[Jointly written by Bryan Boo with Richard Wee of Messrs Richard Wee Chambers]
In our previous article, we discussed the 5 core principles encapsulated in the ‘Guidelines on Adequate Procedures Pursuant to Subsection (5) of Section 17A Under the Malaysian Anti-Corruption Commission Act 2009’ with regards to what amounts to ‘adequate procedures’ under Section 17A(4) of the Malaysian Anti-Corruption Commission Act 2009 (“MACC Act”).
However, further guidance on what amounts to ‘adequate procedures’ may be sought from jurisdictions that have a provision similar to the Malaysian Section 17A, for example, the United Kingdom.
Section 17A(4) is to a large extent modelled upon Section 7(2) of the Bribery Act 2010, which is the primary law for bribery in the United Kingdom. The latter provides as follows:
But it is a defence for C to prove that C had in place adequate procedures designed to prevent persons associated with C from undertaking such conduct.
A few English cases may be referred to in order to determine what the English courts opined amounted to ‘adequate procedures’ and when the procedures in place were regarded as inadequate for purposes of a defence.
Case #1: R v Sweett Group plc, unreported (Self-reporting and full cooperation)
Sweett Group’s (“Sweett”) subsidiary, Cyril Sweett International Limited, secured a contract for the construction of a hotel in Abu Dhabi by making corrupt payments to board members of corporations related to the deal. Sweett pled guilty to the charge of failing to prevent bribery, admitting that it did not have adequate anti-bribery policies and procedures in place. Sweett had also done little to respond to KPMG’s reports calling for improved internal governance.
This conviction sent a strong message that companies in the United Kingdom must take full responsibility for the actions of their employees and in their commercial activities, act in accordance with the law.
Case #2: Serious Fraud Office v Standard Bank PLC (Now Known as ICBC Standard Bank PLC)  Lloyd’s Rep. FC Plus 122 (Unclear policies and insufficient guidance)
This was a case concerning the payment of a bribe by persons associated with Standard Bank to Tanzanian government officials to secure a mandate to act as lead managers for a sovereign note issuance. It is pertinent to note that the offence pertains only to an allegation of inadequate systems.
Lord Justice Leveson at Southwark Crown Court opined that although there were systems in place, they were nevertheless inadequate as the policy was unclear and was not enforced effectively. Besides, the training did not provide sufficient guidance on the relevant obligations and procedures, particularly in situations where two entities within the banking group were involved in a transaction, and the other entity engaged a third-party consultant.
This case illustrated the need for companies to have policies and training that are specifically tailored to the particular transactions that they are involved in. Such policies and training should also be accessible, clear and demonstrably used by employees in order to be construed as an adequate procedure.
Case #3: Serious Fraud Office v Rolls-Royce PLC and Anor  Lloyd’s Rep. FC 249 (Minimal and sporadic training)
On 17 January 2017, the United Kingdom Serious Fraud Office (“SFO”) announced that it had entered into a deferred prosecution agreement (“DPA”) with Rolls-Royce Plc and its subsidiary, Rolls-Royce Energy Systems Inc (“RRESI”) for the sum of £497.25 million. The DPA was approved by Sir Brian Leveson, president of the Queen’s Bench Division at the Royal Courts of Justice.
Rolls Royce was found to be involved in a bribery scandal between 1989 and 2013. The corrupt conduct spanned across Indonesia, Thailand, India, Russia, Nigeria, China and Malaysia, including bribing government officials to secure orders.
The indictment submitted under the DPA led to a four-year investigation into bribery and corruption and contained 12 counts of conspiracy to corrupt, false accounting and breaches of section 7 of the Bribery Act 2010, as well as the corporate offence of failure to prevent bribery being committed by an associated person to obtain or retain business or a business advantage.
It was emphasised that albeit making ‘some effort to put bribery prevention measures in place’, the efforts were inadequate in the context of the type of organisation and the areas where Rolls-Royce was operating. Sir Brian Leveson was of the view that Rolls-Royce had failed to instil within the wider business culture of compliance especially in jurisdictions all of which could objectively be seen as having a high corruption index perception. Minimal and sporadic training, coupled together with persistent offences that spanned throughout the years had indeed aggravated Rolls-Royce’s conduct.
