New Section 17A OF Malaysian Anti-Corruption Commission ACT 2009

By 1 June 2020, the new Section 17A of the Malaysian Anti-Corruption Commission Act (MACC Act) will come into force with wide-ranging repercussions. Its main thrust is to introduce a far-reaching corporate liability provision where it will set out that a commercial organisation is deemed to have committed an offence if any person associated with the commercial organisation commits a corrupt act in order to obtain or retain business or advantage for the commercial organisation. The effective date is also timely as the new government is raising the bar to effectively curb bribery and corruption in Malaysia.

Given the serious threat that corruption poses to commercial organisation and the economy, Bursa Malaysia is supporting our government’s battle against corruption by amending the Listing Requirements to encapsulate anti-corruption measures which are in addition to the statutory provisions under the law. The amendments will not only promote better governance culture and ethical behaviour within the listed issuer group, but will also provide greater accountability and transparency to investors and providing listed companies with a measure of assurance and a defence against corporate liability for corruption under section 17A of the MACC Act 2009.

Companies listed on the Main Market and the ACE Market of Bursa Malaysia Securities (‘the Exchange’) will be required to introduce anti-corruption measures by 1 June 2020 based on the introduction of a new paragraph 15.29 to the Main Market Listing Requirements and a new Rule 15.28 to the ACE Market Listing Requirements. These provisions require a listed company and its board of directors to ensure that the following are established and maintained for the listed company and its subsidiaries (’Group’) –

Policies and guidelines on anti-corruption that are, at a minimum, guided by the Guidelines on Adequate Procedures issued by the MACC pursuant to section 17A(5) of the MACC Act 2009;

1. Policies and guidelines for whistle-blowing;
2. The policies and guidelines referred to in (1) and (2) above are reviewed periodically to assess their effectiveness, at least once in every three years;
3. Corruption risk is included in the annual risk assessment of the group; and
4. A listed company publishes on its website, its policy on anti-corruption and its policy and procedures on whistle-blowing.

According to the Exchange the introduction of anti-corruption measures will –

1. Promote better corporate governance culture and ethical behaviour within a listed company’s group; and
2. Provide listed companies with a defence against corporate liability under section 17A of the MACC Act 2009 by ensuring that listed companies implement adequate procedures to prevent the occurrence of corrupt practices.

WHAT DOES SECTION 17A COVER?

Section 17A is extensive as it covers offences, penalty, presumption, prevention, person associated, question of facts and what are commercial organisations. There are few key elements of Section 17A that needs to be understood.

Firstly, it is the penalty, which is a fine of not less than ten times the sum or value of the gratification or RM1mil, whichever is the higher, or to imprisonment for a term not exceeding 20 years, or both.

Secondly, if the organisation is found liable, a person who is the director, controller, officer or partner of the organisation or a person who is concerned with the organisation’s management affairs at the time of the offence, is deemed to have committed the offence unless such persons can prove that the corrupt act was committed without his consent or connivance and that he exercised due diligence to prevent that 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.

Thirdly, is the definition of preventive steps. Under Section 17A (4), if an organisation is charged for the offence, it is a defence for the commercial organisation to prove that the organisation had in place adequate procedures to prevent *associated persons with the organisation from undertaking such conduct.

* The term “associate” under the guidelines is wider than under the MACC Act and it means –

1. any person who is a nominee or an employee of such person;
2. any person who manages the affairs of such person;
3. any organisation of which such person, or any nominee of his, is a partner, or a person in charge or in control of, or has a controlling interest in, its business or affairs;
4. any corporation within the meaning of the Companies Act 2016 of which such person, or any nominee of his, is a director or is in charge or in control of its business or affairs, or in which such person, alone or together with any nominee of his, has or have a controlling interest, or shares to the total value of not less than 30% of the total issued capital of the corporation; and
5. the trustee of any trust where the trust has been created by such person or the total value of assets contributed by such person amounts to not less than 20% of the total value of the assets of the trust.

The above wide definition of categories of persons would appear to cover shadow directors, the true controllers of a company, significant shareholders of 30% of the issued share capital of companies, and the possible controllers of trusts.

Lastly, we look at the guidelines which have been issued by the Prime Minister’s Department with respect to what constitute as adequate procedures. These guidelines are the pillars of defence for commercial organisations as it defines the steps that an organisation will need to prepare for.

THE GUIDELINES ON ADEQUATE PROCEDURES (THE GUIDELINES)

The Guidelines basically spells out what a commercial organisation ought to do but at the same time, they are also required to put in place systems that can help them to monitor their preparation for this new legislation. These guidelines are the pillars of defence for commercial organisations as it defines the steps that an organisation will need to get ready with. This will help minimise the occurrence of corrupt practices relating to their business activities, thereby safeguarding these businesses against unwanted issues.

The goal of these guidelines is to have adequate procedures in place as part of the statutory provision requirement.

The Guidelines outline the five guiding principles of T.R.U.S.T.; an apt acronym and is detailed below.

Guidelines on Adequate Procedures

While those listed above are key areas to focus on, they are, however, not exhaustive. Having a strong compliance programme in place before Section 17A takes effect will create a strong defence against corruption. A good compliance programme can create time, cost, and risk efficiencies by sharing information across compliance processes and risk processes; increase protection against reputational risks; and foster stronger relationships with suppliers, thereby obtaining better pricing and services through the higher-quality information yielded from due diligence.

Axcelasia brings relevant industry experience and subject matter knowledge to add value to our corporate liability assignments.

In the preparation of Anti-Bribery and Anti-Corruption Policy and Procedures, we conduct gap assessment on the compliance to Adequate Procedures issues by MACC and ISO 37001:2016. We also prepare policies and procedures for conflicts of interest; due diligences, gifts, entertainment, hospitality & travel, donations, sponsorships (including political donations) and facilitation payments.

To complement the Anti-Bribery Management System, we provide whistleblowing advisory services by developing policy and procedures for whistleblowing and manage outsourced fraud hotline. We also hold annual refresher courses for several entities covering staff and vendors.

We can also assist with anti-corruption risk assessment by assisting our clients to build a framework for corruption risk management.

The window to the deadline of 1 June 2020 is closing in fast. So, is your organisation ready? Contact us if you have any questions, would like additional information, or if you would like Axcelasia to help you.