Corporate Liability for Corruption to be Enforced from 1 June 2020
27 May 2020
The Government of Malaysia has confirmed that section 17A of the Malaysian Anti-Corruption Commission Act 2009 (‘the Act’) will come into operation as previously announced, on 1 June 2020.
Below is a brief summary of the ramifications when this provision comes into operation.
What is it?
Section 17A of the Act criminalises an organisation for corrupt actions by associated persons done for the benefit of the organisation. Prior to the implementation of section 17A, the penalties were only applicable to individuals.
What is the objective?
Prevention of corruption
Who does it apply to?
- a company incorporated under the Malaysian Companies Act 2016;
- foreign companies carrying on business or a part of business in Malaysia;
- partnerships formed under the Partnership Act 1961;
- limited partnership registered under the Limited Liability Partnership Act 2012;
- partnerships registered elsewhere but carrying on business or a part of business in Malaysia.
Who is a “person associated” with the “commercial organisation”?
- a chief executive officer, chief operating officer, director, controller, officer, partner or an employee of the commercial organisation;
- a person who performs services for or on behalf of the commercial organisation, outsourced service providers, agents;
- joint venture partners, business associates, intermediaries, subsidiaries, sister companies; and
- a trustee of any trust created by the commercial organisation
What are some examples of corrupt practices carried out by associated persons for the benefit of commercial organisation?
- providing gratification in the form of money, donation, gifts, loan, fee, reward, valuable security, property or interest in property or any similar advantages;
- entertainment, hospitality, paid holidays, festival angpows, concert tickets, golf club memberships, club memberships;
- college funding, conference fee payments and speaker fees.
The above list is non-exhaustive.
Who can be liable?
- the commercial organisation commits an offence if person associated with the organisation gives a bribe; and/or
- a director, controller, officer, anyone who is concerned with the management of its affairs at the time of the commission of the offence is deemed to have committed that offence.
What are the penalties?
A fine of not less than 10 times the sum or value of the gratification or RM1mil, whichever is the higher, or imprisonment for a term not exceeding 20 years, or both.
What are the defences available?
For commercial organisation – it must prove that it had in place “adequate procedures” designed to prevent persons associated with the organisation from undertaking such corrupt conduct
For the directors, controller, officer, management – he must show that the offence was committed without his consent or connivance; and that he exercised due diligence to prevent the commission of the offence as he ought to have exercised having regard to the nature of his function and circumstances
What are “adequate procedures”?
Guidelines on Adequate Procedures (“GAP”) were issued by the Prime Minister’s Department on 11 December 2018 to assist commercial organisations in understanding what are adequate procedures that should be implemented to prevent the occurrence of corrupt practices in relation to their business activities.
The GAP has been formed based on five key principles known as the ‘TRUST Principles’:
Top management to be directly involved in anti-corruption compliance matters
Organisations to conduct periodic risk assessments based on its size and needs
- Undertake Control Measures
Appropriate due diligence, screening, policies and procedures to be put in place
- Systematic Review, Monitoring & Enforcement
The effectiveness of anti-corruption policies and procedures to be reviewed and assessed periodically; audit and investigations to be conducted
Communication of policies and procedures; periodic training for employees and stakeholders