Malaysia aims to be one of the top 10 ‘cleanest’ nations in the world by 2030. It is still a long journey but the Government of Malaysia’s (“GOM”) efforts and initiatives in fighting corruption are commendable.
Since the 14th Malaysian general election, held on 9 May 2018, the GOM has continued to aggressively pursue its anti-corruption agenda through the establishment of the Special Cabinet Committee on Anti-Corruption, and the Governance, Integrity and Anti-Corruption Centre, and the formulation of the National Anti-Corruption Plan.
Malaysia has eight (8) pieces of legislation to deal with corruption, including the Malaysian Anti-Corruption Commission Act 2009 (“MACC Act”), which repealed the Anti-Corruption Act 1997, as the principal legislation dealing with corruption.
Malaysian Anti-Corruption Commission Act 2009
The word ‘corrupt’ was generally explained by the Malaysian court in the case of Public Prosecutor v. Datuk Haji Harun bin Haji Idris (No. 2) [1977] 1 MLJ 15 as ‘doing an act knowing that the act done is wrong, doing so with evil feelings and evil intentions’ and ‘purposely doing an act which the law forbids’.
Through the MACC Act, once gratification has been proven to have been offered or received, it shall be presumed that the gratification is a corrupt gratification as an inducement, or a reward for, or on account of the matters unless the contrary is proven. The burden shall then shift to the accused to show, on the balance of probability, that the gratification was not received or given corruptly.
The Malaysian Anti-Corruption Commission (Amendment) Act 2018 (“MACC Amendment Act”) has been gazetted on 4 May 2018. The Prime Minister of Malaysia, Tun Dr Mahathir Mohamad has recently announced that the corporate liability provisions under this MACC Amendment Act are expected to take effect on 1 June 2020. Hence, all commercial organisations in Malaysia, now, would have less than one (1) year to comply with this new regime of corporate liability in relation to corruption.
The MACC Amendment Act introduces a new Section 17A, which provides that a commercial organisationis deemed to commit an offence if any person associated with the commercial organisation corruptly gives, agrees to give, promises or offers to any person any gratification to obtain or retain business or advantage for the organisation.
Under this new amendment, Subsection 17A(6) of the MACC Amended Act stipulates that a ‘person associated‘ with a ‘commercial organisation‘ may include directors, partners, and employees of the commercial organisation, as well as any person ‘who performs services for or on behalf of the commercial organisation‘.
Thus, a commercial organisation will not only be liable for bribery by its shareholders, boards of directors, partners, or management, but also its employees regardless of their position or function, as the question ‘person associated‘ with a commercial organisation 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 organisation. A commercial organisation could also be liable for bribery by its agents or distributors and potentially, joint venture partners.
PENALTY: A commercial organisation who commits an offence under Section 17A of the MACC Amendment Act shall, upon conviction, be liable to:
a fine not less than 10 times of the value of the bribe, or RM1 million, whichever is higher, or
an imprisonment for a term not exceeding 20 years, or
a combination of both.
Subsection 17A(8) of the MACC Amendment Act defines a ‘commercial organisation’ as follows:
A company incorporated under the Companies Act 2016 and carries a business in Malaysia or elsewhere (includes Malaysian companies operating businesses outside Malaysia);
A company carries on a business anywhere in Malaysia (includes foreign companies operating in Malaysia);
A partnership established under either Partnership Act 1961 or Limited Liability Partnerships Act 2012, and carries on a business in Malaysia or elsewhere (includes Malaysian partnerships carrying on businesses outside Malaysia); and
A partnership that carries on a business anywhere in Malaysia (includes foreign partnerships)
The definition of ‘commercial organisation’ under Subsection 17A(8), however, does not include other organisations or businesses that are not registered under the laws specified in the definition, such as businesses registered under the Registration of Businesses Act 1956.
Section 17A of the MACC Amendment Act also introduces statutory defences for the MACC Act for the first time:
Subsection 17A(3): where an offence is committed by a commercial organisation, a person who is its director, controller, officer or partner or who is concerned in the management of its affairs can escape liability if he or she is able to prove that the offence was committed without his or her consent or connivance and that he or she has exercised due diligence to prevent the commission of the offence; and
Subsection 17A(4): if charged with an offence under Subsection 17A(1), a commercial organisation may, as a defence, prove that it had put in place adequate procedures designed to prevent persons associated with the organisation from undertaking the conduct that is the subject of the offence.
Prior to the amendment, the MACC Act did not provide for the defence of having adequate compliance procedures. However, when the MACC Amendment Act enters into force, Subsection 17A(4) will provide a commercial organisation with the defence of having had in place adequate compliance procedures when charged with an offence under Subsection 17A(1) of the MACC Act 2009.
