Law changes will lead to greater enforcement

Anti-corruption and fraud experts expect there to be increasing enforcement of local regulations next year as the newly amended law will cover a broader range of individuals that may be considered bribe givers and receivers.

The Ninth Amendment of China's Criminal Law, which came in effect on 1 November, has tighter corruption sentencing.

According to the amendment, people convicted of serious corruption and handed death sentences suspended for two years will have those converted to life in prison after the two-year period, reported Xinhua News Agency.

Emmanuel Vignal, leader of fraud investigation and dispute services with EY's China operation said the newly amended criminal law, anti-corruption campaign and continuous enforcement efforts, means Chinese companies will need to focus on implementing more robust anti-fraud and anti-bribery measures that address local regulations, and failure to do so will be detrimental to business operations.

EY found that a common form of fraud in China is a conflict-of-interest between company employees and third parties. These could include kickbacks during the procurement process to more serious incidents, where employees set up business entities to defraud their employer by diverting sales or confidential information, or work with third parties to make corrupt payments.

"The risks significantly increase when individuals involved may be politically exposed during a time when China's anti-graft campaign is focused on investigating such unethical behavior," said Vignal.

A survey by EY showed that employees in China are less comfortable with using a whistle-blower's hotline than their Asia-Pacific peers due to lack of confidentiality as well as lack of legal protection, showing that more measures need to be taken to encourage reports and reduce corruption and fraud risks.

Contact the writer through wuyiyao@chinadaily.com.cn