LEGALLY SPEAKING Lifting the Veil on Corporate Corruption

Introduction
Corruption has always been a thorn to any country's social and economic development. If left unfettered, it creates a toxic business environment which promotes anti-competitive practices and severely undermines the rule of law.
According to KPMG Malaysia's Fraud, Bribery and Corruption Survey 2013, 90% of its respondents viewed bribery and corruption as the major problem for businesses in Malaysia.
Fortunately, Malaysia has been taking proactive steps towards curbing corruption.
Existing safeguards
The main legislation regulating bribery and corruption is the Malaysian Anti-Corruption Commission Act 2009, which was enacted on Jan 1, 2009 (MACCA), repealing the Anti-Corruption Act 1997.
The MACCA introduced several new provisions, such as: extra-territorial application to Malaysian permanent residents or citizens of Malaysia, making it an offence to bribe a foreign public official, and, most importantly, the establishment of the independent and externally monitored Malaysian Anti-Corruption Commission (MACC), replacing the former Anti-Corruption Agency.
In 2011, the Government also initiated the Corporate Integrity System Malaysia and Corporate Integrity Pledge programme that allows companies to voluntarily commit to uphold anti-corruption principles.
One of the recent successes of the MACC involved the arrest of 30 customs officers including state directors in September 2014, for alleged corrupt activities involving hundreds of millions of ringgit worth of contraband items that were smuggled into Malaysia through Port Klang Free Zone.
In recognition of the continuous effort by the relevant authorities, in the 2014 Corruption Perception Index released by Transparency International last month, Malaysia's ranking has improved to 50th spot from 53rd spot in 2013, from a list of 175 countries.
Corporate liability
Under to the MACCA, a person commits an offence if he corruptly solicits, receives, gives or offers to give any form of gratification on account of any person or an officer of a public body, or doing or forbearing to do anything in respect of any matter, including, for example, bribery, extortion, abuse of position, corruption through agents, and electoral corruption.
Presently it is unclear whether the "person" punishable for corrupt practices include corporate bodies, as only individuals/employees rather than corporations are charged for offences under the MACCA.
According to the NKRA Against Corruption website, the MACCA would be amended to incorporate legal provisions for corporate liability per the United Kingdom's Bribery Act 2010 (UKBA) ("Proposed Corporate Liability Provision").
The Proposed Corporate Liability Provision, which is expected to be tabled in Parliament this March, has been lauded as a step in the right direction towards fighting institutional corruption. It is also in line with international anti-corruption practices, such as the United States' Foreign Corrupt Practices Act 1977 and the UKBA.
Under the UKBA, a company is guilty of an offence if an "associated person" of the company bribes another person intending to obtain or retain business for the company; or obtains or retains an advantage in the conduct of business for the company.
An "associated person" of the company is a person who performs services for or on behalf of the company. Whether or not the person is an "associated person" depends on the circumstances and not only the relationship between the person and the company.
It is therefore a defence for the company to prove that it has in place adequate procedures designed to prevent the "associated person" from undertaking such act of corruption.
Accordingly, if the UKBA approach is adopted, a company would not only be liable for the corrupt practices committed by its employee but also persons and/or corporate bodies who are connected to the company, and who has committed an act of bribery on the company's behalf.
The Proposed Corporate Liability Provision would also bring Malaysia's anti-bribery laws in line with that of the UK and US, as the FCPA and UKBA both have extra-territorial jurisdiction, which hold their multinational companies operating abroad liable for acts of corruption committed not only by their employees but also employees of their overseas subsidiaries.
Conclusion
Although there have been some negative reactions towards the introduction of the Proposed Corporate Liability Provision, most notably from the Malaysian Employers Federation, the proposed provisions, with proper enforcement and education, represents an important step in making the private sector more accountable and transparent by making companies accountable for the actions of their employees.
In order to rely on the statutory defence under the Proposed Corporate Liability Provision, companies must revise their standard operating procedures and introduce comprehensive training programmes or anti-corruption practices/safeguards for its employees and agents, or risk being fined by the relevant authorities.
The proposed changes may also counter the misperception that acts of corruption and inappropriate inducements are acceptable business practices in Malaysia.

Contributed by Leslie Kok Lihong of Christopher & Lee Ong (www.christopherleeong.com).