Section 17A - Corporate Liability Provision - Adequate Procedures

This is part 2 of a 5 part series on T.R.U.S.T. - the acronym for the Guidelines on Adequate Procedures to mitigate Section 17A - Corporate Liability provision. In Part 2 of T.R.U.S.T, we discuss Principle 2 - Risk Assessment.

The adequate procedures work best when encapsulated within an organisation-wide anti-corruption compliance program. The guidelines, whilst not being prescriptive, nevertheless forward compelling arguments that an anti-corruption program designed and developed by compliance professionals both meet the spirit and the intent of adequate procedures.

When the Corporate Liability provision – Section 17A of MACC (Amendment) Act 2018 – comes into force on 1 June 2020, companies shoulder the burden of proof that they have put in place adequate procedures to mitigate the risk of corruption and bribery in their organisation. These are designed to protect both the business and their directors and senior management from personal liability in the event of a corruption investigation by the enforcement authorities.

Corruption Risk Assessment

The basis of an effective anti-corruption compliance program is risk assessment, more specifically corruption risk assessment. This risk assessment is also referred to as anti-corruption risk assessment or bribery risk assessment or anti-bribery risk assessment.

The anti-corruption risk assessment must be conducted periodically by the commercial organisation to identify, analyse, assess and prioritise both internal and external bribery and corruption risks. Since the business operations dictate the extent and comprehensiveness of the risk assessment, it falls to the Board of Directors/Top Management who provide Top Level Commitment, to formalise the anti-corruption risk exercise within the organisation.

This exercise then forms the basis of the policies and procedures of the anti-corruption compliance program of the organisation. The Organisational Anti-Corruption Plan or OACP is the umbrella under which the anti-corruption compliance program rests.

Vital Elements

The risk assessment should encompass vital areas that are prone to internal and external corruption risks. These include potential avenues for corruption that may exist through loopholes in the current governance framework of the organisation. Since the directors, company secretaries and senior management of a commercial organisation can be liable for corrupt acts of agents, suppliers, vendors and contractors, a governance framework that excludes appropriate checks and balances opens that organisation to potential risk and the possibility of abuse.

A balance must naturally be struck between the needs of the business and the requirements to safeguard the company from being used as a conduit for illegal activities. Hence the anti-corruption risk assessment and requisite internal controls should be both pragmatic and timely.

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