Corporate Liability For Corruption – Is Your Business Prepared?

May 20, 2020

The enforcement of corporate liability on commercial organisations for failure to prevent corruption is fast approaching. Notwithstanding the talk of delayed implementation amidst the COVID-19 pandemic, companies and businesses nationwide are still, as at today, expected to put in place by 1 June 2020, “Adequate Procedures” encompassing amongst others, anti-bribery and anti-corruption policies, practices and procedures to prevent the occurrence of corrupt practices in relation to their business activities.

Corporate Liability

The concept of corporate criminal liability imposes a strict liability on commercial organizations for acts of corruption by its directors, employees or other associated persons, irrespective of whether it had actual knowledge of such corrupt acts. Commercial organizations found guilty of such offence may be punished with a fine not less than ten times the value of gratification or RM1 million, whichever is higher, and/or imprisonment for a term not exceeding 20 years.

‘Adequate Procedures’

Businesses and commercial organizations should consider the five principles outlined in the Guidelines on Adequate Procedures issued by the Prime Minister’s Department pursuant to section 17A(5) of the MACC Act 2009 when putting in place “Adequate Procedures”. This is discussed below.

1. Top-Level Commitment Top-level management must establish and periodically review an anti-corruption compliance program whilst ensuring employees of all levels and management of the commercial organisation fully comply with such program. Organizations should consider setting clear procedures and policies on complaint reporting and whistleblowing channel including assigning a team to oversee anti-corruption compliance matters, in addition to establishing the organisations’ policies and commitments on anti-corruption to its employees’ and third parties’.

2. Risk Assessments Corruption risk assessments should also be conducted periodically to identify structural weaknesses which may facilitate corruption. It is advisable for the commercial organisations to publicly report on its risk assessment process and the risks identified and develop detailed policies and procedures to mitigate specific corruption risks the business is exposed to.

3. Undertake Control Measures The third principle emphasizes on putting in place appropriate control and contingency measures which are reasonable and proportionate to the nature and size of the organisation in order to address any corruption risks arising from weaknesses in the organisation’s governance framework, processes and procedures. Some examples include conducting due diligence on any relevant parties or personnel prior to the entry of any formalised relationships and establishing an accessible and confidential trusted whistleblowing channel.

4. Systematic Review, Monitoring And Enforcement Top-level management should ensure that the performance, efficiency, and effectiveness of its anti-corruption programme is regularly reviewed and assessed. Results of the review may prove useful for any continual improvement of its existing anti-corruption control measures.

5. Training And Communication Businesses should consider developing and providing internal and external trainings regarding its anti-corruption policies and measures to its members and third parties dealing with its business, to ensure that its policies and procedures are understood and sanctions in the event of violation.

Swift Action

Whether the corporate liability provision would be deferred for a couple of months or up to a year or otherwise, one thing is certain is that its implementation is inevitable. Business and commercial organizations are advised to swiftly prepare and put in place “Adequate Procedures” to avoid facing grave legal repercussions for its failure to do so.

Next Steps

Whether your business is just starting to look at establishing the requisite anti-corruption policies and procedures or at improving existing policies and framework, we can assist you. Our team is experienced in preparing, reviewing and advising on various regulatory policies, including code of conducts, anti-corruption and whistleblowing policies for small and medium-sized enterprises to large corporations, for compliance with the requirements as set out in the Guidelines issued pursuant to the MACC Act 2009.

Preventing and countering corruption cannot be carried out effectively without identifying the range of corruption risks facing a company and singling out the most significant risks to address. We assist by carrying out the requisite risk assessment process on your business to assess such risks in establishing or improving the appropriate anti-corruption controls.