In a speech delivered on 10 December 2018, the Prime Minister of Malaysia announced that the corporate liability amendments to the MACC Act will be brought into force on 1 June 2020.
Further, I had earlier written about the important defence of adequate procedures. It is a defence for an organisation to show it had adequate procedures in place to prevent such associated persons from carrying out the corrupt conduct.
The Prime Minister’s Department has also now issued the Guidelines on Adequate Procedures pursuant to section 17A(5) of the MACC Act. The guidelines (in the Malay and English version) can also be download from the Governance, Integrity and Anti-Corruption Centre (GIACC) website.
Five Guiding Principles for Adequate Procedures: T.R.U.S.T.
The Guidelines on Adequate Procedures outline the five guiding principles of T.R.U.S.T.
- Top Level Commitment.
- Risk Assessment.
- Undertake Control Measures.
- Systematic Review, Monitoring and Enforcement.
- Training and Communication.
I make six observations on these guiding principles
#1: Top Level Management is Primary Responsible
Principle I refers to the responsibility of top level management to ensure that the commercial organisation essentially practices the highest level of integrity and ethics. The guidelines defines “top level management” to be a person who is the organisation’s director, controller, officer or partner, or who is concerned in the management of its affairs. This is a wide definition and can be imposed a wide range of persons managing a commercial organisation.
#2: Recommended for a Corruption Risk Assessment Every Three Years
Principle II recommends that a comprehensive risk assessment is done every three years, with intermittent assessment conducted when necessary.
#3: Control Measures including a List of Policies and Procedures
Under Principle III, commercial organisations should establish policies and procedures to cover:
- general anti-bribery and corruption policy or statement
- conflicts of interest
- gifts, entertainment, hospitality and travel
- donations and sponsorships, including political donations
- facilitation payments
- financial controls, such as separation of duties and approving powers or multiple signatories for transactions
- non-financial controls, such as a separation of duties and approving powers or a pre-tendering process
- managing and improving upon any inadequacies in the anti-corruption monitoring framework
- record keeping for managing documentation to the adequate procedures
#4: Systematic Review: Recommended External Audit Every Three years on Anti-Corruption Controls
Under Principle IV, the organisation is to consider an external audit (e.g. MS ISO 37001 auditors) by a qualified and independent third party at least once every three years. This will help obtain assurance that the organisation is operating in compliance with its policies and procedures in relation to corruption.
#5: Training and Communication to Employees and Business Associates
Under Principle V, the organisation’s anti-corruption policy should be made publicly available and communicated to all personnel and business associates. The commercial organisation should provide its employees and business associates with adequate training to ensure thorough understanding of the organisation’s anti-corruption position.
#6: Wider Meaning of an Associated Person?
Under the corporate liability provision of section 17A of the MACC Act, a commercial organisation commits an offence if a person associated with the commercial organisation does the corrupt act. Section 17A(6) defines a person associated as a director, partner, an employee or a person who performs services for or on behalf of the commercial organisation.
The guidelines then defines the term “associate” in relation to a person and where the guidelines refer to the engagement between the commercial organisation and its business associates.
The term “associate” under the guidelines is wider than under the MACC Act and it means:
- any person who is a nominee or an employee of such person
- any person who manages the affairs of such person
- 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
- any corporation within the meaning of the Companies Act 1965 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
- 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.