THE NEW SECTION 17A OF THE MALAYSIAN ANTI-CORRUPTION COMMISSION ACT 2009
CHART A
WHAT IS THE SECTION 17A(1) OFFENCE?
“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 –
(a) to obtain or retain business for the commercial organization; or
(b) to obtain or retain an advantage in the conduct of business for the commercial organization.
In serious pursuit to combat the corruption, the new Section 17A(1) of the Malaysian Anti-Corruption Commission Act 2009 (hereinafter abbreviated as “theMACC Act 2009”) imposes criminal liabilities on the commercial organisation (corporate liability) and the persons having control on the commercial organisation (personal liability).
This reflects the determination by the lawmakers to flatten the corruption practice in Malaysia is real. This is so because when a corrupt act is committed, not only the actual doer carrying out the act will be charged, its organisation and the persons having control of the organisation may be made liable as well.
In this write-up, the coverage of this provision is discussed by looking into the following aspects or elements found in the entire Section 17A of the MACC Act 2009.
(1) PERSON ASSOCIATED WITH THE COMMERCIAL ORGANISATION
(2) HEAVY PUNISHMENT
(3) INCLUSION OF WIDE RANGE OF BUSINESS ENTITIES
(4) PERSONAL LIABILITY
(5) THE DEFENCE OF ADEQUATE PROCEDURES
The author illustrates all the aspects herein with reference to all subsections contained in the new Section 17A of the MACC Act.
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[1] PERSON ASSOCIATED WITH THE COMMERCIAL ORGANISATION
Reading Section 17A(1), the first question one may ask, who is the “person associated with the commercial organisation” referred to? This is a pertinent point to explore as if the corruption is carried out by such person, it would constitute an offence against the organisation under Section 17A.
Section 17A(6) defines such “person” as a director, partner or an employee of the commercial organisation or a person who performs services for or on behalf of the commercial organisation.
It is further clarified in Section 17A(7) that the question whether or not a person performs services for or on behalf of the commercial organisation shall be determined by reference to all the relevant circumstances and not merely by reference to the nature of the relationship between him and the commercial organisation.
It appears that the test whether one falls under the category of “person associaed with the commercial organisation” would be whether one performs services for or on behalf of the commercial organisation. For obvious reasons, the director, partner and the employee of a commercial organisation unquestionably fall under such category.
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[2] HEAVY PUNISHMENT
Section 17A(2) reveals that the commercial organisation that commits the offence shall upon conviction be liable to:
(a) Not less than ten times the value of the subject matter of the offence, where such gratification is pecuniary, or one million ringgit, whichever is the higher; OR
(b) Imprisonment for a term not exceeding twenty years; OR
(c) Both of the above
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[3] INCLUSION OF WIDE RANGE OF BUSINESS ENTITIES
Under Section 17A(8), “commercial organisation” encompasses the following business entities:
(a) Company incorporated under the Companies Act 2016
(b) Partnership registered under the Partnership Act 1961 and Limited Liability Partnership Act 2012
(c) Foreign company or partnership that carries on a business in Malaysia
The inclusion is wide enough to somewhat cover all business entities possible. Also, (a) & (b) include those who carry on a business in Malaysia or elsewhere.
Essentially, it means that, any locally established organisation would be caught under the purview of Section 17A of the MACC Act even though it has its business carried on in foreign countries. As well as to include any foreign organisation that carries on a business in Malaysia.
[SEE CHART A]
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[4] PERSONAL LIABILITY
If any commercial organisation is found liable of the offence, it is also the law that the any person defined therein is said to have committed that offence too, under the deeming provision of Section 17A(3) unless that person is able to prove that the offence was committed without his consent and that he has excersied due diligence to prevent the commission of the offence as he ought to have exercised, having regard to the nature of his function in that capacity and to the circumstances.
The “person” defined under the subsection includes:
(a) its director, controller, officer or partner; or
(b) any person who is concerned in the management of its affairs
The threatening part of the provision is that apart from the bosses themselves that would be held personally liable of the said offence, it seems that the managers would also be caught under the definition, as they are always the ones who are entrusted or given the mandates and authorisation by the bosses in the management of the organisation’s affairs.
The most direct analogy of the above would be that, if a company registered under the Companies Act is convicted of the offence, the directors and/or shareholders of that company, as well as the managers (likely so) at the time of the commission of the offence by the organisation are deemed to have committed the same offence and be liable to the same punishment, unless the person has a legit defence.
In the case of a partnership, it would be the partners, as well as its appointed managers.
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[5] THE DEFENCE OF ADEQUATE PROCEDURES
Now, if a criminal organisation is charged with the offence, it can raise and rely on the defence of “Adequate Procedures”, provided under Section 17A(4). A statutory defence.
