Safeguard your organisation against corruption with adequate procedures
Corruption, as defined by Transparency International, is the abuse of entrusted power for private gain. With its ability to appear in many forms, such as bribes, nepotism or state captures, corruption erodes trust in government and undermines the social contract.
Based on the corruption trend in Malaysia over the period from 2013 to 2018 cited in the National Anti-Corruption Plan (NACP), the public sector has been the most vulnerable to corruption – the public sector displayed a vulnerability rate of 63.30% as compared to 17.06% in the private sector.
The National Anti-Corruption Plan (NACP) and the MACC Amendment Act 2018
Making inroads in the fight against corruption is no easy feat. In an effort to address these problematic areas, Malaysia has taken a firm stand in combating corruption with the launch of the National Anti-Corruption Plan (NACP) to integrate all aspects of governance, integrity and anti-corruption, as well as the amendment of the Malaysian Anti-Corruption Commission (MACC) Act 2009.
Under the 2018 amendment, Section 17A of the MACC Act 2009 on corruption offences by commercial organisations took effect on the 1st of June 2020.
Being one of the strongest anti-corruption laws in the world, Section 17A of the MACC Act 2009 – also termed as corporate liability provision – cascades liability onto commercial organisations.
In other words, the commercial organisation will be deemed to have committed the offence if a person associated with the commercial organisation (such as employees, Board members, agents, service providers) commits an offence of giving or offering a bribe (an outbound bribery) in the course of obtaining business or gaining an advantage for the commercial organisation.
This section becomes a major challenge to the directors, controllers, officers or partners of the commercial organisation as they will be deemed to have committed the offence as well.
As outlined in the official guide to developing Adequate Procedures issued by the National Centre for Governance, Integrity and Anti-Corruption (GIACC), the aim of this provision is to foster the growth of a business environment free of corruption and to encourage all commercial organisations to take appropriate measures to prevent the participation in corruption activities in their day-to-day business.
Upon conviction, the penalty under the corporate liability provision is a fine of not less than 10 times the value of the bribe or RM1 million, whichever is higher, or imprisonment for up to 20 years.
Commercial organisations can raise their defences, protect their organisation and employees against corporate liability by implementing the Adequate Procedures.
Adequate Procedures are the necessary procedures put in place to prevent an organisation’s employees and associated individuals from assuming corrupt behaviour in relation to its business activities.
As issued by the GIACC, Adequate Procedures are guided by five primary principles:
- Top level commitment
- Risk assessment
- Undertake control measures
- Systematic review, monitoring and enforcement
- Training and communication
Why should I adopt Adequate Procedures for my company?
By the 1st of June 2020, all commercial organisations in Malaysia must have implemented the Adequate Procedures based on the principles of T.R.U.S.T., yet many organisations remain in the dark about the risks ahead.
Apart from protecting your company from the clutches of corruption, the Adequate Procedures help your top management and the organisation gain confidence with an appropriate defence against liabilities under the corporate liability provision.
With guidance in managing third-party interactions in business conduct, the Adequate Procedures keep your business safe as you go on to achieve strategic objectives.
More importantly, Adequate Procedures protect the board and the management of the company, as the corporate liability provision establishes a two-fold liability on the organisation and the personnel.
As outlined in the Adequate Procedures Guidelines, if a corruption incident should occur, it will be up to the courts to decide whether the commercial organisation truly established the necessary safeguards that would have prevented the offence from happening in the first place. Additionally, the judiciary is likely to consider the circumstances of the case, including your organisation’s policies and procedures and the manner of implementation.
The Adequate Procedures, along with implementation efforts go a long way in safeguarding your company against corruption risks that impact levels of integrity, and consequently on your business.
Even now, especially as we are still trapped, combating the COVID-19 pandemic, efforts are still needed to protect your organisation. Whatever the time and effort to establish groundwork – it will be worth it.
References and Resources
National Centre for Governance, Integrity and Anti-Corruption (GIACC). (2018). Guidelines on Adequate Procedures. Pursuant to subsection (5) of Section 17A under the Malaysian Anti-Corruption Commission Act 2009. GIACC. https://giacc.jpm.gov.my/garis-panduan-tatacara/
National Anti-Corruption Plan 2019-2023. (2019). Prime Minister’s Office of Malaysia. Retrieved from https://www.pmo.gov.my/2019/07/national-anti-corruption-plan/
What is corruption? (2021). Transparency International. Retrieved from https://www.transparency.org/en/what-is-corruption
Section 17A Of MACC Act 2009 (Amendment 2018) Comes Into Force Today [PRESS RELEASE]. (2020). Malaysian Anti-Corruption Commission. Retrieved from https://www.sprm.gov.my/index.php?page_id=105&contentid=539&language=en
“GARIS PANDUAN TATACARA MENCUKUPI”, Pusat Governans, Integriti dan Anti-Rasuah Nasional (GIACC). Retrieved from https://giacc.jpm.gov.my/garis-panduan-tatacara/