The Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security recently put forward the Opinions on the Handling of Illegal Fundraising Criminal Cases ( the “Opinions”) to explain the legal basis for determining “illegality”, unit crimes, the handling of subordinate units involved in the crime, and the determination of subjective intent.
1. The basis for determining illegality
According to the Opinions, the people’s court, the people’s procuratorate, and the public security agency should rely on the national financial administration laws and regulations as the basis for determining illegality. If those laws and regulations only provide principle-based rules for the subject, determination may be made pursuant to the spirit of law and in reference to the departmental regulations formulated by administrative departments such as the People’s Bank of China, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission in accordance with such national financial administration laws and regulations, or from regulatory documents such as the state finance administration regulations, measures and implementation rules. This also means that the regulatory documents can be used as references for such determination when the law is ambiguous.
2. Determination concerning unit crimes
In terms of unit crimes, if a unit engages in criminal fundraising activity with all or most of the illegal proceeds going to the unit, such activity should be regarded as a unit crime. If an individual sets up a unit to engage in criminal fundraising activities and commits a crime, or if a unit primarily engages in criminal fundraising activities after it has been set up, this will not be prosecuted as a unit crime; rather, prosecution of criminal liabilities will be toward the individuals of the unit who organize, plan and carry out such criminal fundraising activity.
In addition, whether a unit primarily engages in criminal fundraising activities are to be determined by considering factors such as the number, frequency, duration, size, flow and committed manpower and resources of illegal fundraising activities, as well as the unit’s lawful operations and the impact of its criminal activities.
3. Cases involving subordinate units
Regarding the handling of criminal cases involving illegal fundraising, the people’s courts, people’s procuratorates, and public security agencies are to thoroughly investigate the units involved in such cases, including the entity qualifications, level, relationship, position, role, fund flows, etc., with respect to both superior units (head offices or parent companies) and subordinate units (branches or subsidiaries) in order to deal with such cases.
In case the superior unit has been found to have committed a unit crime, its subordinate units that engage in illegal fundraising with the entirety or most of the illegal proceeds going to the subordinate unit will also result in such subordinate unit being deemed to have committed a unit crime. If a superior unit and a subordinate unit jointly commit a crime, their criminal liabilities should be determined based on their respective positions and roles.
In case a superior unit has been regarded to have committed a unit crime, and if the entirety or most of the illegal proceeds from the criminal fundraising by a subordinate unit goes to the superior unit, while the subordinate unit will not be independently regarded to have committed a unit crime, its personnel who were involved in the crime will be prosecuted as the superior unit’s other directly responsible personnel.
On the other hand, if a superior unit is not regarded to have committed a unit crime but the subordinate unit did, the personnel in the superior unit who organized, planned and carried out the crime of illegal fundraising may be generally prosecuted jointly as natural persons alongside the subordinate unit.
If neither a superior unit nor its subordinate unit is deemed to have committed a unit crime, the principal offenders are generally the supervisors and personnel with key roles carrying out organization, leadership, management and coordination duties in the superior and subordinate units, and the other personnel who actively participate in the illegal fundraising are considered accomplices, all of whom will be jointly prosecuted as individuals.
4. The determination of subjective intent
As to whether the suspects or defendants had criminal intent to embezzle funds from the public, the Opinions require a comprehensive analysis and determination based on the employment status, employment history, professional backgrounds and training history of the suspects or defendants, or the administrative penalties or criminal prosecution they have been subject to as well as evidence such as the manners of fund absorption, promotional activities, contractual materials and business processes, together with their testimonies.
The Opinions also provide explanations regarding number of offenses, the combination of leniency and severity, jurisdiction, the recovery and disposal of the property involved in the case, the protection of the rights and interests of fund-raising participants, and the connection between the administrative enforcement and the criminal justice.