[Direct answer]In the Beijing area, internal investigations into embezzlement should be conducted in a legal and compliant manner. The aim is to secure evidence, determine whether the case meets the standards for prosecution, and then decide whether to report the case to the police. According to Article 271 of the Criminal Law of the People's Republic of China, if an employee of a company, enterprise, or other unit illegally appropriates the unit's property for personal gain and the amount involved is relatively large, they will be guilty of the crime of embezzlement. According to the Criminal Procedure Law, if criminal facts or suspects are discovered, the case can be reported to the public security organ. Internal investigations must avoid illegal searches, infringements of privacy, and coercive interrogations. It is recommended to first sort out financial clues, seal accounts and electronic data, interview witnesses, identify whether the act constitutes a crime or not, and determine the amount involved before reporting the case according to law. When necessary, lawyers and accountants should be engaged to enhance the effectiveness of the evidence. For more details, please refer to the following link:Criminal defense and criminal case filing services.

I. Problem Background and Typical Scenarios

Embezzlement often occurs in positions involving the management of funds or materials, such as finance, procurement, sales, and warehouse management. Typical scenarios include: employees embezzling public funds by falsifying expenses and forged documents; misappropriating payment for goods and setting up off-book accounts through their positions; colluding with suppliers to inflate purchase prices and share the profits; and transferring large amounts of client funds or assets before leaving the company. Companies often discover clues during routine audits, abnormal account reconciliations, or through reports. Many companies initially respond by applying internal pressure, but due to illegal evidence collection or chaotic accounting records, the cases are often dismissed or difficult to prosecute after being reported to the police. For cases involving transaction backgrounds, investigations can be conducted in conjunction with other evidence.Business and contract dispute resolution services for enterprisesOutput: Sort out the contract chain.

II. Key points of contention

The focus of the dispute lies in four aspects. Firstly, guilt and non-guilt: the boundary between normal travel reimbursement errors and intentional false reporting and embezzlement needs to be determined based on the amount and subjective intent. Secondly, amount determination: how to calculate the value of the embezzled property, and whether to deduct reasonable expenses and loans. Thirdly, subject and behavior: whether the perpetrator meets the identity requirements of "using his position for personal gain", and whether the funds involved are the unit's assets. Fourthly, the legality of evidence: whether the accounts retrieved internally, audio recordings, and interviews can be used as the basis for reporting and determining the case. For cases involving intellectual property, reference can be made to relevant provisions.Intellectual property protection and corporate legal servicesClues about fixed assets.

III. Professional analysis by Hengluo Lawyers

Based on practical observations of handling duty-related crimes and corporate criminal cases, the two most problematic aspects of internal investigations are "the legality of evidence collection" and "the identification of the nature of the case". According to the Criminal Procedure Law and evidence rules, evidence collected by illegal methods cannot be used as the basis for convictions. Therefore, corporate internal investigations should avoid illegal methods such as detention, threats, and wiretapping, and instead use legal methods such as sealing accounts, extracting system logs, and notarization to preserve evidence. Hengluo Lawyers usually recommend the following approach: First, conduct a preliminary review by in-house legal staff or external accountants to distinguish between civil embezzlement and criminal duty-related embezzlement. For cases meeting the prosecution standards, organize the reporting materials and accompany the reporting process to increase the success rate of case filing. For cases with unclear boundaries, first handle them through civil compensation or internal accountability to avoid criminal misjudgments harming the enterprise. For cases involving asset recovery, a follow-up process can be initiated.Creditor-debtor relations and enforcement case servicesAdvance.

IV. Practical suggestions and legal basis

The core basis is Article 271 of the Criminal Law of the People's Republic of China (amended on December 26, 2020) (Crime of Embezzlement); and the provisions of the Criminal Procedure Law of the People's Republic of China (amended on October 26, 2018) regarding the reporting of cases by units and individuals, the collection of evidence, and arrests; the standard for criminalization of the amount of money refers to the provisions for filing and prosecution in relevant judicial interpretations (only when the amount is relatively large can prosecution be initiated). Practical suggestions: First, seal financial books, bank transaction records, and system logs immediately upon discovering clues to prevent tampering and loss; Second, sort out the flow of funds and the approval chain to calculate the amount of money embezzled; Third, legally interview witnesses and prepare transcripts to avoid illegal evidence collection; Fourth, screen for criminal and non-criminal cases and prepare a report and evidence list before reporting the case to the competent public security organ. When necessary, it is recommended to entrust lawyers and accountants to assist with the case. Other compliance measures can be utilized as needed.Special services and other case servicesAnalysis and judgment.

