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Corrupt Offence by Commercial Organization

Corrupt Offence by Commercial Organization

At long last! The Malaysian Anti-Corruption Commission (Amendment) Bill 2018 was presented in the first Meeting of the sixth Session of thirteen Parliament sitting on March 26, 2018. The main thrust of this Amendment Bill is to introduce Section 17A into MACC Act. The Section 17A, “Offence by Commercial Organization”, states that commercial organization commits an offence if any person associated with that commercial organization commits a corrupt or bribery act in order to obtain or retain business or advantage for the organization. When this corporate offence is committed by a commercial organization, the director, controller, officer, partner or member of management is liable to a maximum fine of 10 times the sum of gratification or RM1 million, whichever is higher, a maximum jail term of 20 years, or to both.

This proposed Corporate Liability Provision (Bill) is tailored after Section 7 of the UK Bribery Act 2010, “Failure of Commercial Organisations to Prevent Bribery”. So, what is this corporate liability? Sometime, it is also known as corporate criminal liability and it is the liability imposed upon a company or corporation for any criminal act done by any natural person. Liability is imposed so as to regulate the acts of a corporation. The principle of corporate criminal liability is based on the doctrine of respondent superior which is also commonly known as the theory of vicarious liability, where the master is made liable for the acts of his servant. Corporations or most other legal entities may be criminally liable for the crimes of their employees and agents. Any corporation can be made liable for act of its agent or servant if s/he (a) commits a crime; (b) acts within the scope of employment; and (c) with the intent to benefit the corporation

In USA, “Corporate Criminal Liability Act, 1989″ is also known within the business community as the “Be a Manager, Go to Jail” bill. A corporate criminal liability act (CCLA), in essence, imposes criminal sanctions (including incarceration for more than a year) on individual managers who fail to report “serious concealed dangers” present in the workplace. France enacted its corporate criminal liability in 1994 and followed by other EU states such as Belgium (1999); Italy (2001); Poland (2003); Romania (2006); Austria (2006); Luxembourg (2010); Spain (2010); Czech Republic (2012) and Slovakia (2016).

Recently, the Argentine Congress has taken new steps to fight transnational bribery and crimes against the public administration with its passage of the Law on Corporate Criminal Liability No. 27401 on Nov. 8, 2017. The law is intended to raise awareness among companies on how they can prevent corruption, specifically with efforts to strengthen organizational culture, controls and anti-fraud policies as well as their processes and systems.

After all, Malaysian public came to know about this corporate liability provision on 22 August 2013, when the former MACC chief commissioner, Tan Sri Abu Kassim, announced that there is a need for such provision in the MACC Act 2009 to allow prosecution against local and foreign companies for offences committed by their employees. On 23 April 2014, the Minister in the Prime Minister’s Department said that the drafting of corporate liability provision is in the final stage and expected to be tabled in Parliament by year end of 2014. On 9 December 2014, the Minister in the Prime Minister’s Department again mentioned that corporations or companies are to be hold accountable for corrupt practices of its employees and on 22 December 2014, it was reported in the press that corporate liability provision will be tabled at the next parliamentary session in March 2015. Silence is definitely deafening!

It was almost a year later that on 16 October 2015, the Minister in the Prime Minister’s Department once again, for the third time, announced that corporate liability provision to enable the punishing of companies engaging in corruption practices may be tabled in Parliament the following year in 2016. Almost another silent year and on 6 October 2016, the very same Minister in the Prime Minister’s Department announced again, for the fourth time, that the proposed amendments to MACC Act 2009 were expected to be tabled at the Parliament by March 2017 and the Corporate Liability Provision will come into force in 2018. Time really flies and leaves its shadow behind! March 2017 Parliament sitting was done and long gone. The 2nd Meeting of the 5th Session of 13th Parliament sitting from 24 July to 10 August 2017 is also done and gone. And finally, after a long last – four years later, this bill was tabled in the 1st Meeting of the 6th Session of 13th Parliament sitting on March 26, 2018.

Not too long ago, on 29 December 2016, our friendly neighbour, Indonesia has issued an Article 3 of High Court Regulation 13/2016 – Handling Corporate Crime Cases which spelled out that corporate criminal offence is defined as a criminal act done by any person who, based on an employment relationship or other relationship, acts whether alone or with others, for and on behalf of the corporation within or outside the corporation business environment. Giving or receiving bribe, indeed, is a criminal offence! Indonesian Corruption Eradication Commission / Komisi Pemberantasan Korupsi (KPK) named PT DGI as a suspect in a corporate graft case in a hospital project at Udayana University, Bali which caused Rp25 billion in state losses in the Rp138 billion project in July 2017. By October 2017, KPK has successfully won the case and the former president director of PT DGI was sentenced to imprisonment for four (4) years and commercial organization was ordered to pay Rp47 billion (US$3.5 million) in compensation for state loss.

All is not lost, the Section 17A(4) of MACC (Amendment) Bill states that if a commercial organization is charged for the corporate liability offence, there is a defence for the commercial organization to prove that the commercial organization had in place “adequate procedures” designed to prevent persons associates with the commercial organization from undertaking such conduct. So, in the event of a corporate criminal liability investigation, the ISO 37001:2016 Anti-bribery Management System standard can help companies and organisations to demonstrate that reasonable steps or ‘adequate procedures’ have been put in place and appropriate action taken to prevent bribery and corruption. A defence to a prosecution available to an organization is one of having “adequate procedures” in place to prevent bribery. Such procedures refer to having effective anti-bribery and corruption compliance program in place. These ‘steps and procedures’ are already having a mitigating effect in some jurisdictions.

Indeed, ISO 37001:2016 Anti-bribery Management System and its compliance program greatly reduces the risk of suffering high costs, penalties and reputational damages associated with corruption or bribery offence committed by commercial organization, if there is any!

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