Sanctions as foreign policy tool
Anti-corruption compliance and legislative developments
Conducting investigations under new data protection framework
China's domestic regulators and law enforcement agents have recently gained new powers, particularly in relation to the management of sensitive data. This article considers some of the key regulatory challenges that businesses will need to proactively manage in the future.
Sanctions as foreign policy tool
Sanctions, both unilateral and multi-lateral, are likely to continue to feature as a foreign policy tool. This dynamic area requires entities operating in China to be agile in assessing their risk exposure. For companies operating in China, compliance programmes will need to be adapted to respond quickly to the risk of direct penalties exposure, regardless of where the penalties enforcement originates – including in the case of direct penalties exposure through sales or purchases of goods directly from sanctioned entities.
An even more challenging aspect will be to consider supply chain and distribution channels for potential indirect exposure. Multinational companies should consider their exposure to intermediaries if they attempt to circumvent penalties.
Anti-corruption compliance and legislative developments
In China, the legislative developments towards the end of 2021 signalled a move towards an approach that will focus on investigating bribe givers as well as bribe takers, as has been standard practice so far. In particular, the use of a "blacklist" system as a penalty for bribe givers is likely to have a reputational impact, which could greatly exceed any direct financial penalties imposed. A new whistleblower law may also serve as a reporting mechanism for identifying issues.
Chinese companies should be aware that in the United States, enforcement agencies have been given extra resources to investigate offences under the Foreign Corrupt Practices Act (FCPA), including in relation to bribery and other financial crimes involving Chinese corporations. China has historically ranked highest for FCPA enforcement actions and will likely remain the enforcement focus, especially given the exposure of US companies to the strategically important Chinese market.
Conducting investigations under new data protection framework
The landscape of data protection in China has changed markedly in the past year with the introduction of the Data Security Law (DSL) and the Personal Information Protection Law. Investigations and compliance teams need to have strict data protection plans to ensure compliance. As with any operational function, it is imperative that investigations teams do not export personal data outside China.
Specifically, in relation to investigations activity, article 36 of the DSL requires that data is not provided to overseas judicial or law enforcement body without the approval of the authorities in China.
It is therefore critical at the planning stage of an investigation to consider:
- the types of data that are relevant to the exercise;
- how it will be processed and stored during the investigation; and
- what the potential is that the data may be requested by overseas law enforcement.
For further information on this topic please contact Edward Boyle, Colum Bancroft, Stephen Yu or Cliff Lam at AlixPartners by telephone (+852 2236 3500) or email ([email protected], [email protected], [email protected] or [email protected]). The AlixPartners website can be accessed at www.alixpartners.com.