Section 17A of MACCA
These corporate liability provisions can be found in the new section 17A of MACCA. Notably, they provide that the corrupt acts of persons associated with a commercial organization will be attributed to that commercial organization. Associated persons include directors, partners, employees and third-party service providers of the commercial organization. The definition of commercial organization similarly has a wide ambit, and includes Malaysian companies and partnerships whether conducting business in Malaysia or outside of Malaysia, as well as foreign companies conducting business in Malaysia.
Further, where corporate liability is found, the director, controller, officer (and this would include an employee), partner or “person who is concerned in the management of its affairs” will be deemed to have committed the corrupt offense. The onus then shifts to the individual to prove that the offense was committed without their consent, and that they exercised due diligence to prevent the commission of the offense, taking into account the nature of their function in that capacity and the circumstances.
The financial penalties for a commercial organization that is liable under section 17A are fairly significant – being the higher of either a monetary fine of not less than 10 times the value of the gratification, or MYR 1,000,000 (approximately USD 257,000).
Notably, similar to the United Kingdom’s Bribery Act, section 17A provides companies with the ability to assert the legal defense that they had in place adequate procedures designed to prevent persons in their organization from undertaking corrupt conduct.
While the Malaysian authorities have yet to issue guidelines as to what will constitute adequate procedures under section 17A, UK developments may prove instructive. The UK’s Serious Fraud Office has clarified that putting in place adequate procedures is not just a “box ticking” exercise, and extends to adopting a risk-based approach that meaningfully and proportionately seeks to prevent the occurrence of corrupt acts.
What companies should do
These changes to Malaysia’s anti-corruption laws bring the country’s laws closer to the international standard. However, the Malaysian minister who introduced the bill has clarified that these amendments will only be enforced by Malaysian authorities two years after it is approved. The stated reason was to enable stakeholders to digest and understand the changes to the law.
In the lead-up to the enforcement of section 17A, companies doing business in Malaysia should prudently begin the process of ensuring that systems are put in place that demonstrate due diligence in preventing corrupt offenses by not only their executives and employees, but also third-party intermediaries such as distributors, vendors and agents. In particular, we anticipate that section 17A, when ripe for enforcement, will create additional pressures on multinational corporations with significant operations and businesses in Malaysia and on their Malaysia-based management or senior executives. This is given the generally worsening environment for corruption in Malaysia in recent years, and what will likely be a presumption that multinational corporations have the financial means to implement rigorous systems and procedures to prevent corruption within their organization.