What is “Adequate Procedures” then?
Section 17A(4) spells as follow:
“If a commercial organization is charged for the offence referred to in subsection (1), 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 organisation from undertaking such conduct”
Here is a summary of guidelines relating to “Adequate Procedures” issued by the Prime Minister Office pursuant to Section 17A(5) on 04.12.2018 (hereinafter referred to as “the said Minister’s Guidelines”) for the public’s understanding on what and how the procedures or policies be implemented to prevent the occurrence of corrupt practices.
ADEQUATE PROCEDURES PRINCIPLES
T.R.U.S.T
TOP LEVEL COMMITMENT
RISK ASSESSMENT
UNDERTAKE CONTROL MEASURES
SYSTEMATIC REVIEW, MONITORING AND ENFORCEMENT
TRAINING AND COMMUNICATION
*Note: Below is just a summary of the said Minister’s Guidelines. For reference of complete guidelines, i.e. the entire contents; kindly visit the webpage: http://giacc.jpm.gov.my/garis-panduan-tatacara/
PRINCIPLE I
TOP LEVEL COMMITMENT
The top-level management of the commercial organisation is endowed with the utmost responsibility to ensure that the organisation practises the highest level of integrity and ethics, complies fully with the applicable laws and regulatory requirements on anti-corruption and effectively manages the key corruption risks of the organisation.
In simplicity, the top-level management shall lead by example in taking firm stance against corrupt practices in relation to its business activities and of equal importance, to exercise all necessary efforts and uncompromisingly ensure that the T.R.U.S.T principles are achieved.
PRINCIPLE II
RISK ASSESSMENT
It is stipulated in the said Minister’s guidelines, as recommendation that the commercial organisation should conduct a comprehensive risk assessment every 3 years, with intermittent assessments conducted when necessary. Further, when there is a change in law or circumstance of the business, the organisation shall identify, analyse, assess and prioritise the internal and external corruption risks of the organisation.
It is further recommended that the assessment may include the following:
(a) Opportunities for corruption and fraud activities;
(b) Financial transactions that may disguise corrupt payments;
(c) Business activities that expose to higher corruption temptations;
(d) Non-compliance of third parties acting on behalf of the organisation, given the wide definition conferred on “person associated with”; and
(e) Relationships with any third parties that are vulnerable to the corrupt practices
PRINCIPLE III
UNDERTAKE CONTROL MEASURES
The organisation should put in place the reasonable controls and measures in order to address any corruption risks of which the following elements shall be emplaced.
(A) Due Diligence
The organisation should identify key factors, for e.g. background checks on the person or entity, document verification process, or conduct of interview for ensuring exercise of due diligence on any relevant parties before entering into any formalised relationships.
(B) Reporting Channel
The organisation should set up accessible and encouraging, but at the same time confidential-trusted and secured reporting channel for anyone to report or address to the organisation any matters in relation to corruption issue of the organisation which include but not limited to suspected, attempted or actual corruption incidents, and/or suspected inadequacies of the anti-corruption programmes.
Further, the organisation should establish polices and procedures to cover the following:
(a) a general anti-bribery and corruption policy or statement;
(b) conflicts of interest;
(c) gifts, entertainment, hospitality and travel;
(d) donations and sponsorships, including political donations;
(e) facilitation payments;
(f) financial controls, such as separation of duties and approving powers or multiple signatories for transactions;
(g) non-financial controls,such as a separation of duties and approving powers or a pre-tendering process;
(h) managing and improving upon any inadequacies in the anti-corruption monitoring framework; and
(i) record keeping for managing documentation related to the adequate procedures.
PRINCIPLE IV
SYSTEMATIC REVIEW, MONITORING AND ENFORCEMENT
In this aspect, the top-level management is expected to regularly review and assess the performance, efficiency and effectiveness of the anti-corruption programme.
The effort by the top-level management may include implementation of a monitoring programme includes monitoring the performance of personnel on their understanding in their respective roles to combat corrupt practices, internal audit by competent personnel, continual evaluations, external audit by qualified body, and disciplinary proceedings against non-compliant personnel etc.
PRINCIPLE V
TRAINING AND COMMUNICATION
The commercial organisation should develop and provide adequate internal and external training and communications, which are relevant to its anti-corruption management system that should comprehensively cover its policy especially on the employees’ and any relevant personnel’s thorough understanding of the organisation’s anti-corruption position and their respective roles, training, reporting channel and consequences of non-compliance.
The communication of policies should be made publicly available and may be conducted in a variety of mediums such as, messages on the organisation’s intranet or website, emails, newsletters, posters, code of business conduct and employee’s handbooks, video seminars or town-hall sessions. The training may also be conducted in the like mediums as mentioned.
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