Four major issues to be clarified in carrying out enterprise compliance

1. Legal risk is different from compliance risk, and administrative supervision is sometimes more fatal.

2. There are differences in the content of ex ante compliance and ex post compliance, and attention should be paid to the boundary of public power intervention.

3. In the third-party mechanism, the two roles of lawyers should be fully played, without confusion and dislocation

4. Compliance non prosecution is only a theoretical discussion of the legislative system design. Whether the enterprise has completed the compliance inspection is not the premise of non prosecution.

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Four major issues to be clarified in carrying out enterprise compliance

01

Clarify legal risk and compliance risk. Corporate legal risk prevention and control does not mean corporate compliance risk prevention and control, nor does corporate compliance risk prevention and control mean corporate executives and employees risk prevention and control

From the perspective of the concept of general compliance, corporate compliance generally means that the operation and management of enterprises and their employees comply with the requirements of laws and regulations, regulatory provisions, industry standards, articles of association and rules, international treaties and rules, etc. That is to say, enterprises should operate according to laws and regulations. However, if the business process of the enterprise does not meet the above requirements, it may bring legal risks to the enterprise, but it is not necessarily a compliance risk. The extension of legal risk is greater than compliance risk. It is not allowed to take the risk of civil liability such as civil tort and breach of contract as compliance risk, which is just business risk in the business process.

I agree with Mr. Chen Ruihua that what has a fatal impact on the enterprise is the risk that the enterprise will be subject to administrative supervision and punishment and criminal prosecution for violating laws and regulations. This is compliance risk. Once the compliance risk is not controlled, the enterprise may be deprived of the franchise qualification, or even revoked the business license, thus causing economic losses and even reputation losses to the enterprise, being investigated for administrative responsibility, or even bearing criminal responsibility, which will make the enterprise bear catastrophic costs.

It defines the concept of compliance risk. The establishment of the compliance management system is aimed at effectively preventing compliance risk, including the prevention, identification and response system of enterprise compliance risk. Through the establishment of the compliance management system, corporate responsibility, executive responsibility and personal responsibility are effectively separated. The establishment of a sound compliance management system by enterprises can certainly hinder unit crime, which does not have a legal barrier at present, because it means that the behavior involving crime cannot reflect the will of the unit, so it is not a unit crime naturally. Only in a context, can it help to clarify the task objectives of compliance supervision and inspection and the criteria for compliance rectification evaluation.

02

Clarify the difference between ex ante compliance and ex post compliance and the boundary of public power intervention

By ex ante compliance, I mean that some enterprises, without any illegal investigation, entrust law firms or compliance firms to carry out physical examination in all aspects of the enterprise against the possible compliance risk points of their own enterprises, so as to establish a compliance management system for the enterprise. This is an independent act of the enterprise, and the government should not intervene and intervene, let alone send tendentious opinions to the enterprise, Let the enterprise go to a designated law firm or corporate compliance office to do so.

For ex ante compliance, the government can only provide compliance guidance at the macro level. The government has formulated a series of compliance management guidelines and policy documents to call on and guide enterprises to attach importance to compliance and establish and improve their compliance system. For example, the SASAC has formulated the Guidelines on Compliance Management of Central Enterprises (for Trial Implementation) and the Guidelines on Compliance Management of Overseas Enterprises; Policy documents, outlines and five-year plans issued by the CPC Central Committee and the State Council. Since it is a guide, it is an optional reference for enterprises, rather than a must to follow.

The ex post compliance here refers to that when an enterprise violates laws and regulations and is investigated, the public authority department can intervene and suggest that the enterprise involved should establish a special compliance plan for violations and make corresponding rectification. If it meets the applicable conditions of the third-party mechanism, the case handling authority should appoint a third party to investigate and supervise. Among them, the third party organizes the supervision and inspection of the rectification related to violations, but cannot compel enterprises to carry out all-round rectification. For example, if an enterprise is suspected of polluting the environment and is investigated, the regulatory authorities and case handling units can only require the enterprise to make rectification in terms of environmental repair and protection, instead of checking the enterprise accounts to see whether there is tax evasion.

03

Clarify the two roles of lawyers in the third-party mechanism, and give full play to their respective responsibilities, without confusion and dislocation

On June 3, 2021, the Supreme People's Procuratorate, the Ministry of Justice, the Ministry of Finance and other nine ministries and commissions jointly issued the Guiding Opinions on Establishing a Third Party Supervision and Evaluation Mechanism for Compliance of Enterprises Involved in the Case (for Trial Implementation) (hereinafter referred to as the Guiding Opinions). I believe that lawyers can play two roles in the third party mechanism: first, as defenders of enterprises and personnel involved in the case; Second, as a member of a third-party organization. The functions of the two roles are different, and the rights and obligations cannot be confused.

