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Significance of Section17A
• Introduce for the first time - a strict liability offence for commercial
organizations
Rationale
To encourage commercial
To combat a perception that
organizations of all industries
graft and bribery were
and sizes to take reasonable
acceptable business
and proportonate measures
practices in developing
to prevent corruption in their
countries, such as Malaysia.
organization.
COMMERCIAL ORGANIZATION
How?
How?
3 essential ingredients
A ‘Person Associated’
Defined under Section 17A(6) :-
‘person associated’
• Extra-territorial reach:-
• Foreign agent committing bribery outside Malaysia for locally
incorporated company
• Local agent committing bribery in Malaysia for foreign company
carrying on business in Malaysia
‘person associated’
• UK guidelines:
• contractors could be ‘associated’ persons to the extent that they are
performing services for or on behalf of a commercial organisation.
• a supplier can properly be said to be performing services for a
commercial organisation rather than simply acting as the seller of
goods
• Where a supply chain involves several entities or a project is to be
performed by a prime contractor with a series of sub-contractors, an
organisation is likely to exercise control over its relationship with its
contractual counterparty
Bribe given
• No requirement to show that bribe was actually given or received.
• The gratification given by the associated person can be for either the
benefit of the recipient or any other person
OR
A Person
who, at the time when the commercial organization
commits the offence, is
S. 17A (4)-
S. 17A (3)-
BOTH
Statutory Defence
Lessons learnt:-
• Prompt self-reporting – Sweett only reported payments a week after a WSJ
news article linked Sweett to Middle Eastern bribery.
• Stop the impugned conduct immediately and do not attempt to create
defence during investigation – Sweett tried to get a letter from AIAC to
suggest the payments were made under some fee arrangement and continued
to make the payments.
• Full cooperation – Sweett had refused to hand over accounts of witness
interviews and issued false public statement that it had given full co-
operation
• In 2016, Skansen appointed a new CEO. The new CEO initiated internal
investigation and realised that:-
GBP 10,000 was given by Skansen’s former managing director to a
project manager at DTZ to gain the award of the contracts;
a further GBP 29,000 was promised to the project Manager at DTZ upon
completion of the contracts.
• During trial, Skansen raised the “adequate procedures” defence on the basis
that:
1. substantial or sophisticated contol procedures are not necessary as the
company is small, and its business only operated locally
2. the company has a culture of honesty and integrity
3. the company has guidance on ethical dealings with third parties
4. the company has financial controls in place which required multiple
approvals
5. the related contracts contained clauses prohibiting bribery
6. the main person involved was specifically aware of the need to avoid
corrupt conduct.
• NOTE: UKBA 2010 does not imposes parallel personal liability on top-level
management but the personnels involved in the act of bribery are still found
guilty of an offence under Section 1 and Section 2 of the UKBA.
Standard Bank Plc [now • UK’s first Deferred Prosecution Agreement and use of section 7 in Bribery Act.
known as ICBC Standard
Bank Plc] • The charge related to a US $6m payment by a former sister company in
(2015) Tanzania to a Tanzanian firm which was owned by two senior Tanzanian
government officials.
• The bank eventually escaped prosecution in return for a financial penalty and
the promise that it will inform its anti-bribery rules and enforcement and not to
re-offend for three years.
XYZ Ltd
(2016) [UK SME Subject to an indictment alleging conspiracy to corrupt and conspiracy to bribe in
unnamed due to ongoing relation to contracts to supply its products to customers in a number of foreign
related legal proceedings] jurisdiction
What are
ADEQUATE PROCEDURES?
Adequate Procedures
Top-Level
Commitment
Training and
5 Key Risk Assessment
Communication
Elements
Systematic
Due
Review and
Diligence
Monitoring Source: Adapted from UK Ministry of
Justice Guidance
• Higher-risk situation which may call for higher level of due diligence:-
• merger or acquisition;
• use of an intermediary to establish a business in foreign markets; or
• where local law requires the use of local agents to carry out the
busienss activities.
• May include:-
• direct request for details on background, expertise and business
experience of relevant individuals
• verification through research, credential and reference checking
• indirect investigation
© 2018 Wong & Partners 48
Protecting company, directors and management from exposure to S17A liability
• Provides the knowledge and skills to implement the procedures and deal
with corruption-related issues
• Policy
• Training
• Reporting channel
Monitoring Auditing
• refers to the continuous • refers to a limited review which
commitment to review and targets a specific business
detect compliance issues in component, region or market
“real time” sector during a particular time
frame
• allows organisation to identify • upon identifying gaps, to conduct
and address gaps in program special audits on the operations
on a regular basis to further investigate the issues
Challenges Ahead
• Different sectors pose different levels and types of risk : Construction,
Property, Industry, Plantation and Infrastructure
KEY QUESTIONS:-
• Is XY / Y considered an associated person of X?
• what are the adequate procedures which X should consider
in setting up the joint venture XY?
Key Questions:-
• Is the consultant considered an associated person of X?
• what procedures should X consider in engaging the
consultant?
• Yes, if the consultant has paid bribe while performing services for X with
intention of getting new business for X.
• same applies to principal-agent relationship
Organizational transparency
• Benefits of disclosure:-
remove opaque structure which may be used to hide proceeds of
corruption.
allows local stakeholders to identify the entities which are operating
in the local jurisdictions, their relationship in the international network
of related entities.
allows stakeholders to gain knowledge of financial flows among the
organization.
© 2018 Wong & Partners 68
Transparency in Corporate Reporting
Organizational Transparency
Organizational Transparency
• Self-assessment checklist:-
Subsidiaries
Does the company disclose all of its subsidiaries?
Does the company disclose percentages owned in each of its subsidiaries?
Does the company disclose countries of incorporation for each of its
subsidiaries?
Does the company disclose countries of operations for each of its subsidiaries?
Key Takeaways
• Need to put in place ‘adequate procedures’.
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© 2018 Wong & Partners