30 November, 2019
The Malaysian Anti-Corruption Commission Act 2009 (MACC Act) has been amended, among others, to introduce corporate liability provision for bribery and corruption under Section 17A, which will come into effect on 1st June 2020.
The enforcement of Section 17A of the MACC Act would be to fulfil the international requirements under Article 26 of the United Nations Convention Against Corruption (UNCAC), which refers to the liability of legal persons. At the moment, the MACC Act only focuses on the prosecution of individuals involved in corruption. Section 17A was enacted to enable organisations involved in corruption activities to be subjected to legal action and persons associated with the organisations will be deemed to commit the corresponding offence unless it can be proven that adequate measures have been put in place.
Essential Features of Section 17A Section 17A of the MACC Act criminalizes an organisation for corruption-related actions by associated persons done for the benefit of the organisation. Section 17A(1) states that a commercial organisation commits an offence if a person associated with it corruptly gives, offers or promises any gratification to any person with an intent to obtain or retain business or a business advantage for the said commercial organisation.
With Section 17A coming into force next year:
Organisations/companies whom these individuals work for will also be held liable for not preventing the corrupt acts from happening.
Corrupt actions of ordinary employees will have an impact on their organisations/companies.
Section 17(8) clarifies that commercial organisation refers to a company or partnership incorporated under Malaysian law or a company or partnership that carries on business or a part of business in Malaysia. Local companies could be liable for failing to prevent bribery which occurred beyond the borders of Malaysia, even if these acts were committed by its foreign agents. Similar to the UK Bribery Act 2010, the corporate liability provision will have extra-territorial effect as it covers locally incorporated companies and partnership as well as companies and partnerships incorporated overseas with business presence in Malaysia.
Who Are Liable Under Section 17A? Scope of Associated Persons:
Section 17A(6) clarifies that category of persons considered associated with a commercial organisation include:
- directors, partners and employees of the commercial organisation;
- and any person who performs services for or on behalf of the commercial organisation.
Association is determined by reference to all the relevant circumstances and not merely by reference to the nature of the relationship between the person and the commercial organisation.
This is a rather extensive category – a commercial organisation could be found liable due to the act of its director, partner, employee (regardless of status or function), agent, distributor, JV partner, subsidiary etc as it uses the concept of guilt by association.
Hence, when an organisation commits an offence, its directors and key personnel are automatically deemed guilty of the same crime.
As for directors, apart from the MACC Act, they already have duties under the Companies Act 2016, common law and in the service contracts (if said duty is provided under their contract), to act as fiduciaries, in the best interest of the company and to exercise care, skill and diligence. The foregoing duties may encompass duty to encourage compliance with anti-corruption laws and ensure adequate procedures are in place to detect, prevent and minimise corrupt practices.
The Securities Commission Malaysia has recently announced that it will be developing a framework to promote the effective discharge of directors’ responsibilities within the context of anti-corruption measures. This will certainly be of assistance to directors and companies alike.
Extension of Personal Criminal Liability to Senior Personnel Section 17A(3) provides a parallel personal criminal liability for the senior personnel of the commercial organisation which include directors, controllers, officers, partners or persons concerned with the management of a commercial organisation. This is one aspect where Section 17A not only differs but goes further than Section 7 of the UK Bribery Act 2010 since the latter does not have a provision deeming personal liability.
Reversal of the Burden of Proof with the Presumption of Criminal Liability
The above category of persons will be deemed to have committed the same offence committed by the commercial organisation unless they prove that such offence was committed without their consent or connivance and that they had exercised due diligence to prevent the commission of the offence as they ought to have exercised, having regard to the nature of their function in that capacity and to the relevant circumstances.
Defence Against Corporate Liability Offence Section 17A(4) of the MACC Act states that a commercial organisation shall be acquitted of a charge under Section 17A if it proves that it “had in place adequate procedures designed to prevent persons associated with the commercial organisation from undertaking such conduct.” This provision is similar with Section 7(2) of the UK Bribery Act.
The officer must also prove on the balance of probabilities that he/she had exercised due diligence to prevent the commission of the offence as he/she ought to have exercised having regard to the nature of his/her function in that capacity and to the circumstance. Penalty for Offence Under Section 17A:
Section 17A(2) states that the penalty for the offence shall be a fine of not less than 10 times the value of the gratification in question or RM1 million, whichever is higher or imprisonment for not more than 20 years, or both.
Note that this penalty is much higher compared to the existing financial penalty for a bribery offence which is a fine of not less than 5 times the value of the gratification in question or RM10,000, whichever is higher and no imprisonment.
Guidelines on Adequate Procedures Similar to Section 9(1) of the UK Bribery Act, Section 17A(5) of the MACC Act stipulates that the government shall issue guidelines relating to such procedures which would be considered to be “adequate” as a defence under Section 17A(4).
The Guidelines on Adequate Procedures (“GAP”) was issued by the Prime Minister’s Office in December 2018 with the objective of assisting commercial organisations to:
understand what adequate procedures should be implemented to prevent the occurrence of corrupt practices in their business activities and which could be relied on as a defence to absolve liability under section 17A.
The GAP is not intended to be prescriptive and not “one-size-fits-all” and should be applied practically, in proportion to the scale, nature, industry, risk and complexity of the organisation.
With less than ten months’ time left until the enforcement of Section 17A, the clock is ticking for all commercial organisations to ensure anti-corruption efforts become an integral part of their corporate culture at all levels.
Please contact the author on how to craft or improve your organisation’s anti-corruption policies and procedures to be in compliance with the MACC Act 2009.
SUMMARY OF ADEQUATE PROCEDURES UNDER THE T.R.U.S.T PRINCIPLES
Top-level Commitment
- Ensure that the organisation practices highest level of integrity and ethics; fully complies with the applicable anti-corruption laws and regulations; and effectively manages its key corruption risks.
- Able to provide assurance to its stakeholders that the organisation is operating in compliance with its policies and the regulatory requirements.
Risk assessment
- Basis of anti-corruption efforts.
- Periodic risk assessment to be conducted (guidelines suggested 3 years once or when necessary) to identify, analyse, assess and prioritise risks of corruption.
- Findings of the assessments should be used to establish appropriate processes, systems and controls to mitigate corruption risks
Undertake control measures:
Policies & Procedures
Due Diligence
Reporting Channel
- Appropriate control and contingency measures ought to be in place to address corruption risks identified.
- These measures include due diligence, reporting channels as well as policies and procedures.
Systemic review, monitoring and enforcement
- Effectiveness and efficiency of the organisation’s anti-corruption programme are to be regularly reviewed and assessed.
- The review is to form basis of improvement to the existing anti-corruption measures.
Training and communication
- Internal and external training and communications relevant to its anti-corruption management system should be developed and disseminated.
- The organisation’s anti-corruption policies ought to be disseminated internally and externally, and adequate and relevant trainings ought to be provided to the organisation's members and external stakeholders.
For further information, please contact:
Norhisham Bahrin, Partner, Azmi & Associates
norhisham@azmilaw.com