In accordance with the relevant provisions of the Guiding Opinions and in combination with the requirements of the legal duties of the defender, I believe that, as the defender of the enterprise involved in the case, I should perform the following duties:

（1） Clarify the nature of violations and judge whether they meet the conditions of the third-party mechanism

Helping the enterprises involved in the case make a professional judgment on whether the violations constitute a crime, what constitutes a crime, whether they are administrative violations or criminal violations, clarify the nature of violations, and accurately identify the criminal risks of enterprises. This is the premise and basis for good criminal compliance of enterprises, so as to judge whether it is necessary for enterprises to conduct compliance inspections on enterprises and whether they meet the conditions for the application of third-party mechanisms.

（2） For those deemed qualified, apply for enterprise compliance and third-party mechanism

If the enterprises, individuals and their defenders, agents ad litem or other relevant units and personnel involved in the case file an application for the application of enterprise compliance pilot and the third-party mechanism, the People's Procuratorate shall accept and review the application according to law.

（3） Help the enterprises involved to determine the time limit for fulfilling their compliance commitments

According to the relevant provisions of the Guiding Opinions, the compliance inspection period shall be determined by the third party organization after the enterprise makes a commitment to the implementation period of the compliance plan.

（4） Help to establish a professional team of compliance plans and participate in the formulation of enterprise compliance plans

The formulation of an enterprise's compliance plan is not only the identification of criminal risks, but also the formulation of compliance management norms related to criminal behaviors, the construction of an effective compliance organization system, the improvement of the compliance risk prevention and reporting mechanism, and the filling of loopholes in the enterprise's system construction and supervision and management. Therefore, the formulation of a compliance plan cannot be completed by a lawyer. As the defender of the enterprise involved in the case, it should be based on the needs of the enterprise and the requirements of the case handling authority, Help enterprises establish professional teams for compliance programs. According to the specific circumstances of the violations or crimes of the enterprises involved, such as suspected environmental pollution, false VAT invoices, pyramid schemes, violations of listed companies, or illegal land occupation, targeted matching of technical experts who are proficient in this field, etc.

（5） Participate in the hearing on review of arrest, decision on prosecution or change of compulsory measures, and put forward suggestions on lighter punishment to the case handling organ

I believe that the enterprises and personnel involved in the case, as the parties, also have the right to attend the hearing. As a natural extension of their right to defense, their defense lawyers also have the right to express relevant opinions at the same time.

According to the relevant provisions of the Guiding Opinions, lawyers who are members of third-party organizations shall perform the following duties:

1. The enterprises involved are required to submit special or multiple compliance plans and specify the time limit for the completion of the compliance plan commitment.

2. Review the feasibility, effectiveness and comprehensiveness of the compliance plan of the enterprise involved, put forward suggestions for modification and improvement, and determine the compliance inspection period according to the specific situation.

3. If the enterprise involved in the case is found guilty of omission or has committed a new crime, the supervision and evaluation procedure shall be suspended and the case handling authority shall be truthfully informed.

This is also based on the important difference of responsibilities between the members of the third-party organization and the defenders of the enterprises involved. Lawyers, as defenders of enterprises involved, have no obligation to report the omissions of enterprises and personnel involved in the case. As for new crimes, they are only obliged to report the crimes that are prepared or being implemented that endanger national security, public security and seriously endanger the personal safety of others according to the provisions of the Criminal Procedure Law.

4. During the compliance inspection period, conduct regular or irregular inspection and evaluation on the implementation of the compliance plan of the enterprises involved, and send a copy to the procuratorial organ.

5. At the end of the compliance inspection period, a comprehensive inspection, evaluation and assessment of the completion shall be carried out, a written inspection report shall be prepared and submitted to the third-party mechanism management committee and the procuratorial organ.

6. Invited to participate in the hearing of the procuratorate's decision not to approve arrest, not to prosecute, or to change coercive measures, and express relevant opinions.

