corpliability

The Corporate Liability Provision: How can tech help?

As of April last year, there was a little-known bill passed to amend the Malaysian Anti-Corruption Commission (MACC) Act 2019.

The Section 17A provision was passed and when it comes into effect on April/June 2020, any commercial organisaton would be committing an offense if an associated person engages in corruption in order to obtain or retain business or advantage for the organisation.

PriceWaterhouse and Cooper (PwC) Malaysia calls it the most significant change to anti-bribery and corruption legislation in years. An article by ACCA Global at www.accaglobal.com, that was published in January this year, explains why this is so.

Corporate liability provision

When found guilty, a commercial organisation could be fined not less than 10 times the gratification paid or offered, or RM1 million, whichever is higher.

Not only that, but its directors and key managers would also be automatically guilty, if an associated person is found to have been committing the bribe.

Now, the term “associated persons” can mean directors, partners, employees, agents, distributors, contractors, and subsidiaries, among others.

This is a very wide exposure that a company has, to corrupt acts of persons and entitles ‘associated’ with the organisation.

CEO of Trident Integrity Solutions Dr Mark Lovatt observed this means top management have to be proactive in preventing acts of corruption.

“It is no longer a defence to claim ignorance,” he said.

Partner at Wong and Partners Brian Chia said,”It is a very high and onerous standard. The burden is now upon the company to show they had in place adequate procedures designed to prevent associated persons from undertaking such corrupt practices.”

And experts recommend organisations to not wait for a government issuance on what these “adequate procedures” may be. To get started, they may look to available resources from UK’s Ministry of Justice, Transparency International, the U.S Department of Justice, and even ISO37001: Anti-Bribery Management Systems, to get ahead of the deadline.

An early draft that seeks feedback from the stakeholders, is also necessary, the article had recommended.

Our five-year anti-corruption plan (NACP)

While all of this is happening on the private sector side, there is also a new resolve to reduce, if not eradicate, bribery and corruption at in the public sector.

With that in mind, a special cabinet committee on anti-corruption was formed and chaired by our prime minister himself, and a 5-year National Anti-Corruption Plan (NACP) has since been formed.

The hammer is going to come down hard.

There is also reason to believe this is just one of many plans underway to strengthen our business ecosystem’s integrity.

For example, the Securities Commission (SC) has issued a press release late last month that they will be implementing action plans to support the NACP in improving Malaysia’s corporate governance.

As such, the SC is making it a requirement for all listed companies to put in place anti-corruption measures.

Addressing the public sector with tech

The accounting fraternity is hard pressed to meet these standards that our country has set.

UHY Managing Partner, Steven Chong, feels that the independent professional accountant can add value from one aspect at least – public procurement.

He shared a keynote speech by former Auditor General Tan Sri Ambrin Buang in 2017, that public procurement is one area most vulnerable to corruption, in many countries.

Steven added that he was most encouraged by current  reform that is paying attention to international best practices from OECD guidelines and even the Open Contracting Partnership standards.

He described, “Put simply, Open Contracting allows governments the prospects of securing better value for money, goods, works and services while building trust with the private sector.

“With an open data standards, the prospects of tools, analytics, and mobile apps built upon such data include modules that facilitate bidding for business, dashboards to monitor performance, tools to flag potential corruption risks and feedback processes that monitor government contracting in real time. ”

He also identified blockchain’s potential, highlighting that it is a “ledger for the accountability of any sort of transaction, financial or not, with the records decentralised…”

This makes transactions recorded on blockchain tamper-proof. This in turn, makes it particularly useful in the registry of assets and process of procurement.

Technology now provides end-to-end transparency in government procurement, allowing detection of red flags, bid rigging, phantom vendors and price fixing using advanced analytics, Chong had shared.

Overall, the enforcement date of the 17A corporate liability provision is fast approaching. Aside from the SC sending a friendly reminder to listed companies, and a few articles talking about this provision, it remains to be seen if commercial organisations in Malaysia have fully realised the consequences of Section 17A coming into enforcement, next year.

Can we pass muster?