Death sentence for China’s Top Banker guilty of bribery: should compliance Officers take note?

LinkedIn was abuzz yesterday with news of one of China’s top bankers’ sentencing to death after he was found guilty of accepting $277 million in bribes. Capital punishment for government officials convicted of bribery in China is uncommon but not unheard of. But here’s what you may have missed.

Despite how uneasy we might feel from a human’s right perspective about anti-corruption drives in countries like Saudi Arabia and China, developments like this ought to be noted if in charge of a program involving employees or operations there. So let’s talk about China.

Let us first explore the crime in question:

Lai Xiaomin, former chairman of the banking giant China Huarong Asset Management, reportedly accepted $277 million in bribes between 2008 and 2018, which earned him the infamous title of “China’s most corrupt financial official.”

According to court filings, Xiaomin “endangered national financial security and financial stability.” He reportedly confessed to taking the bribes and admitted to keeping the money in an apartment but “didn’t spend a cent.”

All of his assets will be seized by the Chinese authorities — including properties, luxury watches, and flashy cars. 

Is this common in China?

Shortly after becoming president in 2012, Xi launched a massive anti-corruption campaign targeting the widespread practice of bribe-seeking and graft among government officials. In 2018, China formed an agency designed to investigate any Chinese government official. The National Supervision Commission was granted powers to operate outside of China’s judicial system, which gave it a tremendous amount of oversight. For example, suspects can be detained for up to six months without allowing a lawyer’s representation. The commission has sanctioned about 1.5 million officials since its inception.

Aside from probable political motives, the anti-corruption campaign has also been seen as redeeming the corrupt one-party system in the Chinese populace’s eyes.

Although capital punishment is common in China (Amnesty International estimates that China carried out thousands of executions in 2019), it is not the preferred form of sentence for corruption in China, which usually results in life in prison.

Experts believe that this particular sentence was likely due to the scale of Xiaomin’s corruption and the public attention it has generated. It is meant to be a warning that China is willing to issue executions as punishment for government corruption.

Now here’s where companies ought to pay heed

Over the holidays (On December 26, 2020, to be exact), China’s National People’s Congress (“NPC”) made substantial amendments to China’s Criminal Law. The Amendments will take effect on March 1, 2021.

According to this expert legal opinion from Covington

“In the anti-corruption area, the Amendments increase the punishments for corrupt conduct by non-state functionaries (including taking or soliciting bribes, embezzling company assets, and grafting company funds) to parallel punishments for similar acts by state functionaries. (State functionaries are individuals who perform “public functions,” primarily individuals in decision-making positions at government agencies, state-owned enterprises, and some private enterprises.)”

Translation: China may punish private-sector employees at the same level as government officials.

Just have a look at the following new sentencing levels:

  • for cases involving a “relatively large” amount would lead to no more than three years in prison or criminal detention, plus a fine.
  • for cases involving a “huge” amount or where there are “serious” circumstances would result in
  • 3- 10 years in prison, plus a fine
  • for cases where the involved amount is “especially huge” or where there are other “especially serious” circumstances: more than ten years or life imprisonment, plus a fine ( now that is severe)

These amendments should have severe ramifications for companies operating compliance programs in China. It will be crucial to train, inform, and heighten your employees’ alertness in China about the consequences of this new criminal liability.

Disclaimer: The views expressed on this page are personal. The information provided here does not, and is not intended to, constitute legal advice; instead, all examples, media, content, and materials available on this page are for general informational and compliance guidance illustrative purposes only. Readers are advised to contact an attorney in the relevant jurisdiction to obtain advice concerning any particular legal matter or legal development shared here.

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