AS aptly described by Transparency International UK, corruption is a malign force which perpetuates poverty, sows insecurity, and robs the world’s most vulnerable people of desperately needed public services. Corruption, as we know, can manifest in many different forms.
Section 17A of the Malaysian Anti-Corruption Commission Act 2009 (MACC Act) which came into force on June 1, 2020 brought about much-anticipated change to the anti-corruption landscape. Section 17A is aimed at fostering good corporate governance practices and promoting the importance of conducting business activities with integrity.
With the first charge underway, the MACC is now no longer accepting ignorance as an excuse.
Essential features of Section 17A
Section 17A of the MACC Act provides that a commercial organisation may be prosecuted alongside its “director, controller, officer or partner”; or persons who are “concerned in the management of its affairs”, if “persons associated” with the company offer a bribe to a third party for the company’s benefits. “Persons associated” covers directors, partners, employees of the organisation (whether temporary or fixed), as well as those performing services for or on behalf of the organisation (agents, distributors and more).
Significantly, Section 17A includes a deeming provision whereby once an offence has been committed by a commercial organisation, there is a presumption of criminal liability on directors and management personnel; and such presumption can only be successfully discharged if the following can be satisfied. First, if it can be proven that the offence was committed without their consent or participation. Second, if all relevant due diligence exercises have been carried out to prevent the commission of the offence itself, considering the nature of the individual’s function in that capacity and the circumstances of the case.
There is, however, an opportunity for redemption, as an organisation can be absolved of liability if it can demonstrate that adequate procedures were in place to prevent associated persons from committing the corrupt act. As a corollary to a successful defence by the organisation, the deeming provision against directors and management will not be triggered.
If an organisation is found to be in contravention of Section 17A, the maximum penalty for this offence is a fine at least 10 times the value of the bribe or RM1 million, whichever is higher; or up to 20 years imprisonment for the officers of the company, or both.
Recent events
On March 18, 2021, a milestone was marked under the MACC Act with the first company, Pristine Offshore Sdn Bhd having been charged under Section 17A. It was alleged that Pristine’s former director had paid a bribe of RM312,350 to the COO of Deleum Primera Sdn Bhd to ensure that Pristine would be awarded a subcontract from Petronas Carigali Sdn Bhd.
This case will set the benchmark on what constitutes “adequate” for a commercial organisation to successfully rely on the adequate procedure defence.
Interestingly, in the UK case of R v Skansen Interiors Limited (2018) where a company failed to assert the adequate procedure defence, it was raised by the prosecution that there were some contemporaneous records of the company’s efforts to respond to the new offences under the UK Bribery 2010 Act such as a failure to indoctrinate a compliance culture, and no evidence that the company had ensured that its staff had read the company’s anti-bribery policies. The Malaysian Courts may take a similar approach and delve into the steps taken by an organisation in view of section 17A coming into force.
Practical steps
Regardless of the lack of Malaysian case law to draw examples from, it is apparent from the Guidelines on Adequate Procedures issued by MACC, that the bar to consider whether there are adequate procedures in place will be high. When assessing a commercial organisation’s current policies on anti-bribery and anti-money laundering, there are some key points to consider:
> Are the organisation’s policies sufficiently detailed (if it meets the key requirements under the five TRUST principles as advocated by MACC)?
> Are the procedures and policies wide enough to cover gifts, hospitality, entertainment, donations and sponsorships, conflicts of interests, facilitation payments, financial and non-financial controls, record keeping and whistleblowing?
> Is there an awareness, amongst all employees, of such policies, not just the senior management?
> Does the organisation’s risk assessment scope cover both external and internal risks?
> Is there a risk assessment committee in place that regularly oversees and reviews the current policies and processes in place?
It is important for all organisations and senior personnel within corporate organisation to start taking stock of their existing policies and procedures to assess whether they stack up to the expectations of MACC, and if not, to seek legal advice to start building up its adequate procedures.
This article was contributed by Deborah Low Yuen Yen of Christopher & Lee Ong.
