentencing recommendation, imposed fines of RMB 150,000 and RMB 70,000 on the two entities respectively. Since the directly responsible person had meritorious performance, a mitigated punishment was legally available, and that person was given a suspended sentence. This reflects the cautious exploration spirit of applying non-prosecution to serious enterprise-related crimes in the early stages of reform.

In the second batch of cases published in December 2021, three serious crime cases appeared. Among them, a case of smuggling general goods with evaded taxes of RMB 3.97 million was potentially the most serious, with a statutory sentence of more than 10 years’ imprisonment or life imprisonment. After the enterprise passed compliance rectification, considering that the involved enterprise could be found to be an accessory and thus entitled to mitigated punishment, the Zhangjiagang procuratorial authorities made a decision not to prosecute both the entity and the responsible person. Compared with the aforementioned fraudulent VAT invoice case, this case was more serious. However, with the deepening of reform, even for serious crimes, enterprise compliance rectification non-prosecution can now be firmly implemented.

In the third batch of typical cases published in August 2022, there was an insider trading case with a transaction amount of over RMB 4.11 million. This did not involve an organizational crime, but the responsible person’s personal freedom was significant to the enterprise’s survival and development. The statutory sentence for this insider trading case was more than five years’ imprisonment. The case did not disclose what mitigating circumstances the responsible person had, but detailed study of the case reveals that the responsible person likely had a voluntary surrender circumstance. Therefore, after the Beijing procuratorial authorities made the enterprise undergo compliance rectification, the responsible person was leniently sentenced to two years’ imprisonment, suspended for two years. This shows that as reform deepens further, enterprise compliance rectification is no longer limited to cases where the enterprise is suspected of crime. When the entrepreneur’s criminal facts are related to the enterprise to some extent, enterprise compliance rectification can serve as one of the considerations for lenient punishment of the responsible person in serious crimes.

In the fourth batch of cases published in January 2023, an insurance fraud case involving RMB 410,000 and a fraud case involving RMB 260,000 — both serious crime cases involving natural persons — saw procuratorial authorities, after considering circumstances such as voluntary surrender, accessory status, and compliance rectification contributions, ultimately recommend suspended sentences or make non-prosecution decisions for the natural persons. Compared with the previous third batch of cases, in enterprise compliance rectification cases not involving organizational crimes, the punishment for responsible persons was further lenient.

It is worth noting that in the published typical serious crime cases, the responsible persons had mitigating circumstances such as voluntary surrender, meritorious performance, or accessory status that allowed the statutory sentencing range to reach the threshold of three years’ imprisonment, thus enabling suspended sentences or conditional non-prosecution. This did not break through the existing provisions of the Criminal Procedure Law (刑事诉讼法) on non-prosecution and suspended sentences.

(2) Regarding the types of crimes subject to compliance rectification, the scope is not limited to economic crimes or organizational crimes

In the early stages of reform, procuratorial authorities mainly initiated compliance rectification procedures for economic crimes involving enterprises, consistent with the conditions for compliance non-prosecution in most countries worldwide. However, in the typical cases, crimes such as illegal logging, major liability accidents, illegal occupation of agricultural land, aiding and abetting information network criminal activities, environmental pollution, illegal access to computer information system data, illegal mining, and even fraud have appeared. These crimes either do not fall under economic crimes or lack statutory organizational crime provisions. However, as long as the case facts are directly related to the enterprise’s operations or closely connected to production and business activities, and there is legal remediability, they can be included in the scope of enterprise compliance rectification exploration.

III. Outlook on Corporate Criminal Compliance Work

The enterprises with legal service needs for compliance rectification are the vast majority of private enterprises. They bear the most significant employment space in the GBA and are the most vibrant yet fragile entities in economic activities. As a practicing lawyer with nearly 20 years of experience, the author would like to share some perspectives and thoughts on providing compliance rectification services for private enterprises:

(1) Pre-positioning Criminal Compliance Services

Procuratorial authorities have fully leveraged the advantages of the “integrated arrest and prosecution” model, conducting preliminary assessments of the feasibility of compliance work during the investigation stage through early intervention to guide investigations. Similarly, after a lawyer becomes involved in a criminal case involving an enterprise — including cases about to be criminally filed and prosecuted or those just entering the investigation stage — the first step should be to assess whether to initiate compliance rectification construction, promptly inform the enterprise’s responsible persons to make restitution, compensate for losses, pay back taxes, restore the environment, reform financial systems, and establish a corporate compliance framework. This prepares for the subsequent decision by procuratorial authorities on whether to initiate compliance rectification procedures or for third-party supervision inspection work. In other words, criminal compliance legal services should be pre-positioned. This not only allows sufficient time for compliance rectification but also paves the way for subsequent lenient treatment and timely initiation of compliance rectification by procuratorial authorities.

