Setting puzzles can cut crimes (12)
I believe the answer is:
circumstance
'setting' is the definition.
(I know that setting can be written as circumstance)
'puzzles can cut crimes' is the wordplay.
'puzzles' indicates an anagram.
'can'+'cut'+'crimes'='cancutcrimes'
'cancutcrimes' with letters rearranged gives 'CIRCUMSTANCE'.
(Other definitions for circumstance that I've seen before include "to go with pomp" , "Pomp and - (Elgar)" , "Condition - associated with 1 down" , "Situation" , "Happening" .)