Bribery charges in Malaysia: the burden of establishing innocence is on corporate directors

Apathy and ignorance towards bribery and corruption in your business could personally cost you!

Malaysia’s seemingly never-ending battle to combat bribery and corruption is taking a decidedly different turn this year (2020), as specific measures went into effect as of June. Measure that will saddle corporations and other organisations – along with their directors, controllers and senior management – with the full burden of proving that they are not involved in allegations of corrupt activity by their employees and third party partners. That burden of proof means that corporations will have to effectively demonstrate that policies and procedures are firmly in place that deter, detect and defend against incidences of bribery at all levels of the organisation. Malaysia is taking a further step against corruption with its new Corporate Liability Provisions of the Malaysian Anti-Corruption Commission MACC (Amendment) Act 2018. The new provisions go into force this June. The measure has been compared to the UK Bribery Act 2010 and the U.S. Foreign Corrupt Practices Act (FCPA) 1977 (The Star, 2019).

The State Of Corruption In Malaysia

While a large part of the political and economic universe still believes that engaging in some form of corruption is the only way to survive and advance, many countries now are taking drastic measures to root out corruption, and Malaysia is rushing to the forefront of that trend. Currently ranked at 51 out of 180 countries on Transparency International’s “Corruption Perception Index” (2019), with a score of 53 (where 0 is perceived to be highly corrupt and 100 is perceived to be very clean), the Malaysian government emerged from the highly publicised 1MDB financial scandal on high alert and with a firm resolve to adopt tough anti-corruption legislation as one of its main priorities. The result was the empowerment of the Malaysian Anti-Corruption Commission (MACC) and its 2009 Act which addressed corruption on both the political and private sector levels.  The Parliament’s subsequent amendment – Section 17A – was added in 2018 which likened the legislation to the UK Bribery Act, but added a “parallel” element of personal criminal liability in corporate bribery cases.  And that’s where business organisations need to take notice, and take immediate action.

The new Section 17A of the MACC Act not only introduces corporate liability for corruption, it imposes personal liability on directors, controllers and management.  In other words, it assigns responsibility directly to individuals within the organisation, making those individuals personally liable for the actions of the company if it is involved in bribery, unless they can prove that the organisation has successfully implemented “adequate procedures” to prevent such bribery occurrences from happening. That’s a dramatic shift from the previous version of the anti-corruption Act.  Simply stated, where once it was the job of prosecutors and authorities to prove a bribery case, the new statute uses a provision – Section 17A – to place that burden of proof on the directors, controllers and management who must now personally prove that they did everything in the company’s power to thwart bad actors.

Imagine being in senior management for a multi-national conglomerate that is represented by thousands of employees who work alongside thousands of third party affiliates and “associated persons” to conduct business on behalf of the organisation in the global marketplace.  That senior manager (and related directors) becomes personally responsible – and personally liable – for the acts of all those employees, outside representatives and “associated persons.” It should be noted here that it’s not just Malaysian companies or partnerships incorporated and operating in the country that are affected by this new statute.  It also impacts Malaysian-based companies operating outside of the country, and non-Malaysian companies operating inside the country. And again, those organisations can be liable regardless of having actual knowledge of corrupt actions of its company representatives.  (“Corrupt actions” being defined as any associated person offering a bribe – or “gratification” – with intent to obtain or retain business, or an advantage in the conduct of business, for the commercial organisation.  Such actions can extend all the way down to offering gifts, donations, travel, entertainment or other related items.)

Costly Consequences for the Company and its Directors

If the company is found to be liable in a bribery case, the statute states that any director, controller, officer, partner or manager of the commercial organisation is personally liable for the same offence. And if convicted, potential penalties for both the company and its senior management can become quite severe.  The maximum fine is ten times the sum (or value) of the gratification or RM 1 million, whichever is higher, or imprisonment for a term not exceeding 20 years, or both.  These penalties are up to ten times higher than the penalties defined in the original MACC Act of 2009. Thankfully, the statute further states that relevant individuals can properly defend themselves if they can prove that the offence was committed without their consent, and that they initiated proper due diligence to prevent the commission of the offence.

Adequate Procedures:  An Acceptable Statutory Defence

Section 17A(4) of the MACC Act states that a commercial organisation could be acquitted of a charge under Section 17A if can successfully prove that it “had in place adequate procedures designed to prevent persons associated with the commercial organisation from undertaking such conduct.”

“Adequate procedures” is a key term here, as it provides credible evidence that the company (and relevant individuals) has proactively employed mechanisms to prevent corruption, while demonstrating a top-level commitment by the organisation to police itself, provide proper training and implement policies and procedures aimed at identifying and deterring corruption. To comply with the guidelines outlined in Section 17A and prove “adequate procedures,” public and private sector organisations should strongly consider the ISO 37001:2016 Anti-Bribery Management System certification process which provides proper assurance that the organisation has succeeded in establishing, implementing, maintaining, reviewing and improving its anti-bribery management system.

Certification to the ISO 37001 standard is considered one of the most effective tools available in proving that the organisation has taken reasonable steps to prevent bribery and corruption, and fully complies with the requirements of Section 17A in that it documents key items that are globally defined as successful measures to combat bribery and corruption in the workplace.  These measures involve top-level leadership, training, bribery risk assessment, due diligence adequacy, financial and commercial controls, reporting, audit, and investigation. And in addition to demonstrating adequate procedures in a criminal case, ISO 37001 certification can provide a positive return on investment for the organisation, as it results in improved management systems, enhanced public perception and distinct competitive advantages.

Any organisation that engages in bribery or corrupt acts, or overlooks its outside agents or contractors who practice such acts, are now on high alert.  Commercial organisations affected by the new law should take immediate steps to implement an appropriate anti-corruption compliance program as protection to demonstrate adequate procedures.

Prove That Your Business is Ethical

Complete our FREE Highest Ethical Business Assessment (HEBA) & evaluate your current Corporate Compliance Program. Find out if your organisation’s compliance program is in the line with worldwide Compliance, Business Ethics, Anti-Bribery and Anti-Corruption Frameworks. Let ABAC®-Malaysia experts prepare a complimentary gap analysis of your compliance program to evaluate if it meets “adequate procedures” requirements under UK Bribery Act, DOJ’s Evaluation of Corporate Compliance Programs Guidance and Malaysian Anti-Corruption Commission. COMPLETE HERE!