(2) Vigorously Advocating Simplified and Differentiated Criminal Compliance Application Procedures, Providing Legal Opinions on Procuratorial Authorities’ Choice Between “Simplified Compliance” or “Standard Compliance”

“Simplified compliance” and “standard compliance” are two compliance handling procedures explored by GBA procuratorial authorities. “Simplified compliance” mainly uses procuratorial recommendations to urge and guide involved enterprises in effective compliance rectification, providing compliance incentives. “Standard compliance” refers to “third-party supervision + compliance incentives.”

“Standard compliance” needs no elaboration; it is currently the main compliance rectification model. China’s target enterprises for compliance include micro, small, and medium enterprises (MSMEs), which constitute the vast majority in judicial practice. “Simplified compliance,” due to its short duration, simplified process, and low cost, can be primarily applied to MSMEs with small capital and scale and clear compliance risk points. If “standard compliance” were universally applied to small and medium enterprises, especially micro enterprises, it would not only waste judicial resources but also impose compliance costs that these enterprises cannot bear.

Establishing a system for simplified and differentiated procedures can promote effective coverage of enterprise compliance nationwide. In economically underdeveloped areas with weak judicial resources, simplified compliance can ensure that most county-level judicial authorities are willing to implement criminal compliance rectification work. For complex cases, jurisdiction can be elevated to effectively allocate resources at different levels. Reducing the difficulty for MSMEs to access the involved enterprise compliance system can also enhance enterprises’ enthusiasm for participating in compliance. Defense lawyers should play a participatory role in determining whether to apply “simplified compliance” or “standard compliance,” offering legal opinions for effective utilization of judicial resources, reducing enterprise burdens, and achieving effective and efficient compliance rectification.

(3) Thoughts on Institutional Construction

1. Enterprise compliance rectification should not completely replace the application of discretionary non-prosecution

Discretionary non-prosecution is one of the non-prosecution situations in the Criminal Procedure Law. Before the 2020 involved enterprise compliance rectification pilot, cases involving minor criminal circumstances with admission of guilt and acceptance of punishment in organizational crime were basically handled through discretionary non-prosecution. This mode of handling, from the perspective of results and reduction of enterprise burden, is undoubtedly beneficial to enterprises. One should not kill an enterprise just for closing a case, nor should one bankrupt an enterprise just for carrying out a compliance rectification. It is hoped that in future exploration, purely discretionary non-prosecution will retain its application space for organizational crimes, rather than forcing a single model of non-prosecution after compliance rectification. This would reduce litigation burdens for MSMEs, especially cases that lack rectification conditions but still meet the circumstances for compliance non-prosecution, retaining more paths for lenient treatment of organizational crimes.

2. The statutory maximum sentence ceiling for non-prosecution of enterprise responsible persons should not be broken

Whether the statutory maximum sentence ceiling can be broken in enterprise compliance rectification cases is probably one of the most controversial topics in theoretical and practical circles today.

Regarding whether, after passing enterprise compliance rectification, the applicable conditions for non-prosecution of natural persons can be broken through, the author remains cautious. The focus of enterprise compliance rectification is to save the enterprise. Especially enterprises whose management structure does not depend on a single natural person truly have compliance rectification value. If an无罪出路 is given to an entrepreneur who committed a serious crime by breaking through the conditions for statutory non-prosecution, this would violate the basic principle of equality before the law. Enterprises, which only bear pecuniary penalty liability, could receive non-prosecution treatment without considering the level of punishment that the natural person may face, in promoting the reform of involved enterprise compliance rectification.

3. Hope that the Criminal Procedure Law can be amended as soon as possible based on effective exploration of compliance rectification

In the fifth part on special procedures, similar to the procedures for party settlement and compulsory medical treatment for mentally ill persons, a separate chapter on criminal compliance rectification should be established. First, clarify the compliance rectification procedure. Second, distinguish between compliance non-prosecution, discretionary non-prosecution, and conditional non-prosecution. Third, clarify the conditions for using compliance rectification for enterprises and the statutory maximum sentence ceiling. This would give judicial authorities more confidence and responsibility to advance the compliance rectification work for involved enterprises, safeguarding high-quality economic development.