Case #4: R v Skansen Interiors Ltd, Southwark Crown Court, unreported (Absence of specific policies)
Skansen Interiors Limited (“Skansen”), a refurbishment contractor was invited by DTZ Debenham Tie Leung (“DTZ”) to tender for two refurbishment contracts. The former managing director of Skansen had allegedly made two payments of £10,000 and offered to pay a further sum of £29,000 to a former project manager of DTZ. Following an internal investigation, Skansen self-reported the wrongdoing to the National Crime Agency, dismissed the managing director and the head of commercial, and gave full cooperation to the investigation.
Upon prosecution for the offence of bribery, Skansen argued that it had adequate procedures in place to prevent bribery. Skansen’s defence was that notwithstanding the absence of any specific policies, it was established across the organization that its staff should not offer any form of bribe. There were also anti-bribery clauses in the contracts to which the bribes relate. Due to the size of the company (of which was approximately 30 employees), Skansen argued that such checks and balances would suffice and that it did not require complex and sophisticated control procedures in order to be deemed to be adequate.
The jury returned a guilty verdict and decided that the controls in place at Skansen were insufficient. Skansen was convicted of failure to prevent bribery.
The guilty verdict in Skansen’s case seems to connote that companies are expected to be more robust in implementing written procedures which are satisfactorily communicated. It is also salient for a company to keep compliance records. Larger companies are encouraged to have a dedicated compliance director with designated responsibility for anti-bribery.
Case #5: Director of the Serious Fraud Office v Airbus SE  Lexis Citation 56 (Scrutinising Third-Party Business Relationships)
Airbus SE, being one of the world’s two largest manufacturers of commercial aircraft, faced five counts of failing to prevent bribery under Section 7 of the Bribery Act 2010 in regards to Malaysia, Sri Lanka, Taiwan, Indonesia and Ghana. Essentially, persons associated with Airbus had offered huge sums of money to third parties with the aim of securing the purchase of aircrafts.
In an approved judgment by the Southwark Crown Court, Dame Victoria opined that “bribery usually involves two sides: those willing to pay a bribe and those willing to take a bribe.” On the point of adequate procedures, the Court was of the view that albeit having bribery prevention policies and procedures in place, it was not difficult to go around such policies and procedures resulting in falsification of invoices and payments as well as compliance materials. The Court further opined that the offence committed in this particular case was grave as it involved business partners, senior employees, and even employees entrusted with compliance responsibilities. The weakness of senior corporate oversight in Airbus was also a factor considered by the Court, in view that there should be an increase in international awareness that corrupt business practices are detrimental in nature.
Nonetheless, the Court had applauded Airbus for its efforts in making noteworthy changes to its internal processes. Besides having an entirely different management team, Airbus had in fact commissioned an Independent Compliance Review Panel (ICRP) to complete an independent review of its ethics and compliance procedures. An Anti-bribery and corruption risk assessment was also launched, and offenders were removed from their employment with Airbus.
This case illustrates the need for companies to put third-party business relationships to scrutiny by conducting proper due diligence prior to making payments. Gifts and entertainment expenses should be thoroughly inspected. In ascertaining the intended recipients of payments made from the company, internal communications among employees should also be monitored.
While the ‘Guidelines on Adequate Procedures Pursuant to Subsection (5) of Section 17A Under the Malaysian Anti-Corruption Commission Act 2009’ issued by the Prime Minister’s Department may be a helpful guide as to what amounts to ‘adequate procedures’, it cannot be denied that the factual matrix and surrounding circumstances often differs from company to company. With a long, non-exhaustive list of variables, should ever a case be brought before the Malaysian courts for an offence under Section 17A in which a Section 17A(4) defence is raised, the courts will likely have to look at the facts and circumstances of each individual case and decide on a case-to-case basis whether or not the commercial organisation had in place ‘adequate procedures’.
Stay tuned for our next article in which we discuss Section 17A(4) in the Malaysian landscape and proffer some suggestions and steps that a commercial organisation may implement so as to hopefully fulfil the requirements of ‘adequate procedures’ under Section 17A(4).