Kwan Will Sen discusses the proposal to introduce corporate criminal liability for corruption in Malaysia.
Should corporations be held liable for corruption offences by their employees? The figures and public sentiment appear to suggest that this is a move in the right direction.
The KPMG Malaysia Fraud, Bribery and Corruption Survey 2013 revealed that 90% of the respondents believe that bribery and corruption are major problems for businesses in Malaysia. Furthermore, the survey revealed that only 26% of the respondents believe that their organisation has adequate anti-bribery and anti-corruption control measures.
In the United Nations 2012 Compact Annual Implementation Survey, which is the largest survey on corporate sustainability practices with input from over 1,700 businesses, 39% of respondents ranked corruption as a major obstacle to sustainable development, highlighting the fact that sustainability and overall market growth cannot be achieved alongside the prevalence of corruption.
In 2015, Malaysia ranked 54th
in Transparency International’s annual Corruption Perception Index which evaluates nations around the world based on 13 surveys from 12 high level international institutions, including the World Bank and the World Justice Project. Whilst the results are based on perception, the gradual slide in our rankings, from 49th
(in 2012, 2013 and 2014 respectively) cannot be ignored.
Going back to the question posed earlier, one of the means proposed by the Malaysian Anti-Corruption Commission (“MACC”) to further curb the scourge of corruption in Malaysia is to introduce provisions on corporate liability into the Malaysian Anti-Corruption Commission Act 2009 (“MACC Act”) to make corporations liable for the corrupt acts of their employees. Various stakeholders within the Government have indicated that such a move is on the cards.
In August 2013, the Special Committee on Corruption (JKMR) had suggested that the MACC Act be updated to introduce a corporate liability provision (Sun Daily Online
, 23 August 2013). This call was reiterated in April 2014 and again in December 2014 by the Minister in the Prime Minister’s Department, Datuk Paul Low, who in both instances said that the draft amendment was in its “final stage” (Sun Daily Online
, 22 April 2014 and Astro Awani
, 10 December 2014). Similarly, the MACC Deputy Chief Commissioner (Prevention), Dato’ Sri Haji Mustafar Ali, said that “the drafting process had been completed
” (NST Online, 23 December 2014
This article will discuss the concept of corporate criminal liability, the position of corporate criminal liability in Malaysia, the current legal framework in Malaysia vis-à-vis
anti-corruption laws, and provide a brief overview of the position in other jurisdictions.
THE CONCEPT OF CORPORATE CRIMINAL LIABILITY
Generally, corporate criminal liability is the legal liability of a corporation for criminal actions (or the failure to act in some cases) committed by the corporation’s employees for the benefit of the corporation.
This concept can be traced back to the case of New York Central & Hudson River Railroad Co v United States
, 212 U.S. 481 (1909). In that case, the Supreme Court of the United States of America imposed criminal liability on a corporation by establishing a principal-agent relationship with its employee. The Supreme Court expressed the view that criminal liability can be extended to a corporation if it could be established that the criminal act or omission concerned was committed by its officer, employee or agent within the scope of the latter’s authority and at least in part for the benefit of the corporation.
In the English case of Mousell Bros Ltd v London and Northwestern Railway Co
 2 KB 836, 846, Atkin J (in referring to the relevant legislation in that case) stated that “Once it is decided that this is one of those cases where a principal may be held liable criminally for the act of his servant, there is no difficulty in holding that a corporation may be the principal. No mens rea being necessary to make the principal liable, a corporation is in exactly the same position as a principal who is not a corporation.”
In another English case, ICR Haulage Co Ltd
 KB 551, the Court of Criminal Appeal upheld the conviction of a company, its managing director and nine other persons for criminal conspiracy to defraud. According to Stable J, “… the acts of the managing director of the company were the acts of the company and fraud of that person was fraud of the company
Further, in Director of Public Prosecutions v Kent and Sussex Contractors Ltd
 KB 146, the Court rejected the finding of the lower court that a body corporate could not be guilty of the offence of intentionally using a document that was false in a material particular on grounds that a body corporate could not be imputed with an act of will (actus reus
) or state of mind (mens rea
) that was implicit in the commission of the offence. Instead, the Court held that the acts, knowledge and intention of a responsible agent of the company (in this case, the transport manager), acting within the scope of his authority, must be imputed to the company.
An interesting development on the jurisprudence on corporate criminal liability can be seen in United States v Bank of England
(1987) 821 F. 2d 844 (1st
Cir.), where the U.S. Court of Appeals affirmed the decision of the lower court which convicted the bank for its failure to report to the Treasury Department a series of withdrawals exceeding USD10,000 made by a specific individual. The Court developed a theory known as the aggregation theory to impose corporate criminal liability, i.e. where the composite knowledge of different employees is aggregated and imputed to the corporation (and consequently, liability). The Court said “If employee A knows one facet of the currency reporting requirement, and B knows another facet of it, and C a third facet of it the bank knows them all … A collective knowledge is entirely appropriate in the context of corporate criminal liability.”
In short, depending on the circumstances of each case, a corporation can be criminally liable for the criminal acts or omissions of its employees – the fact that it is a separate legal entity may not shield the corporation from the arms of the law.
CORPORATE CRIMINAL LIABILITY IN MALAYSIA
In Malaysia, there are various legislation which impute criminal liability to a corporation. Such legislation typically contain “deeming provisions” which provide that if a person, i.e. an employee, commits an offence, the corporation is deemed to have committed the same offence.
For example, section 138(3) of the Securities Commission Malaysia Act 1993 (“SC Act”) provides that “Where a person who is an employee of a body corporate contravenes any provision of this Act, the body corporate shall be deemed to have contravened such provision.”
