Introduction
 
On 19 September 2023, the Chief Commissioner of the Malaysian Anti-Corruption Commission (“MACC”), Tan Sri Azam Baki, stated that the MACC is planning to amend the Malaysian Anti-Corruption Commission Act 2009 (“MACC Act”) to introduce a deferred prosecution agreement (“DPA”) mechanism.¹
 
The Chief Commissioner recently reiterated that the MACC is still assessing the proposed implementation of a DPA mechanism and “will propose to the Government that this law be enacted.”²
 
According to Tan Sri Azam Baki, the DPA mechanism will enable prosecutors to focus on achieving outcomes without the need of going through long, tedious, and expensive trials.³ The MACC Chief Commissioner added that this would be an effective means of combatting economic and financial crimes, ensuring faster recovery of assets and funds, and better compliance by the persons or entities (involved) to prevent future violations.
 
DPAs are not a new concept and have been adopted in various jurisdictions such as the United Kingdom, the United States of America and Singapore. According to Tan Sri Azam Baki, “We (MACC) are in the midst of benchmarking with other countries. A team will be heading to the United Kingdom and they will come back with a proposal. Once we have fine-tuned it, the proposal will be presented to the Cabinet for approval.”⁴
 
As the MACC appears to be leaning towards the DPA mechanism in the United Kingdom, this article will discuss the salient features of the mechanism in that jurisdiction.
 
What is a DPA?
 
In essence, a DPA is a voluntary agreement reached between a prosecutor and an organisation facing financial crime charges to allow the prosecution to be suspended or deferred for a defined period, provided the organisation fulfils specified conditions. In the United Kingdom, DPAs are governed by section 45 and Schedule 17 of the Crime and Courts Act 2013 which apply exclusively to organisations and not individuals.
 
The effect of a DPA is that proceedings which are instituted by preferring a bill of indictment (equivalent to a criminal charge in the Malaysian context) are immediately suspended pending satisfactory performance of its terms, such as payment of a financial penalty, compensation, payment to charity and disgorgement of profit along with the implementation of a compliance programme, co-operation with the investigation and payment of costs. If the terms of the agreement are met within the specified timeframe, the prosecution will be discontinued. However, a breach of the terms of the agreement can lead to the suspension being lifted and the prosecution pursued.
 
To enter into a DPA, the prosecutor must satisfy a two-stage test, comprising an evidential stage and a public interest stage.⁵ Under evidential stage, the prosecutor must be satisfied that there is sufficient evidence to provide a realistic prospect of conviction on each charge, or there is at least a reasonable suspicion based on admissible evidence that the organisation has committed the offence and there are reasonable grounds for believing that a continued investigation would provide further admissible evidence within a reasonable period of time, so that all the evidence together would be capable of establishing a realistic prospect of conviction.
 
Under public interest stage, the prosecutor must demonstrate that it is in the greater public interest not to pursue prosecution but, instead, to engage in a DPA with the organisation. Generally, the more serious the offence, the more likely it is that prosecution will be required in the public interest. Factors indicating the seriousness of the offence go beyond mere financial gains or losses and encompass potential harm to the public, unidentified victims, shareholders, employees, creditors, as well as risks to the stability and integrity of financial markets and international trade.
 
Upon satisfying the two-stage test, an invitation to negotiate a DPA may be issued by the Directors of the Crown Prosecution Service (“CPS”) and the Serious Fraud Office (“SFO”) to the organisation. The invitation to participate in DPA discussions does not guarantee that a DPA will be offered at the conclusion of the discussions as the CPS and SFO still retain the discretion to pursue full prosecution.
 
The finalisation of the DPA involves two stages of court proceedings. First, before the prosecutor and the organisation can agree on the terms of the DPA, the prosecutor must obtain a court declaration that the entering into a DPA is likely to be in the interests of justice and that its proposed terms are fair, reasonable and proportionate.
 
In the event where the court requires more information about the facts or does not agree with the terms of a proposed DPA, the court may adjourn the case for another hearing. However, if a DPA is rejected by the court, the case will proceed to trial as if no agreement was ever reached.
 
Second, when the prosecutor and the organisation have agreed on the terms of the DPA, the prosecution must obtain a further court declaration that the DPA is in the interests of justice and that its terms are fair, reasonable and proportionate. A DPA can only come into force when the court has approved the DPA by making this further declaration.
 
In the interest of transparency, the court is required to give reasons for its decision at both stages of the court proceedings relating to a DPA. If a DPA is approved at the second stage of the proceedings, the prosecutor must, unless prevented from doing so by an enactment or a court order, publish the DPA, the court declaration and the reasons for its declaration at both stages of the proceedings, and if the court had declined to make a declaration at the first stage, the reasons for the court’s decision.
 
A DPA that has come into force may only be varied after the court is satisfied that the variation is in the interests of justice, and the terms of the DPA as varied are fair reasonable and proportionate. The application can only be made by the prosecutor, and not the organisation, and the proposed variation must arise from circumstances that were not and could not have been foreseen by the prosecutor or the organisation at the time the DPA was agreed.
 
The key advantages of DPAs are that they allow an organisation to make full rehabilitation for criminal behaviour without the collateral damage of a conviction. The oversight and supervision of a judge ensure fairness and transparency of proceedings.⁶
 
Case studies
 
The Standard Bank DPA
 
Notably, in the Southwark Crown Court’s case of Serious Fraud Office v Standard Bank Plc [2015] 11 WLUK 804, Standard Bank and Stanbic Bank Tanzania Ltd (“Stanbic”) were  charged with failing to prevent bribery in violation of section 7 of the United Kingdom Bribery Act 2010 (“UKBA 2010”). The investigation in Tanzania pertained to a payment of USD6.0 million made in March 2013 by Stanbic, a former sister company of Standard Bank, to an entity that was its local partner. There were suspicions that this payment was intended to induce Tanzanian public officials to support Standard Bank and Stanbic’s proposal for a US$600 million sovereign note private placement to be carried out on behalf of the Government.
 
