Bribery and corruption continue to be a persistent challenge in the business world, affecting not only the reputation and integrity of companies, but also society as a whole. 

Transparency International Corruption Perception Index (CPI) latest report provides that Malaysia’s score fell to 47 out of 100, the lower the score indicates a higher level of perceived corruption. This marks the third consecutive year of decline for Malaysia, from a high of 53 in 2019. 

To effectively address the issue of bribery and corruption, a comprehensive approach is necessary which includes the implementation of internal policies and employees training on ABAC. 

Donovan & Ho has assisted several clients in conducting Malaysian Anti-Corruption Commission (“MACC”) compliance exercises and live trainings. During these trainings, we present common and practical scenarios that are faced by management and staff alike in the real world. We have compiled just a few of the frequently asked questions that we receive during our ABAC trainings:

No. Question Answer

1.

What is the difference between bribery and corruption?

Bribery is the offering, giving, receiving or soliciting something of value in an attempt to illicitly influence the decisions or actions of a person with a position of trust within a company. 

Corruption is arguably wider, being the abuse of entrusted power for personal gain. Corruption can encompass bribery but also includes other forms of misusing public office for personal benefit such as embezzlement, nepotism, and fraud. 

2.

Why are companies focusing on only section 17A of the MACC Act 2009 out of the entire legislation? There are many offences contained in the MACC Act 2009, but most of them apply only to individuals.

Section 17A of the MACC Act 2009 is a provision that relates to the prosecution of a company, rather than an individual, for offences of bribery committed by their associated persons. 

A company can now be held liable for the bribery offences committed by their associated persons, if the company fails to take all reasonable steps to prevent such offences from being committed. 

3. What are the penalties if the bribe amount is low or insignificant? The penalty for an offence under Section 17A of the MACC Act 2009 shall be a fine of not less than 10 times the value of the gratification or RM1 million (whichever is higher), and/or jail for not more than 20 years, or both. A small bribe can still attract a large fine or jail time.

The management and senior personnel (such as director, partner, or person who is concerned with the management of a company), shall be deemed to have also committed the same offence when a company is found to be liable for corruption under section 17A. 

4.

What is the difference between “normal business conduct” and a bribe? Normal business conduct involves the exchange of gifts or hospitality in a transparent and ethical manner, such as giving a gift to a business partner or client during a festive season as a gesture of goodwill. This type of gift giving is not intended to influence the recipient’s business decisions or actions and is within the acceptable cultural norm. 

On the other hand, a bribe involves giving a gift or payment with the intention of influencing an official action or decision. For example, if a company gives a gift to a public official during a festival with the expectation that the official will award them a contract in return, this would be considered a bribe. 

To determine whether a gift constitutes a bribe, the surrounding circumstances and the intent behind the gift must be considered. Factors that may indicate corrupt intent include the timing of the gift in relation to a business decision, the value of the gift and any mutually beneficial arrangement between the giver and recipient. 

5.

What can my company do to prevent or mitigate corruption risks? Your company can implement the following to identify and address bribery and corruption risks:

  • ABAC Policy – Establish clear ethical standards and expectations for employees, and communicate them through an ABAC policy. 
  • Corruption Risk Assessment – Regularly assess corruption risks in the business operations. 
  • Training and Awareness – Provide a regular training to employees to distinguish corruption from acceptable business practices, how to properly react to common situations, on what your company’s ABAC policy says, as well as the consequences of engaging in corrupt practices. 
  • Due Diligence – Conduct thorough due diligence on third party(ies) (e.g., customers, suppliers, and other business partners) to identify any potential red flags.
  • Whistleblowing – Encourage employees or any third parties to report any suspected corrupt behaviour through an anonymous reporting system or whistleblower hotline. 
  • Monitoring and Audit – Regularly monitor business operations for any signs of corruption and conduct audits as needed. 
  • Compliance and Enforcement – Establish procedures for investigating and addressing any corrupt behaviour and enforce penalties as necessary. 

6.

Should my company perform a corruption risk assessment? Yes, it is mandatory for your company to perform corruption risk assessment and one of the first actions that should be done before drafting any ABAC policies or procedures. 

Corruption risk assessment is a systematic and comprehensive identification and evaluation of the risk potential for corruption within a company. It helps the company to identify, manage, and minimise the corruption risks. 

By conducting a corruption risk assessment, the company can understand the areas of their operations that are most vulnerable to corruption and can take proactive steps to implement ABAC measures tailored to their specific risks. 

We help clients with this step by using a GAP Analysis approach, presented in an Excel spreadsheet that can be updated.

7.

My company has multiple customers and suppliers. Should my company conduct due diligence to all customers and suppliers? It depends on several factors. Such checks do involve resources of time and costs to the company, so the degree of such checks and on whom such checks are done should be proportionate to the risk of corruption identified.

Due diligence helps to ensure that your company is doing business with credible, trustworthy, and financially stable partners. This can help to mitigate the risk of fraud, financial loss, reputational damage, and other negative consequences that could arise from working with unreliable third party(ies). 

8.