Furthermore, section 138(2) of the SC Act states that “Where an offence against this Act … has been committed by a body corporate, any person who at the time of the commission of the offence was a director, a chief executive officer, an officer, an employee, a representative or the secretary of the body corporate or was purporting to act in such capacity, shall be deemed to have committed that offence unless he proves that the offence was committed without his consent or connivance and that he exercised all such diligence to prevent the commission of the offence as he ought to have exercised, having regard to the nature of his functions in that capacity and to all the circumstances.”
Another example is section 144 of the Consumer Protection Act 1999, which provides, inter alia
, that where an offence is committed under that Act by an employee, agent or employee of the agent of a principal, the principal shall be deemed to have committed that offence unless the contrary is proven.
These “deeming provisions” do not impose strict liability on a corporation or its relevant officers, as the case may be, but give rise to rebuttable presumptions that shift the burden to the corporation or its officers to prove that they did not commit the offence.
In relation to corruption offences, MACC Act does not contain such deeming provisions vis-à-vis
corporation and its officers. Although specific details of the proposed amendments to the MACC Act have not been disclosed thus far, it is possible that the proposed corporate criminal liability provisions to be inserted into the MACC Act could be along similar lines to the provisions of the legislation discussed above. The effect of doing so will be that where employees of a corporation commit offences under the MACC Act (e.g. giving and accepting gratification or bribing an officer of a public body), the corporation (and its directors or officers) would be deemed to have committed the offence unless they prove otherwise.
This would inevitably impose an obligation on a corporation to be accountable for the acts of its employees and possibly those of its agents or employees of the agent. In the larger scheme of things, this may lead to a reduction of corrupt practices by corporations.
Based on the English cases referred to above, it is arguable that a corporation can be liable for corruption offences under existing provisions of the MACC Act if it can be proved that the acts were carried out by one or more persons who, in the words of Denning LJ in H.L. Bolton (Engineering) Co Ltd v T.J. Graham & Sons Ltd
 1 QB 159, 172, represent “the directing mind and will of the company and control what it does
.” It is also worth noting that the expression “person
”, which is found in the various provisions for corruption offences in the MACC Act, is not restricted to a natural person as section 2 of the Interpretation Acts 1948 and 1967 defines a “person” to include “a body of persons, corporate or unincorporate”
. This point remains to be tested in the Malaysian Courts.
THE LAW IN OTHER JURISDICTIONS
For purpose of comparison (in which the proposed amendments to the MACC Act could be modelled upon), we now examine the legislative framework in the United Kingdom and the United States of America.
Section 7 of the Bribery Act 2010 (“UKBA”) imposes strict liability for failure by a commercial organisation to prevent bribery by persons associated with it to obtain or retain business or to obtain or retain an advantage in the conduct of business for that organisation. However, a commercial organisation could be absolved from liability if it is able to show that it had adequate procedures in place to prevent persons associated with it from committing bribery.
The last quarter of 2015 witnessed two significant developments in relation to the UKBA. On 30 November 2015, the UK Serious Fraud Office (“SFO”) entered into the first ever deferred prosecution agreement (“DPA”) under the UKBA with ICBC Standard Bank PLC (“ICBCS”) in respect of ICBCS’s failure to prevent third parties who were closely connected with ICBCS from committing bribery. Under the DPA, ICBCS agreed, inter alia
, to pay a fine of USD32.2 million and to engage a leading audit firm to conduct an independent review of its procedures and to rectify shortcomings in the same.
In the first ever prosecution under section 7 of the UKBA, Sweett Group PLC pleaded guilty to an offence under that provision on 2 December 2015. The international construction and property consultancy admitted that it had failed to prevent bribery after its staff were found to have paid bribes to secure and retain a £1.6 million contract with Al Ain Ahlia Insurance Company to build a £63 million luxury hotel in Dubai. The company was sentenced on 19 February 2016 and ordered to pay a total penalty of £2.25 million for the offence.
These cases may have set the tone for enforcement actions on corruption offences by the SFO.
United States of America
The Foreign Corrupt Practice Act (“FCPA”) contains provisions which apply to corporations. Amongst others, this includes corporations which are either incorporated or have their principal place of business in the U.S. The FCPA has been used on numerous occasions by the Department of Justice and the U.S. Securities and Exchange Commission against corporations which have violated the provisions of the FCPA. Under the FCPA, a corporation could be liable for the wrongful acts of its employees committed in the course of their employment.
The Corporate Integrity System Malaysia Framework was introduced in March 2011 to facilitate and streamline the undertaking of the Corporate Integrity Pledge (“CIP”) among the public and private sectors alike. The CIP is a voluntary action that companies, businesses and other organisations in Malaysia may undertake by making a unilateral declaration against corrupt practices and expressing their resolve to work towards a highly principled Malaysian business environment. To date, there are 162 signatories from the public sector, 645 signatories from the private sector and 25 signatories from non-governmental organisations. The CIP is a good step forward, but lacks the force of law.
The proposed introduction of corporate criminal liability provisions into the MACC Act is timely. Although the scope of such provisions remains to be seen, it will be interesting to see whether the Government will resort to the “deeming provisions” found in other Malaysian legislation or will seek to impose liability on corporations for failure to prevent corruption along the lines contained in section 7 of the UKBA.
The Minister in the Prime Minister’s Department, Datuk Paul Low, has expressed the hope that the Bill will be tabled in Malaysian Parliament this year (The Star
, 11 March 2016). Without doubt, the introduction of corporate criminal liability into the MACC Act will give the MACC greater powers to combat corruption in Malaysia. Corporations and their officers must re-evaluate the adequacy of the anti-corruption compliance procedures of the corporation in view of the enhanced obligations that will be imposed when this new and powerful force is unleashed.