Due to the fact that Standard Bank fully cooperated with the SFO from the earliest possible date in which it immediately reported itself to the authorities and adopted a genuinely proactive approach to the matter, the President of the Queen's Bench Division, Rt. Hon. Sir Brian Leveson, stated that credit must be given for self-reporting of the events which might otherwise have remained unknown to the prosecutor.
 
Consequently, the DPA was approved by the court where Standard Bank was ordered to pay USD16.8 million in financial penalty, USD8.4 million in disgorgement of profits and USD7.0 million in compensation to the Government of Tanzania.
 
The DPA also covered cooperation with the authorities and future compliance; this ensures that Standard Bank would have to review its existing internal anti-bribery and corruption controls, policies, and procedures regarding compliance with the UKBA 2010 and other applicable anti-corruption laws. Additionally, it also enhances Standard Bank’s policies and processes with respect to third parties and improves its training with respect to anti-bribery and corruption policies.
 
The Sarclad DPA
 
The Crown Court case of Serious Fraud Office v Sarclad Limited [2016] 7 WLUK 211 involved Sarclad, a designer and manufacturer of technology based products for the metal industry, which historically generated the majority of its revenue from exports to Asian markets. Following its acquisition in February 2000, Sarclad became a wholly-owned subsidiary of Heico Companies LLC (“Heico”).
 
From 2004 to 2012, several key employees and agents of Sarclad were involved in a systematic offer and/or payment of bribes to secure contracts in foreign jurisdictions. A total of 74 contracts were examined and evidence was found of bribes being offered and/or paid in respect of 28 of the contracts. A DPA was eventually entered into in relation to these 28 contracts.
 
In order to address Sarclad’s admission that it did not have adequate compliance procedures prior to 2012, Heico implemented its global compliance programme within Sarclad. It was within the context of this compliance programme that concerns came to light as to the way in which a number of contracts had been procured. Sarclad took immediate action and retained a law firm to undertake an independent investigation and a self-report was made to the SFO. Thereafter, Sarclad continued to investigate and supplement the initial report with two further self-reports.
 
Under the DPA, Sarclad was required, among others, to disgorge profits of GBP6,201,085, pay a financial penalty of GBP352,000 and review, maintain and report on its compliance programme to the SFO.
 
This case suggests that a DPA offers a chance for an organisation to undergo rehabilitation and demonstrate a commitment to comply effectively over the period of the DPA, without facing the potential repercussions of a criminal conviction. This ensures that a major employer can align its operations with stringent ethical and compliance norms. Accordingly, this shows that a DPA can set a precedent that may encourage other organisations facing similar circumstances to voluntarily disclose and report wrongdoing.
 
Possible Introduction in Malaysia
 
In Malaysia, commercial organisations can be found liable under section 17A of the MACC Act which was enacted based on section 7 of UKBA 2010. Both section 17A of the MACC Act and section 7 of the UKBA 2010 aim to punish commercial organisations that fail to prevent corruption, such as bribery, and giving or receiving any gratification. This may pose a significant risk on commercial organisations, as a conviction under section 17A of the MACC Act could entail substantial fine equivalent to ten times the bribery amount or imprisonment for up to 20 years. Such an outcome may result in the temporary suspension of business or, in the worst-case scenario, the complete closure of the organisation which would adversely affect innocent third parties and stakeholders.
 
As such, the introduction of a DPA mechanism in Malaysia would signal a shift towards a more flexible and pragmatic approach to combat corporate misconduct. Instead of proceeding directly to a criminal trial, organisations will have the opportunity to rectify their actions, cooperate with authorities, and implement necessary reforms. This approach aligns with global trends as there are an increasing number of countries considering implementing a DPA regime.
 
The existence of a DPA mechanism will also encourage self-reporting of corruption by businesses. When organisations are assured that cooperation may result in a DPA rather than immediate prosecution, they are more likely to disclose information about wrongdoing. This serves not only the public interest by uncovering corruption but also aids in the recovery of misappropriated assets and funds while avoiding the devastating consequences of business closures and mass layoffs. According to Dr Muhammad Mohan, the President of Transparency International Malaysia, the DPA is a “good form of restorative justice.”⁷
 
Commentary  
 
Although the DPA mechanism comes with its benefits, it cannot be over-emphasised that it is crucial to ensure that its procedures must be clearly outlined, transparent and free from executive interference⁸ or potential abuse. Ideally, a proposed DPA should be sanctioned by a High Court Judge to ensure that the arrangements are not contrary to public interest and are clear of questionable motives.
 
The adoption of a DPA regime will provide the MACC with an additional tool that will enable the MACC to strike a balance between punishment and rehabilitation, ultimately fostering a more transparent and accountable corporate landscape in the country. The key policy benefit possible with the introduction of the DPA mechanism in Malaysia is that it would incentivise organisations to self-report any discovery of corruption and to allow such organisations to start over with a clean slate.
 
Tan Sri Azam Baki is due to retire as the Chief Commissioner of the MACC in the second quarter of 2024. On the MACC’s intention to push for the adoption of a DPA regime, the Chief Commissioner said, “This is one of my last few missions as the MACC chief.”⁹ If the initiative comes to fruition, it could be his greatest legacy to Malaysia’s battle against corruption.
 
Article by Lim Koon Huan (Partner) and Manshan Singh (Partner) of the White-Collar Crimes Practice of Skrine¹⁰
 
 

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