DID YOU KNOW?
Commercial organisations may now be liable for corruption offences in Malaysia and the commercial organisation's director, officer or management may also be deemed liable if the commercial organisation is found liable.
Section 17A Malaysian Anti-Corruption Commission Act 2009 ("MACC Act") introduces corporate liability for corruption offences. As such, both local and foreign commercial organisations conducting business in Malaysia should be aware of the implications and liabilities of S.17A MACC Act towards their commercial organisation, directors, partners, management as well as their employees.
INTRODUCTION
S17A MACC Act provides that “A commercial organisation commits an offence if a person associated with the commercial organisation corruptly gives, agrees to give, promises or offers to any person any gratification whether for the benefit of that person or another person with intent to obtain or retain business for the commercial organisation or to obtain or retain an advantage in the conduct of business for the commercial organisation.”
This means that S17A MACC Act criminalises the corrupt acts of a commercial organisation if any persons associated with that organisation gives or offers gratification to any person to obtain a business advantage for the commercial organisation.
COMMERCIAL ORGANISATION
Local company, partnership or limited liability partnership incorporated under Malaysian law carrying on business in Malaysia or elsewhere; or
Foreign company or partnership that carries on business or part of a business in Malaysia.
ASSOCIATED PERSONS
Directors, partners and employees of the Commercial Organisation; or
Persons who perform services for and on behalf of the Commercial Organisation.
TWO-FOLD LIABILITY
S17A MACC Act introduces deeming liability which is two-fold:
Corporate Liability : Whereby if an offence is committed by Persons Associated to the Commercial Organisation, the Commercial Organisation is automatically deemed to have committed the offence unless it can prove "adequate procedures to prevent" the conduct.
Personal Liability : If the Commercial Organisation is found liable, the director, controller, officer or partner of the Commercial Organisation or any person who is concerned in the management of the affairs of the Commercial Organisation is also automatically deemed liable unless he can prove the statutory defence discussed below.
PENALTIES
Fine of not less than 10 times the sum or value of the gratification or RM1.0 Million, whichever is the higher; or imprisonment for a term not exceeding 20 years; or both.
DEFENCES
CORPORATE LIABILITY
The defence available to a Commercial Organisation is to prove that the Commercial Organisation had in place adequate procedures to prevent Persons Associated with the Commercial Organisation from undertaking such conduct. The Prime Minister’s Department released the Guidelines on Adequate Procedures (“Guidelines”) which helps Commercial Organisations understand what kind of adequate procedures should be implemented to prevent the occurrence of corrupt practices while conducting business. The implementation of the Guidelines could be relied on as a defence to absolve liability under S17A. The Guidelines were formed on the basis of 5 principles which may be used as reference points for any anti-corruption policies, procedures and controls that Commercial Organisations should choose to implement:
ADEQUATE PROCEDURES
TOP LEVEL COMMITMENT
The management of a Commercial Organisation is required to demonstrate commitment by creating a corporate culture where bribery is not an acceptable practice by promoting a culture of integrity within the Commercial Organisation.
RISK ASSESMENT
The Commercial Organisation is required to identify, analyse and prioritise corruption risk through comprehensive risk assessment once every three years.
UNDERTAKE CONTROL MEASURES
The Commercial Organisation is required to establish appropriate controls and contingency measures to confront corruption. Example of control measures includes conducting due diligence on relevant parties and establishing a trusted and accessible reporting and whistleblowing channel.
SYSTEMATIC REVIEW, MONITORING AND ENFORCEMENT
The Commercial Organisation is required to conduct regular reviews to assess the performance, efficiency and effectiveness of the anti-corruption programme.
TRAINING AND COMMUNICATION
Commercial Organisations should diligently train and communicate to their employees on the relevant anti-corruption policies and procedures.
PERSONAL LIABILITY
The director, controller, officer or partner of the Commercial Organisation or management of the Commercial Organisation must prove that the offence was committed without his consent or connivance; AND that he has exercised due diligence to prevent the commission of the offence.
