The Coming Into Effect of Section 17A MACC Act 2018 on 1.6.2020

by Lavinia Kumaraendran & Mavinthra Jothy ~ 22 May 2020

The Coming Into Effect of Section 17A MACC Act 2018 on 1.6.2020


Lavinia Kumaraendran (Partner)

Tel: 603-6201 5678 / Fax: 603-6203 5678

Email: lkk@thomasphilip.com.my

Website: www.thomasphilip.com.my

Mavinthra Jothy Thillainathan                                 (Senior Associate)

Tel: 603-6201 5678 / Fax: 603-6203 5678

Email: mjt@thomasphilip.com.my

Website: www.thomasphilip.com.my

The Prime Minister’s Office released a statement on 21.05.2020 notifying of the coming into force of Section 17A of the Malaysian Anti-Corruption Commission Act 2009 (the “Act”) on 1st June 2020. This section is modelled after the United Kingdom Bribery Act 2010 and the United States Foreign Corrupt Practices Act 1977. Section 17A creates a new strict liability offence for a commercial organisation and the only line of defence is to ensure that adequate procedures are in place to foster a business environment free of corruption.

Section 17A is essentially a corporate liability provision which provides that a commercial organisation can be found guilty if individuals involved within the organisation give or agree to give bribes with the intention of enabling the business entity to profit from the transaction.

Under Section 17A(8) of the Act, a commercial organisation is defined as either a company or partnership that is formed under Malaysian law or a company or partnership that carries on business or a part of a business in Malaysia.

Interestingly, Section 17A is a deeming provision in that any director, officer, partner or manager of a commercial organisation can be personally liable for the same offence if the commercial organisation is found liable, unless the individual establishes that the offence was committed without his consent, and that he had exercised the requisite due diligence to prevent the commission of the offence. What this means is that the burden of proof lies with the directors and management to show that the offence was committed without their consent or connivance and that he had exercised due diligence to prevent the commission of the offence.

If convicted, the commercial organisation is liable to a maximum fine of ten times the sum of the gratification involved or RM 1 million, whichever is the higher; or to imprisonment of a term not exceeding 20 years, or both.

There was initially some concern as to whether Section 17A which was passed by Parliament on 5th April 2018, would come into force in June 2020 as scheduled. This was particularly due to the current COVID-19 pandemic and consequently whether companies were prepared to face the introduction of this provision in this challenging economic climate. Nevertheless, the government persisted and with the coming into force of Section 17A on 1st June 2020, it does appear that the government is committed to combating corruption, improving integrity and implementing good governance.

With the coming into force of Section 17A, commercial organisations will now be incentivised to implement measures and policies to adhere to the law and ensure the business is not involved in corrupt activities for their benefit. Moving forward, companies and businesses must now start asking what is needed to show that there were reasonable steps or due diligence taken to prevent corruption from occurring within their organisation and take immediate steps to address any risks or misgivings in their organisations and businesses in order to steer clear of any possible liability for corrupt practices. It is important for a company to foster a culture of due diligence across all parts of its business. Companies should foster such a culture with a baseline standard for due diligence essential to building an adequate compliance programme.