ARC News • March 24, 2020
Generally, corruption is an abuse of entrusted power for private gain. Failure to tackle corruption efficiently will result in socio-economic issues such as shadow economy, inefficient allocation of resources, low-quality healthcare, and education system.
According to an address by the Secretary General of United Nations during International Anti-Corruption Day 2019, the annual cost of international corruption amounts to $1 trillion in bribes and $2.6 trillion in stolen monies. Due to the imperative need to fight corruptions, Malaysia had taken a colossal leap to introduce Section 17A of Malaysian Anti-Corruption Act 2009 (“Section 17A”) on 27 April 2018 and is expected to come into force on 01 June 2020.
In line with the international requirements under Article 26 of the United Nations Convention Against Corruption (UNCAC) which refers to the Liability of Legal Persons, Section 17A is enacted to enable organisations involving in corruption activities to be prosecuted and the organisation is deemed to commit the offence unless the organisation is able to demonstrate that adequate procedures have been put in place to prevent corrupt practices. This provision applies to any person of a commercial organisation, from top to lower level of management including but not limited to directors, partners, officers or anyone who is in the management team.
The question is – what then amounts to “adequate procedures” under the MACC Act 2009?
What Amount to Adequate Procedures?
On 10 December 2018, Guidelines on Adequate Procedures (“Guidelines”) was released by the Prime Minister’s Department pursuant to Section 17A(5) of MACC Act 2009. In essence, the Guidelines set out the T.R.U.S.T. principles that are served as reference points to assist commercial organisations in achieving the objective of having adequate procedures under Section 17A.
The T.R.U.S.T. principles are as below:
- Top Level Commitment
- Ensure the organisation practices highest level of integrity and ethics; fully complies with the applicable anti-corruption laws and regulatory requirements; and effectively manages the organisation’s key corruption risk.
- Able to provide assurance to its stakeholders that the organisation complies with its policies and regulatory requirements.
- Risk Assessment
- Conduct periodic risk assessment (once in every 3 years with intermittent assessment when necessary) to identify, analyse, assess and prioritise risks of corruption within the organisation.
- Findings of the assessment shall form the basis to determine appropriate processes, systems and controls to mitigate the risks of corruption in the organisation.
- Undertake Control Measure
- Put in place appropriate control and contingency measures which is reasonable and proportionate to the nature and size of the organisation to address any corruption risks in the organisation.
- This includes conducting due diligence on relevant parties / personnel prior to formalising a relationship; launch an accessible and confidential reporting channel for internal and external parties to highlight any concern on suspected or real corruption incidents; set out policies and procedures to amongst others include anti-bribery policy, gift, entertainment and donation policy.
- Systematic review, monitoring and enforcement
- Conduct regular reviews to assess the performance, efficiency and effectiveness of the anti-corruption programme.
- Training and communication
- Develop and conduct training to employees on the organisation’s anti-corruption position;
- Make the anti-corruption policy publicly available to all personnel and business associates.
What are the Consequences of Non-Compliance?
Contravention with this provision will attract a fine of not less than 10 times of the value of gratification in question or RM 1 million, whichever is greater, or imprisonment term of not more than 20 years, or both. Unless the management team is able to justify that such conviction is without his consent and he had exercised all due diligence to prevent from committing the offence on balance of probabilities, attempt to escape from liability may prove futile.
With just over 2 months to go, it is crucial for commercial organisation to get a move on in establishing adequate procedures to ensure their level of compliance is within the regulatory requirements.
So, to business owners out there, there are only 2 options available – either you take appropriate actions to embrace Section 17A now; or be prepared to brace the impact of Section 17A when it hits you later. Which road will you take?
This Article is co-written by Yeo Shu Pin (Partner) and Serene, Tee Jia Qing (Legal Executive) of Messrs. Afif Rahman & Chong
Disclaimer: Every attempt to ensure the accuracy and reliability of the information provided in this publication has been made. This publication does not constitute legal advice and is not intended to be used as a substitute for specific legal advice or opinions. Please contact the authors for a specific technical or legal advice on the information provided and related topics.