How should I combat fraud?

The domestic perspective

You need to be cognisant of PRC law as it relates to fraud and bribery issues. In addition to the bribery of officials, commercial bribery is illegal in China. However, assessing what is bribery and what is a legitimate commission to a third party can be challenging. As China enhances its efforts to combat commercial bribery, many companies are abandoning a once common practice of providing benefits to business partners, third parties, and agents. In my view, this is an area sometimes neglected by managers of companies in China.

Recently, King & Wood represented two clients suspected of commercial bribery, both of whom were investigated by different Administration of Industry and Commerce (AIC) branches. These investigations reveal three emerging trends. First, while governmental agencies and quasi-governmental agencies have typically been the subjects of AIC investigations, recent investigations reveal that non-governmental institutions (for example, commercial entities) are also subject to enhanced scrutiny. Second, the AIC has historically targeted payments and incentives made directly to employees of a company with whom the paying party wishes to do business.