Pursuant to Section 17A(5) of the Malaysian Anti-Corruption Commission Act 2009 (MACC Act), the Prime Minister’s Department issued the Guidelines on Adequate Procedures to prevent persons associated with a commercial organisation from undertaking corrupt practices. To comply with Section 17A, the starting point would be to formulate and implement anti-corruption policies, procedures, programmes, and controls around the T.R.U.S.T principles, as discussed in our previous article.
In this article, we highlight some aspects to be considered under the T.R.U.S.T principles in drawing up the “Adequate Procedures”.
T.R.U.S.T Principles and “Adequate Procedures”
Whilst there is no definite or standard determination of the “adequacy” of corruption prevention policies and procedures, the question of whether a commercial organisation has implemented “Adequate Procedures” depends on the level of risk it faces in light of its size, nature, and complexity of business. Hence, an organisation should adopt a risk-based approach in drawing up policies and implementation procedures to fulfil the requirement of “Adequate Procedures”. For example, companies in the construction sector are generally more prone to corruption risks, given the significant monetary value and size of projects involving numerous parties.
T – Top Level Commitment
Top-level management plays an instrumental role in raising awareness of transparency and integrity in the commercial organisation. This includes ensuring the highest level of integrity and ethics, adhering to the anti-corruption regime, and managing key corruption risks effectively.
A clear anti-corruption programme (“Programme”) should encapsulate the following:
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A secure reporting channel
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A competent person or function tasked with providing guidance and ensuring compliance with the Programme
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Engagement with all parties on the organisation’s Programme
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A line of authority for personnel tasked with overseeing the Programme
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Periodic review of the risk assessment, control measures, and Programme performance
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Reporting of audit results to top-level management and ensuring actions are taken
R – Risk Assessment
The core of an effective Programme lies in the assessment of corruption risk within a commercial organisation. Ideally, this assessment should be performed before introducing any anti-corruption programme, as it identifies and mitigates specific corruption risks.
An assessment exercise may include:
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Identifying and analysing internal and external corruption risks
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Documenting the risk assessment and its conclusions
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Evaluating factors that might increase the level of corruption risk
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Conducting a thorough assessment of the organisation’s corruption risks periodically
U – Undertake Control Measures
Once corruption signs and risks are identified, a commercial organisation can introduce appropriate policies and procedures to prevent corruption. Upon endorsement by top-level management, these policies should be accessible to employees and the public and updated according to business needs and laws.
Such policies and procedures should cover:
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Key criteria and methodology for due diligence on relevant parties
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A reporting channel for corruption incidents (whistleblowing)
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A general anti-bribery and corruption policy
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A conflict of interest policy
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Policies on gifts, entertainment, hospitality and travel, donations, and sponsorships
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Protocols on facilitation payments, financial controls, and other non-financial controls
S – Systematic Review, Monitoring and Enforcement
A commercial organisation should have both internal and external review mechanisms for the Programme, as the organisation’s risk profile may evolve over time alongside business expansion. Reviews and audits should be documented and maintained permanently for corporate governance and compliance purposes. This preserves the evidence required to defend the organisation if corporate liabilities under Section 17A of the MACC Act are triggered.
T – Training and Communication
Training on the Programme helps employees, suppliers, agents, and other personnel learn about the organisation’s anti-bribery culture. Organisations may raise awareness about forms of corruption, specific risks associated with roles or sectors, and the consequences of corruption.
Two-way communication, both internal and external, is crucial:
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Internal communications focus on Programme implementation, management roles, and employee implications. A secure, confidential, and accessible channel should be provided for stakeholders to report and discuss corruption-related matters.
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External communications target parties that deal with the organisation, deterring them from bribing on the organisation’s behalf.
At the time of writing, Section 17 of the MACC Act is confirmed to be enforced on 1 June 2020, following the announcement by the Prime Minister’s Office on 21 May 2020. Commercial organisations are urged to draw up and implement suitable and sensible anti-corruption policies and procedures that fit their operations adequately.
This article is authored by:
Gan Khong Aik
Partner, Gan Partnership
E: khongaik@ganlaw.my
Lee Sze Ching (Ashley)
Associate, Gan Partnership
E: szeching@ganlaw.my
DISCLAIMER: This article is for general information only and should not be relied upon as legal advice. The position stated herein is as of the date of publication on 26th May 2020. For any enquiries, please contact Gan Khong Aik (khongaik@ganlaw.my).