The provision of corporate liability in the MACC Amendment Act is similar to the UK Anti-Bribery Act 2010. Since the enforcement of the Anti-Bribery Act 2010 in the UK, a few highly reputable corporations have been prosecuted upon failure to prove that adequate procedures were put in place to detect, prevent and respond to bribery and corruption cases.
In addition, the MACC Act has been amended to substitute the word ‘bank’ with ‘financial institution’. This amendment effectively updates and widens the scope of the MACC Act to include all institutions under the relevant laws. Prior to the amendment, the definition of a financial institution was confined to a person carrying on any banking or finance company business as defined in the Banking and Financial Institutions Act 1989, which has been repealed by the Financial Services Act 2013.
The Guidelines on Adequate Procedures
The Malaysia’s Prime Minister’s Department has issue the Guidelines on Adequate Procedures (“GAP”) pursuant to Subsection 17A(5) of the MACC Amendment Act 2018 to assist commercial organisations in understanding what adequate procedures should be implemented to prevent the occurrence of corrupt practices in relation to their business activities.
The GAP has been formed on the basis of five (5) key principles which may be used as reference points for any anti-corruption policies, procedures and controls the commercial organisation may choose to implement towards the goal of having adequate procedures as required under the above statutory provision. These five principles shall also be known as the ‘TRUST Principles’. (See figure below)
Other than referring to the GAP, commercial organisations also are encouraged to adopt the standards under ISO 37001:2016 which specifies requirements and provides guidance for establishing, implementing, maintaining, reviewing and improving an anti-bribery management system to help an organisation to prevent, detect and respond to bribery and comply with anti-bribery laws and voluntary commitments applicable to its activities.
Corruption Risk Management
Additionally, commercial organisations are also expected to establish corruption risk management (“CRM”). CRM is a management process that helps organisations to identify the risks of corruption, abuse of power and embezzlement. It offers a systematic risk management plan in establishing good governance which reduces the opportunity for corruption, abuse of power and embezzlement.
The requirement for managing critical risks has since existed it becomes the principle responsibility of the Board of Directors as stated in the Code of Corporate Governance of Malaysia. The risk-based approach to corruption prevention helps organisation to focus on key processes or activities that have high exposure to potential corruption risks.
A basic risk management process has a minimum of three (3) stages:
Risk identification: Identifying types of risk (bribery, nepotism, absenteeism, etc.) in a given process or system, based on a generic risk model.
Risk assessment: Estimating the magnitude of each type of risk (probability x impact).
Risk mitigation: Putting measures in place to minimise risk, monitoring those measures to ensure that they have their desired effect, and redesigning them if they do not.
Next, what Commercial Organisations in Malaysia should do?
Though the new anti-corruption regime for commercial organisations is yet to be enforced, it is never too early for an internal anti-corruption procedure or policy to be drafted and implemented for each and every commercial organisation in Malaysia.
The following are among the steps should be taken prior to the enforcement of the new anti-corruption regime:
prepare an internal anti-corruption procedure or policy;
implement the internal anti-corruption procedure or policy in your organisation, even the new regimes is yet to be enforced, e.g. conflicts of interest, gifts, entertainment, hospitality and travel, donations and sponsorship, facilitation payment, financial and non-financial controls, record keeping and enforcement;
brief your directors, shareholders, management, officers, employees and any person you may think directly associated with your company regarding your internal anti-corruption policy/procedure;
appoint a risk management officer;
conduct comprehensive risk assessments;
create and manage a risk register;establish and maintain regular monitoring programmes, internal audits and external audits;
conduct due diligence on third parties;consult lawyers for better understanding about this new anti-corruption regime and the relevant policy to be prepared;
conduct trainings (internal and/or external) for staff and officers; and
to some extent, to review, revise and/or amend employment contract/handbook in your company by stipulating anti-corruption policy in the employment contract/handbook.
The what-to-do list above is not exhaustive. There are some possibilities that your company may go beyond the list ensuring that the company and the directors are protected under the statutory defences provided under Subsections 17A(3) and 17A(4).
Establishing an internal anti-corruption policy and CRM in your organisation may seem tedious but they are very crucial to protect the company, directors and management of the company from being prosecuted and convicted for corruption.
* This article is for general information only, and is not a substitute for legal advice. If you require any advice or further information, please contact us.
[This article was originally published on Asia Law Portal]
Author:
Haeme Hashim
haeme.hashim@haemelaw.com