Introduction and changes brought against by Section 17A of the Malaysian Anti-Corruption Commission Act 2009 (MACC Act)
On 1st June 2020, a new provision, that is Section 17A of the MACC Act in relation to corruption offences committed by commercial organization has come into force.
Prior to the enforcement of Section 17A of the MACC Act, the existing Section 16 and Section 17 of the MACC Act focus only on the prosecution of individuals who are involved in corruption, whereby it provides that a person or a person acting as an agent solicits, receives from any person for himself or for any other person or gives, promises or offers to any person or to any agent whether for the benefit of that person or of another agent, any form of gratification or bribe as an inducement to or reward for any person from doing or refrain from doing anything, shall commit an offence under the MACC Act.
It is to be noted that prior to the enforcement of Section 17A of the MACC Act, a company can also be found liable for corruption under the common law but it requires an impracticably high standard of proof required of a prosecutor to satisfy the intention for the Company’s commission of corruption, which is beyond reasonable doubt.
Now, with the enforcement of Section 17A of the MACC Act, it imposes statutory corporate liabilities upon the commercial organization, as a result, commercial organization will now be punished and be subjected to legal actions if their employees or associates are involved in crimes of corruption. The burden of proof now lies with the commercial organization to prove to the Court that it has in place adequate procedures to effectively prevent the commission of the corruption.
Section 17A MACC Act (“Act”)
Section 17A of the MACC Act provides that a commercial organization commits an offence if a person associated with the commercial organization 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 business and advantage in the conduct of business for the commercial organization.
Persons liable under the Act other than the Commercial Organization
In addition and pursuant to Section 17(A)(4) of the MACC Act, when a commercial organization commits the offence, the top management and its representative (i.e. the director, controller, officer, partner or who is concerned in the management of its affairs of the commercial organization) will also be deemed to have committed the offence, unless he can prove that the offence was committed without his consent and he has exercised due diligence to prevent the commission of the offence.
In short, the individuals who work in the commercial organization are automatically be held liable under the Act for not being able to prevent the commission of corruption in the organization.
Section 17A(6) of the MACC Act stipulates that a person is associated with a commercial organization if he is a director, partner or an employee of the commercial organization or he is a person who performs services for or on behalf of the commercial organization. Further in Section 17A(7) of the MACC Act, it states that the question as to whether a person is found to be 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. This could potentially include the agent and joint venture partner of the commercial organization who perform services for an on behalf of the commercial organization other than its director, partner or employee.
Meaning of “Commercial Organization”
Under the Act, a commercial organization refers to:-
(a) a company incorporated under the Companies Act 2016 and carries on a business in Malaysia or elsewhere;
(b) a company wherever incorporated and carries on a business or part of a business in Malaysia;
(c) a partnership-
(i) under the Partnership Act 1961 and carries on a business in Malaysia or elsewhere; or
(ii) which is a limited liability partnership registered under the Limited Liability Partnerships Act 2012 and carries on a business in Malaysia or elsewhere; or
(d) a partnership wherever formed and carries on a business or part of a business in Malaysia.
Referring to the above, this Act covers corruption committed by foreign company where it carries on business in Malaysia and corruption committed by a local company where the corruption is committed outside of Malaysia.
Defence relied by Commercial Organization
It is provided under the Act that when a commercial organization is charged for the offence, it is a defence for the commercial organization to prove that the commercial organization had in place adequate procedures to prevent persons associated with the commercial organization from undertaking such conduct.
It is significant for commercial organisation to have in place and implement a set of adequate procedures in the organization to prevent the commission of corruption in the organization by the employees and/or associated persons. Having in place of this set of adequate procedures, the commercial organization shall from time to time ensure that the procedures are properly practised by all the employees and the associate persons.
The guidelines on adequate procedures issued by the Prime’s Minister Department have been formed based on the principle of T.R.U.S.T as per the non-exhaustive list as follows:-
(a) Top Level Commitment
The top level management is primarily responsible for ensuring that the commercial organization and must be able to provide assurance to its internal and external stakeholders that the organization is operating in compliance with its policies and applicable regulatory requirements:-
(i) practices the highest level of integrity and ethics;
(ii) complies fully with the applicable laws and regulatory requirements on anti-corruption; and
(iii) effectively manages the key corruption risks of the organisation.
(b) Risk Assessment
A corruption risk assessment should form the basis of an organization’s anti-corruption efforts. A comprehensive risk assessment is recommended to be conducted every three years and also when there is a change in law or circumstance of the business, to establish appropriate processes, controls and systems approved by top level management.
The assessment may include but not limited to the following:-
(i) opportunities for corruption and fraud activities;
(ii) financial transactions that may disguise corrupt payments;
(iii) business activities in countries or sectors that pose a higher corruption risk;
(iv) non-compliance of external parties acting on behalf of the commercial organisation;
(v) relationship with third parties in its supply chain
(c) Undertake Control Measures
The commercial organization should put in place controls and measures which are reasonable and commensurate to the nature and size of the organization. The controls and measures include but not limited to conduct of due diligence and having reporting channels.
The policies and procedures should be endorsed by top level management, kept up to date, publicly and/or easily available and suitable for us where and needed.
(d) Systematic Review, Monitoring and Enforcement
The top level management should ensure that regular reviews are conducted to assess the performance, efficiency and effectiveness of the anti-corruption programme and ensure the programme is enforced.
(e) Training and Communication
The commercial organisation should develop and disseminate internal and external training and communications relevant to its anti-corruption management system in proportion to its operation covering policy, training, reporting channel and consequences of non-compliance.
The organization’s anti-corruption policy should be made publicly available and should also be appropriately communicated to all personnel and business associates.
The commercial organization should provide its employees and business associates with adequate training to ensure their thorough understanding of the organization’s anti-corruption position, especially in relation to their role within or outside the commercial organization.
More information on the guidelines on adequate procedures issued by the Prime Minister’s Department can be viewed at http://giacc.jpm.gov.my/wp-content/uploads/2019/01/Eng-Garis-Panduan-Tatacara-Mencukupi.pdf
On the other hand, with effective from 1st June 2020, Bursa Malaysia Berhad has also amended the Main and ACE Market Listing Requirements to encapsulate anti-corruption measures whereby it requires the listed issuers to have in place and implement policies and procedures to prevent corrupt practices, thereby providing them with a measure of assurance and a defence against corporate liability for corruption under section 17A of the Malaysian Anti-Corruption Commission Act 2009.
Section 17(A)(2) of the MACC Act provides that the penalty for the commission of the offence shall be a fine of not less than ten times times the sum or value of the gratification where such gratification is capable of being valued or is of pecuniary nature, or one million ringgit, whichever is the higher, or to imprisonment for a term not exceeding twenty years or to both.