It should be noted that the members of the third-party organization are invited to participate in the hearing and express their opinions at the meeting. It is only appropriate to express the performance and effect of the compliance plan of the enterprises involved during the investigation, and it is not appropriate to express their opinions on the enterprises and individuals involved in the case, whether to sue or not, whether to arrest or not to change the coercive measures. In this way, the role of supervisor and neutral person can be embodied. However, as the defender of the enterprise, the lawyer can certainly express his opinion on the handling of the case.

04

Clarifying compliance non prosecution is only a legislative system design discussed in theory, not a model under operation in practice. Whether an enterprise has completed compliance inspection is not a prerequisite for non prosecution

Some people believe that the compliance non prosecution system refers to the system promoted by the Supreme People's Procuratorate, in which procuratorial organs at all levels make non prosecution decisions against enterprises involved in cases suspected of committing crimes and making a plea of guilty under the premise of their commitment or implementing an effective compliance management system. This is actually a misunderstanding of the implementation of compliance pilot reform by the current Supreme Inspection Commission.

No matter the relevant policy documents of the Supreme People's Procuratorate or the speeches and articles of the responsible comrades, they never mentioned the pilot reform of "compliance non prosecution", but at most they said that "in the long run, we must seek to establish the criminal compliance non prosecution system in legislation". Therefore, if the so-called compliance non prosecution is still pursued at this stage, it will become a disguised conditional non prosecution, which breaks the framework of the Criminal Procedure Law and is an illegal experiment.

According to Paragraph 1 of Article 14 of the Guiding Opinions, the People's Procuratorate shall, in the process of handling enterprise related crime cases, use the compliance materials such as the written report of the third-party organization's compliance investigation, the compliance plan of the enterprise involved, and the regular written report as an important reference for approving or disapproving arrest, prosecution or non prosecution, and whether to change the coercive measures, etc. according to law, and putting forward sentencing suggestions or prosecutorial suggestions and prosecutorial opinions.

This shows that the procuratorial organ only takes a variety of compliance materials, such as the written report of the third-party organization's compliance investigation, the compliance plan of the enterprise involved in the case, and the regular written report, as an important reference for handling the case and making relevant decisions or putting forward procuratorial suggestions and opinions, rather than the preconditions and conditions for making relevant decisions.

Dr. Gao Jingfeng, director of the Legal Policy Research Office of the Supreme People's Procuratorate, made it clear in the Public Welfare Lecture Hall that the procuratorial organ's promotion of enterprise compliance reform pilot means that the procuratorial organ, when making a decision not to approve arrest or not to prosecute in accordance with the law, or putting forward a suggestion on mitigation of sentencing according to the system of pleading guilty and leniency of punishment, aims at enterprises suspected of specific crimes, combined with the actual situation of handling cases, Urge the enterprises involved in the case to make compliance commitments and actively rectify and implement them, promote the compliance and law-abiding operation of enterprises, reduce and prevent corporate crimes, and achieve the organic unity of political, legal and social effects of judicial case handling.

For example, in the typical case of the enterprise compliance reform pilot issued by the Supreme People's Procuratorate, in which Wang, Lin, and Liu bribed non state staff, the procuratorial organ made a relatively non prosecution decision against Wang in April 2020 and a statutory non prosecution decision against Lin and Liu, and signed a compliance supervision agreement with Y Company in July 2020 to assist the enterprise in its compliance construction. Later, through a return visit to the compliance construction of Y Company, it further put forward guidance, promoted the enterprise to check and fill the gaps and restarted the listing application procedure.

In this case, the procuratorial organ actively promoted the combination of enterprise compliance and non prosecution according to law. The decision not to prosecute the responsible person of the enterprise involved in the case according to law is not a simple one, but a follow-up work such as putting forward rectification opinions to the enterprise, promoting the compliance construction of the enterprise, and conducting compliance inspection, so that the enterprise involved in the case can not only pay the price for the illegal crime, but also learn from the lessons to establish and improve the compliance system to prevent reoffending, and maintain the normal economic order.

Finally, I want to emphasize that the most important embodiment of the work value of criminal lawyers is to accurately determine the nature, identify risks, and help enterprises clarify the distinction between legal acts, administrative violations and criminal violations. Qualitative and accurate judgment is more critical and urgent than helping enterprises establish or improve their compliance system, and it is also the premise and basis for enterprise compliance. As in the above typical cases, the procuratorate makes relative non prosecution and statutory non prosecution respectively according to the different criminal facts of the persons involved, and then puts forward rectification suggestions to the enterprise to promote the compliance construction of the enterprise, truly reflecting the unity of the political effect, legal effect and social effect of judicial case handling.