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InsiderTAPS (28 November 2018)

Stopping Corporations Guilt-Washing On Corruption – Malaysian Anti-Corruption Commission (Amendment) Act 2018

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28 November 2018

In April 2018, the Dewan Rakyat passed the Malaysian Anti-Corruption Commission (Amendment) Bill 2018 (hereinafter referred to as the “Amended Act”) which criminalised companies for corrupt acts. Historically, the Malaysian Anti – Corruption Commission (MACC) Act 2009 (hereinafter referred as the “2009 Act”) dealt with grafts and corruptions committed by individuals only. The Amended Act paved a new development of governance to address issues of corporate corruption. This development could be said to be overdue in view of the rising number of corporate corruption on a massive scale in Malaysia. At the time of writing this article, the Amended Act has not yet come into force. The effective date is expected to be 1 January 2020 to give MACC time for public advocacy and for stakeholders to prepare for this new regime.

History Leading to Amendment

Malaysia is ranked at 62nd place and scored 47 out of 100 in the 2017 Corruption Perception Index, an analytical statistics for corruption carried out by the watchdog organisation, Transparency International. This deterioration of 7 ranks as compared to in 2016 demonstrates a negative setting of corruption practices in the country, putting the nation behind our Asian neighbours such as Taiwan, Japan, Hong Kong and Singapore.

The 2009 Act is nearly a decade old and is struggling to combat modern operations and modus operandi of corruption activities. The 2009 Act received heavy criticisms from all corners due to its narrow implication of corruptions – applying mainly to agents (excluding the corporation itself). The 2009 Act demonstrates a rather short-sighted approach in capturing the “culprit in action” rather than the “real culprit of the action” benefitting from the fruits of the corruption practice.

Amendment Act 2018,

The Malaysian Parliament decided to modernise the Act with reference to the UK Bribery Act 2010 (hereinafter referred to as “BA 2010”) and the Foreign Corrupt Practices Act from the United States of America. The Amended Act introduces a new Section 17A to the 2009 Act and directly addressed Article 26 of the United Nations Convention against Corruption (hereinafter referred to as “UNCAC”) which was signed by Malaysia in 2003. Article 26 of UNCAC requires member countries to “adopt such measures as may be necessary, consistent with its legal principles, to establish the liability of legal persons,” in the commission of corruption offences in the country within their legal enforcements.

The operative mechanism of Section 17A is the attribution of the corrupt acts of “a person connected with the commercial organisation” to the commercial organisation. Once corporate liability is established, two things will follow:

First, the commercial organisation is liable to a maximum fine of ten times the sum of the gratification involved or one million ringgit, whichever is the higher; or to imprisonment of a term not exceeding 20 years, or both.

Second, a director, controller, officer, partner or a person concerned with the management of its affairs is deemed to have committed that offence, unless he proves the act was committed without his consent or connivance, and he has taken due diligence to prevent the offence.

Who is a “Commercial Organisation”?

Although routinely referred to as corporate liability, Section 17A applies to partnerships (both under the Partnership Act 1961 and the Limited Liability Partnership 2012). Of course, it applies to companies incorporated under the Malaysian Companies Act 2016. Section 17A will also apply to any company or partnership incorporated or established anywhere outside Malaysia but which carries on business in Malaysia. Section 17A(8) has also extended into extra-territorial jurisdiction by including Malaysian incorporated companies and partnerships committing corrupt practices outside of Malaysia.

Deemed Liability to Include Controllers

The deemed liability provision extends to directors, managers, officer, partners, persons concerned with management and controller. The last of these categories of people is perhaps not so well understood in Malaysia as the Malaysian company law does not use the “controller” concept nor require a company to have a register of controller. Taking a leaf from the Singapore Companies Act (Cap 50), a “controller” comprises of an individual controller or a corporate controller. An individual controller is “an individual controller who has significant interest in, or significant control over, the company or the foreign company” in relation to a company or foreign company. The latter simply means any legal entity, other than an individual who has significant interests or control in such.

Interestingly and frighteningly so, no distinction is made between an executive and non-executive director, and likewise between an active partner and a “sleeping” partner. Those who are implicated and do not wish to be deemed to be liable will have to show that he or she has taken due diligence to prevent the offence.

