Corporate Liability on Commercial Organisations in Malaysia

In 2018, the Parliament amended the Malaysian Anti-Corruption Commission Act 2009 (MACC Act), introducing corporate liability on commercial organisations in Malaysia.

It took effect in June 2020 and enables commercial organisations and associated personnel to be subjected to legal actions if the person associated with the organisation commits corruption offences. 

Section 17A of the MACC Act 2009

This section governs the corruption offence committed by a commercial organisation. 

The act imposes strict criminal liability on commercial organisations where an associated person corruptly provides any gratification with the purpose of obtaining or retaining business, or an advantage in the business conduct, for the commercial organisation.

The provision's scope applies to Malaysian companies and foreign companies conducting business in this country. A company will be liable regardless of whether it had any knowledge of the associated persons' offence. 

The offence's penalty is a fine not less than ten times the bribe's value or RM 1 million, whichever is higher, and/or imprisonment no more than 20 years. 

The introduction of parallel personal criminal liability for the senior personnel of a commercial company ensured that the Government has a clear intention to hold business owners accountable for corrupt acts perpetrated through their companies. 

Criminal liability

Section 17A(3) of the MACC Act provides that senior personnel found to be liable for corruption under Section 17A at the time of the offence's commission are considered to have also committed the same offence. 

Not only would a commercial organisation be liable for corruption committed by associated personnel, but its senior personnel holding the office at the time of the offence's commission will be considered to have personally committed the crime as well. 

Associated persons

According to Section 17A(6) of the MACC Act 2009, associated persons include:

• Director,
• Controller,
• Officer,
• Partner,
• Employees,
• Persons who perform services for and on behalf of the commercial organisation. 

Section 17A(7) says a person performing services for and on behalf of a commercial organisation is decided by reference to all relevant circumstances. 

 Senior personnel of commercial organisations must stay up-to-date with this law.

Defence against corporate liability for corruption

Section 17A(4) of the MACC Act 2009 states that a commercial company shall be acquitted of a charge if it can prove that it had established procedures to prevent persons associated with the organisation from undertaking such conduct. 

An accused person can evade conviction by proving that the offence was committed without their consent and exercised due diligence to prevent it.   

HR's responsibility

The corporate liability law puts the burden of proof on commercial organisations to show that they had undertaken enough due diligence to prevent corruption. Here are some actions that HR should take: 

1. Communicate with the business department to assess the standard practices 

The standard practices should also include communication with customers, suppliers or government authorities. It will help create a proper anti-corruption policy that will make it clear to employees what kind of behaviour is unacceptable. 

Many employees may not realise that certain obvious conducts are considered corrupt. HR can provide clarity to employees by addressing specific and common activities in the anti-corruption policy. 

2. Establish procedures and channels for employees to report offence

HR can create a channel for employees to report incidents anonymously and implement a whistleblowing policy to protect employees from retaliation. 

3. Implement special work arrangements for jobs that are corruption-prone

For instance, departments such as purchasing, sales and finance.

Some companies have mandatory block leave where employees go on leave for a while so employers can audit their work. There is also job rotation where employees do not work in the same position for too long. These arrangements can reduce corruption risk and increases the chance for the organisation to uncover possible corrupt practices. 

4. Review the training and development programmes

For example, regular anti-corruption training. Some organisations make it compulsory for all employees to finish an online anti-corruption training every year. 

5. Standardise the recruitment process

It will mitigate the risk of hiring decisions being made only by one person or used for corrupt intents. For example, hiring the son of a government official in exchange for specific business advantages. 

If the HR department has a strict hiring process, it will ensure hiring decisions are made objectively and independently. 

Companies affected by this law should already take steps to implement an appropriate anti-corruption compliance programme. Directors and other senior personnel should also ensure that anti-corruption policies and procedures will withstand scrutiny and are implemented throughout the organisation. 

Sources: Global Compliance News, Norton Rose Fulbright, Donovan & Ho

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