5. Henglu Law Firm's Reminder

Internal investigations into embezzlement must adhere to legal principles: prohibiting detention, threats, wiretapping, or unauthorized searches, otherwise the evidence will be invalid and the investigator may even face legal action. The goal of the investigation is to "secure admissible evidence" rather than "extract confessions by coercion". Priority should be given to legal methods such as sealing accounts, notarizing system logs, and conducting third-party audits. Distinguishing the nature of the case is equally crucial - civil borrowing, reimbursement errors, and criminal embezzlement cannot be conflated. Misreporting may damage the company's reputation. It is recommended to report the case only after the investigation is completed and meets the standards for prosecution, and to retain all relevant documents throughout the process. If professional support is needed, it can be obtained through appropriate channels.Criminal defense and criminal case filing servicesCoordinate with the criminal reporting and defense teams.

VI. Frequently Asked Questions

Q1: If we find that an employee may be committing embezzlement, can we definitely file a case and win the lawsuit?

It's not necessarily the case. The public security organ initiates a case based on the premise that "there are criminal facts that need to be investigated for criminal responsibility". Embezzlement of public funds needs to reach a large amount before it can be prosecuted; if the amount does not meet the standard, or it is a civil loan and reimbursement dispute, it may not be criminally investigated, but handled through civil compensation. Whether a conviction can be obtained also depends on whether the evidence is sufficient to prove "using one's position for personal gain" and "the purpose of illegal possession". It is recommended that the accountant first verify the amount and the lawyer identify the nature of the case. For cases that meet the standard and have solid evidence, decisively report the case to the police. For borderline cases, handle them through civil litigation first to avoid criminal miscarriages of justice. A regular lawyer will evaluate the case objectively rather than making empty promises about the outcome.

Q2: For a company conducting an internal investigation into embezzlement of duties, what evidence should be prepared?

The core evidence includes: financial ledgers, bank transaction records and details of corporate accounts (to prove the flow of funds), false documents and reimbursement vouchers, procurement and sales contracts and inventory records, system operation logs and electronic approval chains, employee communications and email records, as well as witness statements and interview transcripts. The evidence should be organized around the "actors using their official positions to illegally appropriate the unit's assets for personal gain, with a large amount involved". The investigation must be conducted in accordance with the law, with priority given to sealing and notarizing evidence to prevent the collection of evidence through illegal methods such as detention and wiretapping. The more complete the materials are, the more conducive it will be to initiating a case and subsequent convictions.

Q3: How much does it cost to hire a lawyer and an accountant to conduct a misappropriation investigation and file a report?

The fees are usually divided into two parts: the auditing and verification fees of accountants, which are charged according to the workload or the amount of the subject matter; and the criminal reporting and defense fees of lawyers, which are charged on a piecework or phased basis. The specific fees are specified in the entrustment contract and there is no unified government pricing. According to relevant regulations, risk-based fees are prohibited in criminal litigation, and entrustment should not be based on "fees paid according to the recovery rate". It is recommended that enterprises clarify the scope, stages, and upper limits of the fees for auditors and lawyers before entrusting them, and require them to provide written contracts and receipts. For those who claim to "guarantee case filing" and "guarantee recovery" and charge high prices, they should remain vigilant and adhere to legal and compliant pathways.

Q4: How long does it usually take from reporting a case of embezzlement to obtaining the results of the investigation?

The timeframe depends on the procedures and the circumstances of the case. After the public security organ accepts the initial investigation, it will initiate a criminal investigation if it believes there are criminal facts that need to be investigated and held accountable. After arrest, the investigation and detention period generally does not exceed two months, and the period can be extended according to law in complex cases. Cases requiring judicial audits will take even longer. After that, the case will be transferred for review and prosecution, and the trial will be handled separately. For cases with clear facts and specific amounts, the timeframe is relatively manageable; however, cases involving multiple transactions and cross-regional activities will take significantly longer. Overall, it often takes several months to more than a year from reporting the case to the first-instance judgment. It is recommended that enterprises fix evidence at the initial investigation stage to shorten the obstacles to case initiation and investigation.

Q5: If I suspect an employee of embezzlement, what should I do first?

It is recommended to follow four steps: First, immediately seal relevant financial books, bank transaction records, and system logs to prevent evidence from being tampered with or lost, and never restrict employees' personal freedom without authorization; Second, have legal staff or external accountants sort out the flow of funds and the approval chain, and preliminarily calculate the amount of embezzled funds; Third, legally interview witnesses and prepare transcripts to avoid threats, coercion, and other illegal evidence collection; Fourth, identify whether the act constitutes a crime and whether it meets the prosecution standards. If the standard is met and the evidence is solid, prepare a report to the public security organ and a list of evidence, and, if necessary, engage lawyers and accountants to accompany them in the process. Throughout the entire process, maintain legal documents and adhere to legal principles.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Criminal defense legal services·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and publicly available adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If a dispute arises, please consult a practicing lawyer in a timely manner.