MACC Section 17A: corporate liability for corruption in Malaysia

What does Section 17A of the MACC Act say?

Section 17A was inserted into the MACC Act by the Malaysian Anti-Corruption Commission (Amendment) Act 2018 (Act A1567) and came into force on 1 June 2020. It is not retrospective: the MACC states that prosecutions can only be brought for offences committed after that date.

The offence is confined to offering, promising or giving gratification. It is committed when:

• a person associated with a commercial organisation corruptly gives, agrees to give, promises or offers any gratification to any person; and
• the intent is to obtain or retain business for the commercial organisation, or to obtain or retain an advantage in the conduct of business for it.

Which organisations does Section 17A cover?

Section 17A(8) defines a commercial organisation. In practice there are four groups:

• Companies incorporated under Malaysian company law that carry on business in Malaysia or elsewhere.
• Companies incorporated anywhere that carry on business, or part of a business, in Malaysia.
• Partnerships under the Partnership Act 1961 and limited liability partnerships under the Limited Liability Partnerships Act 2012 that carry on business in Malaysia or elsewhere.
• Partnerships formed anywhere that carry on business, or part of a business, in Malaysia.

Who is a person associated with the organisation?

Under Section 17A(6), a person is associated with a commercial organisation if he or she is a director, partner or employee, or performs services for or on its behalf. The MACC gives consultants and intermediaries as examples. Whether someone performs services on the organisation's behalf is decided by looking at all the relevant circumstances, not just the label on the relationship.

The Securities Commission Malaysia (SC) points out that this can include agents, distributors and other service providers, and that liability can arise for corruption by any employee, whatever their level, whether or not senior management knew about it.

What are the penalties under Section 17A?

On conviction, a commercial organisation is liable to a fine of not less than ten times the sum or value of the gratification, where it can be valued or is of a pecuniary nature, or RM1 million, whichever is higher, or to imprisonment for up to 20 years, or both.

Senior people are also exposed. Under Section 17A(3), anyone who was a director, controller, officer or partner, or concerned in the management of the organisation's affairs, when the offence was committed is deemed to have committed it too. They escape liability only by proving that the offence happened without their consent or connivance and that they exercised the due diligence they ought to have exercised, given their role and the circumstances.

What is the adequate procedures defence?

Section 17A(4) gives a commercial organisation a defence if it proves that it had adequate procedures in place to prevent associated persons from undertaking the corrupt conduct. Section 17A(5) requires the Minister to issue guidelines on those procedures.

The Guidelines on Adequate Procedures were issued by the Governance, Integrity and Anti-Corruption Centre (GIACC) of the Prime Minister's Office on 10 December 2018. The SC describes them as a non-prescriptive list of measures, not a checklist for a successful defence: procedures should match the scale, nature, risk and complexity of the business and genuinely prevent corrupt conduct.

The MACC makes the same point. Certification under an anti-bribery management system (ABMS) or signing the Corporate Integrity Pledge (CIP) does not guarantee that procedures are adequate. What matters is showing a court that the procedures work in practice and do not just exist on paper.

What are the T.R.U.S.T. principles?

The guidelines are built on five principles, known as T.R.U.S.T. from their initials. The SC's published good practices give a sense of what each involves:

• Top-level commitment: clear anti-corruption roles for the board and senior management, periodic review of the framework, and consequence management for breaches.
• Risk assessment: periodic assessment of internal and external corruption risks, including geographical, third-party, business and transaction risks, with results reported to the board.
• Undertake control measures: documented policies, due diligence on third parties and agents, controls over third-party payments, and clear whistleblowing and escalation channels.
• Systematic review, monitoring and enforcement: objective assessment of the framework's effectiveness, timely reporting of audit results, and a designated officer for corruption issues.
• Training and communication: anti-bribery training for all staff, including senior management and the board, with policies made available and acknowledged by employees.

What does Section 17A mean for capital market firms?

After Section 17A was enacted, the SC amended its Licensing Handbook and other guidelines to require Capital Markets Services Licence holders, registered trustee companies and issuing houses, bond pricing agencies, credit rating agencies, recognised market operators and registered electronic platform operators hosting digital token offerings to have anti-bribery and corruption and whistleblowing policies guided by the Guidelines on Adequate Procedures. Firms outside those guidelines are still liable under Section 17A.

In a thematic review of 255 intermediaries, the SC found that 68% had a good overall level of compliance, 19% were satisfactory and 13% needed to enhance their anti-corruption framework. It saw room for improvement in the adequacy of policies and procedures, risk assessment, monitoring and training.

What does Section 17A training usually cover?

The SC's good practices give a useful outline for an anti-corruption training plan:

• Training for every employee, including the board and senior management, with tailored sessions for people in roles where corruption risks have been identified.
• Gifts, hospitality, entertainment and donations, including when accepting them could be seen to influence a business decision.
• Conflicts of interest, dealings with public officials and whistleblowing.
• How to escalate and report suspected bribery and corruption.
• Checking that staff have understood the training, and having them read and acknowledge the organisation's policies.

Anti-corruption training from Ogos Learning

Ogos Learning runs compliance training for bank and capital market teams, including on anti-bribery and corruption. Ogos Learning has trained teams at more than 10 of Malaysia's licensed commercial banks.