What should my company check for when conducting due diligence on third party(ies)? When conducting due diligence on third party(ies), your company should check on the following to ensure that you are entering into a business relationship with a trustworthy and compliant entity or individual:

  • Business reputation – check the third party’s business reputation and standing in the industry, including any prior history of unethical behaviour or legal disputes. 
  • Ownership structure – check the third party’s ownership structure and the background of its owners and key executives.
  • Financial stability – evaluate the third party’s financial stability and ability to fulfil its obligations such as debts repayment and meeting contractual obligations.
  • Legal compliance – check if the third party has a history of legal compliance, including compliance with labour laws, ABAC related laws, etc.
  • Background checks – conduct background checks on the third party, its owners and key executives via CTOS or CCRIS to evaluate their creditworthiness. 
  • Political Exposure – assess if the third party ties to any political figures or organisations that could pose a risk to your company
  • Published List – There  are also some published lists available online which can be used as a reference for due diligence check: 

Malaysia:

Malaysian Anti-Corruption Commission (MACC) Corruption Offender Database – the list includes individuals that have been investigated by MACC for corruption or other unethical behaviour.

Bank Negara Malaysia (BNM) List of Unauthorised Companies – the list includes companies that are not authorised to carry out financial services in Malaysia. 

Registrar of Societies of Malaysia’s Blacklist Check – the check includes individuals who are blacklisted by Registrar of Societies 

Global:

United Nations Sanctions List – the list includes individuals and entities that are subject to United Nations sanctions, such as asset freezes, travel bans, and arms embargoes. 

World Bank List of Ineligible Firms and Individuals – this list includes companies and individuals that are banned from participating in World Bank-financed projects due to unethical or illegal behaviour, such as fraud, corruption, and human rights violations. 

Transparency International Corruption Perceptions Index – this index ranks countries based on their perceived levels of corruption, and can be used as a reference for due diligence on companies operating in a particular country.

US Office of Foreign Assets Control Sanctions List Search – the list includes individuals and entities that are subject to US Sanctions.

9.

What are the considerations when establishing or reviewing a gift policy on receiving or giving gifts? There are several matters need to take into consideration when setting and reviewing your company’s gift policy:

  • Ethics and integrity – Establish clear ethical standards and expectations for accepting and giving gifts, in order to maintain your company’s reputation and integrity.
  • Approval process – Develop a clear and transparent process for employees to follow when accepting or giving gifts, including seeking approval from a supervisor or compliance department. 
  • Gift value and frequency – Establish clear & numerical limits on the value and frequency of gifts that can be accepted or given, to ensure that they do not create an appearance of impropriety or create a conflict of interest. 
  • Documentation – Require your company’s employees to document gifts received or given, including the purpose, value, and recipient/ giver, to maintain a record of all gifts.
  • Conflict of interest – Address all potential conflicts of interests that may arise from gift-giving and gift-receiving practices. 
  • Cultural sensitivity – Consider cultural differences and sensitivities in different regions and countries when developing the gift policy. 

10.

Can gifts be given to public officials?  Public officials are generally not allowed (or allow their spouse or any other person) to receive any gifts in any form from any person that is connected with the official duties of the officer. 

There are exceptions for certain personal celebrations that the public officials may accept the gifts such as retirement, assignment transfer or marriage, provided that the value of the item is ¼ of the emoluments or RM500 (whichever is lower). 

11.

My company’s staff has reported corruption and bribery elements in their dealings with a supplier or subcontractor. What can my company do?

Your company can take the following steps:

  • Utilise your company’s whistleblowing policy – encourage your staff to utilise the whistleblowing policy to report any incidents of corruption or bribery. The whistleblowing policy should provide a secure and confidential mechanism for reporting such incidents, and should protect the whistleblower from retaliation.
  • Investigate the matter thoroughly – conduct an internal investigation to gather all relevant information and evidence about the alleged corruption or bribery, which may involve reviewing records and emails.
  • Notify the authorities – report the matter to the relevant authorities such as police and MACC to allow for an impartial and independent investigation to take place. 
  • Take internal corrective action – based on the findings of the internal investigation, your company may need to take corrective action, such as terminating the agreements with the supplier (if the termination of the agreement is warranted), taking disciplinary action against the employees involved or implementing new policies or procedures to prevent similar incidents from occurring in the future. 
  • Implement ABAC measures – consider implementing ABAC measures to prevent similar incidents from happening in the future, such as getting the third party(ies) to sign your company’s ABAC declaration and provide undertaking and indemnity for ABAC related matters, conducting regular audits and risk assessments. 

12.

Is it permissible for my company’s staff to make payments to public official or others if his life is being threatened? This is a type of extortion payment, which is a payment made to someone who is threatening to cause harm or problems unless they receive something of value in return. 

Extortion payments are illegal and could result in potential legal or regulatory consequences. However, if the demand is accompanied by a threat to life, limb and liberty of the staff or others, then the staff may make such payment.  

It is advisable to report the threat to the relevant authorities immediately and seek their assistance in resolving the matter. Your company should also have internal procedures in place for employees to report such incidents and seek support, as well as comprehensive risk management policies to mitigate the risk of extortion and other forms of corruption. 

 

***

This article was written by Toh Jia Yi (Associate) and edited by Shawn Ho (Partner) from the corporate practice group of Donovan & Ho. Shawn leads the corporate practice group of Donovan & Ho, and has been recognised as a Notable Practitioner, whilst the firm has been recognised as a Notable Firm for Corporate and M&A by Asialaw Profiles 2020 and 2021.  We are also ranked as a Recommended Firm by IFLR1000 2020 and 2021.

Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. Feel free to contact us if you have any queries.

 

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