ON Dec 10, 2018, Prime Minister Tun Dr Mahathir Mohamad launched the “Guidelines on Adequate Procedures”, which seek to provide further clarity on the soon-to-be-enforced Section 17A of the Malaysian Anti-Corruption Commission (MACC) Act.
Under the new legal provision, commercial organisations in Malaysia such as companies, partnerships and limited liability partnerships are required to introduce “adequate procedures” to prevent acts of corruption related to the organisations.
Without such procedures such as internal guidelines or staff training, companies and their directors could be prosecuted under Section 17A if an associated person such as an employee or subcontractor is caught involved in corruption for the benefit of the commercial organisation.
Section 17A will be enforced from June 1, 2020 onwards.
The “Guidelines on Adequate Procedures” are based on five principles or “T.R.U.S.T” that serve as reference points for any anti-corruption policies, procedures and controls an organisation may choose to implement towards the goal of having adequate procedures as required under Section 17A.
The five principles are:
> Top-level commitment
The top-level management is primarily responsible to ensure that a commercial organisation upholds integrity, complies fully with anti-corruption regulations and provides assurance to its internal and external stakeholders that it is operating in compliance with its policies and any applicable regulatory requirements.
Among the measures that a commercial organisation could undertake under this principle are the establishment of an anti-corruption compliance programme, encouraging the use of any reporting or whistle-blowing channel, assigning a competent person to undertake all anti-corruption compliance matters, as well as issuing instructions on the organisations’ policies and commitments on anti-corruption to both internal and external parties.
In addition, the results of any audit or review of risk assessment should be reported to all top-level management and must be acted upon.
> Risk assessment
A commercial organisation should conduct risk assessments on internal and external corruption risks periodically, or when there is a change in law or circumstance of the business. Under the Guidelines on Adequate Procedures, it is recommended that a comprehensive risk assessment is done every three years, with intermittent assessments conducted when necessary.
The assessment may include opportunities for corruption and fraud activities resulting from weaknesses in the organisation’s governance framework, financial transactions that may disguise corrupt payments or relationships with third parties in the supply chain such as agents, vendors and contractors, among others.
> Undertake control measures
A commercial organisation should put in place appropriate control measures that are reasonable and proportionate to the nature and size of the business.
One such measure is the creation of a reporting channel for acts of corruption.
The commercial organisation should establish key criteria for conducting due diligence on any relevant parties or personnel such as board members, employees and suppliers prior to entering into any formalised relationships.
Not only that, internal policies and procedures must be created on several matters such as conflicts of interest, gifts, donations and sponsorships (including political donations) and facilitation payments.
> Systematic review, monitoring and enforcement
Regular reviews in the form of internal or external audits must be conducted to assess the effectiveness of the anti-corruption programme.
For this purpose, the commercial organisations should consider establishing a monitoring programme for review, engaging in external audit at least once every three years and taking disciplinary action against personnel found to be non-compliant to the programme.
> Training and communication
The commercial organisation should develop and disseminate internal and external training and communications relevant to its anti-corruption management system, in proportion to its operation.
This should cover several areas such as policy, training, reporting channel and consequences of non-compliance.
> See also page 16
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