Unlike the Guidelines abovementioned, there are no guideline in respect of the defence for personal liability of S.17A.
CASE STUDY : AIRBUS SE (2020)
Airbus SE was charged pursuant to the corporate liability provision in UK (Section 7 of the UK Bribery Act 2010). In January 2020, Airbus SE entered into a Deferred Prosecution Agreement with the UK’s Serious Fraud Office to pay £3.6 billion in fines as part the world’s largest global resolution for bribery, involving authorities in France and the United States.
Although Airbus SE had implemented procedures such as the commissioning of a private company to review its compliance programme, being awarded an anti-corruption compliance certificate for the design of its anti-bribery compliance program, implementing written policies governing payments and contractual relationships with third parties, they were not able to rely on the defence of having "adequate procedures".
The court ruled that “Notwithstanding such policies and compliance review, it later emerged that there were serious weaknesses within Airbus' compliance and oversight structure.” This was because those policies and procedures were easily bypassed or breached. There existed a corporate culture which permitted bribery by Airbus business partners and/or employees to be committed throughout the world.
DEFERRED PROSECUTION AGREEMENT
The UK's introduction of the Deferred Prosecution Agreement ("DPA") in 2014 provided a mechanism by which an organisation can avoid prosecution for certain economic offences through an agreement with the prosecuting authority. The agreement allows a prosecution to be suspended for a defined period provided the organisation meets certain specified conditions.
DPAs are aimed at strengthening the enforcement of the corporate liability provision against Commercial Organisations while enabling a Commercial Organisation to make full reparation for criminal behaviour without the collateral damage of a conviction. It is further aimed to avoid lengthy and costly trials.
Although Malaysia does not presently have any legislation or legal framework on DPAs, very recently, the Special Cabinet Committee on Anti-Corruption (JKKMAR) on 18 November 2020 in principle agreed for a comprehensive study to be done on the establishment of new legislation on DPA by the Attorney General’s Chambers and MACC with regard to the provisions of Corporate Liability. The study targets to look at the mechanisms and benchmarks of a Commercial Organisation that has been charged under Section 17A (4) of the MACC Act.
KEY TAKEAWAYS
PERSONS ASSOCIATED
Commercial Organisations ought to be aware of their business partners and agreements with its service providers and its stance against anti-corruption should also be effectively communicated in public documents and provide for contractual safeguards regarding unlawful activity or other bribery prevention measures of counterparties/employees.
ADEQUATE PROCEDURES
Having “adequate procedures” in place provide Commercial Organisations a defence should they be investigated or charged under section 17A. It is prudent for Commercial Organisations to take immediate steps to establish “adequate procedures” in compliance with the TRUST Guidelines if they have not already done so.
CORPORATE AND PERSONAL LIABILITY
With the implementation of two-fold liability, if the Commercial Organisation is found liable and cannot rely on the adequate procedures defence, the top management or senior officer of the Commercial Organisation will also be automatically liable.
The burden is placed on the directors and senior management to prove the statutory defence. It is therefore of utmost importance that the Commercial Organisation implements adequate procedures to avoid corporate liability and the deemed personal liability on the said directors and senior management to take effect.
EXTRA TERRITORIAL EFFECT
The corporate liability will extend to Malaysian Commercial Organisations, whether carrying on business in Malaysia or in foreign jurisdictions. In addition, liability would also extend to foreign Commercial Organisations carrying on a business or part of a business in Malaysia.
HOW WE CAN HELP
Among others, we have previously assisted various Commercial Organisations in the following to ensure compliance of their Commercial Organisation with the MACC Act 2009:
Implementation of adequate procedures
Drafting policies and procedures
Conducting a Gap Analysis on existing policies and procedures
Conducting trainings for management and employees
Article by:
Jeremiah Gurusamy, Mike Lee Seang Yik,
Bonnie Ashley Paul, Haamsaaveni Dilip Kumar,
Chong Sharon Man Yin