Persons Associated with the Commercial Organisation

Since Section 17A says that a commercial organisation commits the corrupt offence if a person associated with the commercial organization commits the corrupt act, who exactly is such a person? The section provides that he or she is a director, partner, employee of the commercial organisation or a person who perform services for or on behalf of the commercial organisation. The latter category is wide and could include a whole range of entities or persons who might be capable of committing corruption on behalf of the commercial organisation. This would include contractors and potentially those down the supply chain of service providers.

Defence – Adequate Procedures

There is a defence (and potentially a complete defence) to corporate liability if the commercial organisation is able to show it has in place “adequate procedures” to prevent such corruption from happening. This defence is given in recognition of the fact that there are many organisations that are well managed but despite all the best controls a rogue person associated with it could still commit the offending conduct.

The Minister in charge is responsible for issuing guidelines on the adequate procedures under the Amended Act. At the time of writing of this article such a guideline has not been published but it is understood that a working draft is making its way or about to make its way through stakeholders for inputs, comments and consultation. There is however precedent for such guidelines and they can be found in the UK’s Ministry of Justice Guidance on the Bribery Act 2010 and also another by Transparency International.

Returning to Malaysia, many Malaysian organisations have applied ISO 37001:2016 which prescribes anti-bribery standard procedure for organisations to follow. The ISO Guidelines sets out for corporations the methods to prevent, detect and respond to common forms of bribery. In addition, it also lays down requirements and guidance for the establishment, implementation, maintenance and improvement of an anti-bribery management system. This may however not be the complete answer to what constitutes adequate procedure under Section 17A.


Section 17A(2) of the Amended Act increases the penalties to a maximum imprisonment of 20 years and/or fine of not less than 10 times the value of gratification or One Million Ringgit Malaysia (RM1,000,000.00) (whichever is higher).

Deferred Prosecution Agreement

As a compliment and perhaps a useful tool from both the perspective of the State and the commercial organisations, deferred prosecution agreement (hereinafter referred to as “DPA”) should be explored with the advent of corporate liability. Lengthy investigations and trials could sometimes wreak more damage on a corporation under a cloud of corruption than the actual indictment. Shareholders of a publicly listed company may be the real loser if the agony drags and potentially puts the company out of business. A DPA could, in an appropriate case, serve the public interest, and the interest of the commercial organisation and its shareholders. The mechanism of DPA is an alternative to the criminal trial but the companies concerned are bound to strict conditions, undertakings, reforms and usually payment of substantial financial penalties in return for a deferment in prosecution. Having said that, the State may reinstate prosecution if the conditions, undertakings and reforms are not strictly complied with.

The DPA was recently seen in the prosecution of a Singaporean-based company, Keppel Offshore & Marine Ltd (“Keppel O & M”). Keppel O & M was charged under the US Foreign Corrupt Practices Act in connection with a scheme of paying millions of dollars in bribes to certain Brazilian officials to secure business for the company. Under the DPA, Keppel O & M agreed to pay a penalty of more than US$422 million to settle the charges with relevant authorities of United States of America, Brazil and Singapore . As noted earlier, prosecution could be reinstated if the concerned organisation slips up again or fails to abide by its undertakings to the State.

Going Forward

With the impending Section 17A coming into force, commercial organisations should seriously look into their internal processes, procedures and conduct trainings to avail themselves of the defence. As they say, it all starts with leadership and commitment at the top to resolutely shun all forms of corrupt practices, and a necessary change of mind-set for some organisations.

1Malaysian Anti-Corruption Commission (Amendment) Bill 2018
2Malaysian Anti-Corruption Commission Act 2009
3Transparency International, “Corruption Perceptions Index 2017” (Transparency International, 21 February 2018) <https://www.transparency.org/news/feature/corruption_perceptions_index_2017> accessed 23 October 2018
4Bribery Act 2010
5Foreign Corrupt Practices Act 1977
6United Nations Convention Against Corruption 2003, Article 26
8Supra note 1, s. 17A(8)
9Partnership Act 1961
10Limited Liability Partnership Act 2012
11Companies Act 2016
12Companies Act (Singapore), s. 386AB
13International Organisation for Standardisation, “ISO37001- Anti Bribery Management Systems” (International Organisation for Standardisation) <https://www.iso.org/iso-37001-anti-bribery-management.html> accessed 23 October 2018
14Supra note 8, s. 4
15Department of Justice – Office of Public Affairs, “Keppel Offshore & Marine Ltd. And U.S. Based Subsidiary Agree To Pay $422 Million In Global Penalties To Resolve Foreign Bribery Case” (2017).


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Nicole Leong
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Andros Lim