section 17A - corporate liability provision : no more coffee money?

How the new Corporate Liability provision is a wake-up call

Are you familiar with "coffee money"? It's the local Malaysian parlance for bribery. Or, in Malaysian legal terms, gratification.

Are you familiar with "coffee money"? If not, let me enlighten you, if I may. It doesn't refer to someone picking up the tab for the coffee you've both just had. It's the money that exchanges hands when a company or individual wants to get ahead in business or out of a certain predicament. It's the lubricant that's used to gain a customer, clinch a deal, secure an approval or escape enforcement. It's the local Malaysian parlance for bribery. Or, in Malaysian legal terms, gratification.

There's not much money to be had in cups of coffee these days, however. A new amendment to the Malaysian Anti-Corruption Commission Act sets out the Corporate Liability Provision. The new Bill, gazetted in May 2018, includes a provision in Section 17A which criminalises corporations if any associated person commits an act of corruption with the intention of obtaining, retaining or taking undue advantage in the conduct of business for the organization. This means that a company commits an offence if a person associated with it offers or gives a bribe to benefit the organisation. In this context such a person can be an employee, a director, a partner or a 3rd party, such as a supplier, who provides services for or on behalf of the corporation. It's modelled after the UK Bribery Act 2010.

This provision is aimed at preventing private corruption in Malaysia and is meant to ensure that businesses, both Malaysian incorporated and foreign owned companies operating in the country, adhere to ethical business practices. To add to the severity of the new law, when a commercial organisation commits an offence, its Directors and Top Management are equally liable. In their defence, they need to prove they did not know about the offence and that they had done all they could in their respective roles to prevent such an offence. It's commonly referred to as the "adequate procedures" defence. And a robust compliance program that adheres to an Anti-Bribery Management System advocated in ISO37001:2016, with a competent compliance professional helming the role in the company, goes a long way in this regard.

For a convicted offender, the penalties are pretty high. A fine of MYR1 million or not less than 10 times the bribe, whichever is higher. Alternatively, being behind bars for 20 years. Or both a fine and imprisonment. A rather unpleasant combination.

The new law is expected to come into force in June, 2020. And the Malaysian corporate sector is aware that companies which do not operate with integrity will find it increasingly difficult to attract quality talent, customers and vendors. And the new adage will not be along the lines of money for coffee.

©RC Compliance Consultancy-2019

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