United States: Malaysia Announces Intention To Require Listed Companies To Implement Anti-Corruption Measures

On 22 July 2019, the Securities Commission Malaysia (the "Securities Commission") announced that it would implement an action plan to strengthen standards of corporate governance to prevent corruption, misconduct and fraud in Malaysia.1 The Securities Commission's recommendations – which were approved by the Cabinet Special Committee on Anti‑Corruption – include a requirement that companies listed in Malaysia put in place anti‑corruption measures. These recommendations build on and dovetail with new corporate liability provisions (and the associated "adequate procedures" defence) of the amended Malaysian Anti‑Corruption Commission Act (the "MACC Act"), the amendments to which will come into effect in June 2020.2 Companies listed and/or doing business in Malaysia should play close attention to these developments.

Following Malaysia's ratification of the United Nations Convention against Corruption ("UNCAC") on 24 September 2008, Malaysia's Parliament passed the MACC Act on 11 December 2008, which came into force on 1 January 2009. As of 2009, the MACC Act defined various corruption offences criminalizing the inappropriate exchange of "gratification," which is broadly defined in Section 2 of the MACC Act to include most things of value. As of 2009, the offences included (a) accepting gratification, (b) giving or accepting gratification by agent, (c) intending to deceive principal by agent, (d) corruptly procuring withdrawal of tender, (e) bribery of officer of public body, (f) bribery of foreign public officials and (g) offence of using office or position for gratification. Section 17(A)(2) of the MACC Act provides for potential penalties for the company, directors, officers and managers of fines of up to ten times the value of the gratification provided (if capable of valuation) or RM1 million (US$238,276) (whichever is higher) and/or imprisonment of the director, officer or manager for up to 20 years.

Read together, Articles 21 and 26 of the UNCAC impose an obligation to establish the liability of legal persons for participating in bribery or other corrupt acts. However, as originally adopted, the MACC Act did not make express provision for corporate liability. While it was theoretically possible to impute "the acts and state of mind" of directors and managers to a company under the pre-amendment MACC Act, it proved difficult in practice to prove the necessary criminal intent or unlawful acts, which required proof that individuals making up the company's "controlling mind" committed the violations.

In the years that followed enactment of the MACC Act, discussion continued in Malaysia about how to provide for corporate liability for bribery or other corrupt acts.3 In August 2015, the Malaysian Bar, the Institute for Democracy and Economic Affairs, the Centre to Combat Corruption and Cronyism, the Citizens' Network for a Better Malaysia and Transparency International Malaysia released a joint memorandum calling for the addition of a corporate liability offence to the MACC Act.4 In October 2016, Minister Datuk Paul Low Seng Kuang of the Prime Minister's Department announced that amendments would be proposed to the MACC Act that would include provisions on adequate procedures and penalties in line with those already implemented in the United Kingdom and in Europe.5 In March 2018, Transparency International Malaysia issued a press release identifying the expedited passage of an amendment incorporating corporate liability provisions into the MACC Act as one of a number of "key concerns" for resolution by the Government.6

On 5 April 2018, Malaysia's Parliament passed amendments to the MACC Act that would, inter alia, render companies – and their directors, controllers, partners, officers and managers – liable for their employees' involvement in corrupt acts. The amendments received royal assent on 27 April 2018 and were gazetted on 4 May 2018. In order to fulfil Malaysia's obligation under Article 26 of the UNCAC,7 the amendments introduced a new Section 17A, which is aligned closely with the approach adopted in Section 7 of the UK Bribery Act 2010 (the "UK Bribery Act"). Specifically, the new Section 17A(1) provides for corporate liability where:

"A person associated with the commercial organization corruptly gives, agrees to give, promises or offers to any person any gratification whether for the benefit of that person or another person with intent – (a) to obtain or retain business for the commercial organization; or (b) to obtain or retain an advantage in the conduct of business for the commercial organization."

The corporate liability provisions apply to Malaysian companies (section 17A(8)(a)) and foreign companies conducting business in Malaysia (section 17A(8)(b)). "Associated persons" include directors, partners, employees and third parties acting on behalf of the company (Section 17A(6)).

In addition, Section 17A(3) provides that where a commercial organization commits an offence, its "director, controller, officer, or partner" or a person "concerned in the management of its affairs" is deemed to have committed the same offence, unless (a) he/she proves that the offence was committed without his/her consent or connivance; and (b) he/she exercised due diligence to prevent the commission of the offence as he ought to have exercised. Thus, lack of consent or knowledge is irrelevant if the person failed to exercise due diligence appropriate to his/her function.

Like Section 7(2) of the UK Bribery Act, Section 17A(4) of the amended MACC Act provides a defence where "the commercial organization had in place adequate procedures designed to prevent persons associated with the commercial organization from undertaking such conduct." On 4 December 2018, the Prime Minister's Department issued "Guidelines on Adequate Procedures," which emphasizes the following principles: top-level commitment, risk assessment, control measures, systematic review, monitoring and enforcement and training and communication.8 The Guidelines on Adequate Procedures are expressly "not intended to be prescriptive" and "should be applied practically, in proportion to the scale, nature, industry, risk and complexity of the organization."9

The Malaysian Anti‑Corruption Commission is expected to begin enforcing the new corporate liability provisions from June 2020.10 Based on a review conducted as of 31 May 2019, the Securities Commission found that only 59% of listed companies have an anti‑corruption policy, and the majority of these policies contain gaps when compared to the Guidelines on Adequate Procedures.11 In the remaining ten months, companies operating in Malaysia should carefully consider their anti‑corruption policies and procedures to ensure compliance with the new provisions.

*The authors are not admitted to practise in Malaysia and are grateful to Lee Shih of our Lex Mundi affiliate, Skrine, for his input for this update. The authors are also grateful for the research assistance of trainee solicitor Keyon Lo.


1 SC to Implement Anti‑Corruption Action Plan, Media Releases and Announcements of Securities Commission Malaysia, 22 July 2019, https://www.sc.com.my/resources/media-releases-and-announcements/sc-to-implement-anti-corruption-action-plan.

2 Id.

3 See generally YBhg. Tan Sri Abdul Gani Patail, Attorney General Malaysia, Keynote Address, Seminar on Corporate Governance: Corrupt Practices, 2 December 2014, http://www.legalplus.com.my/seminar-on-corporate-governance-corrupt-practices/.

4 Joint Memorandum for the Reform of the Malaysian Anti­‑Corruption Commission issued by The Malaysian Bar, 19 August 2015.

5 Revised MACC Act 2009 to come into force in 2018, New Straits Times, 6 October 2016, https://www.nst.com.my/news/2016/10/178559/revised-macc-act-2009-come-force-2018.

6 Business Integrity Country Agenda (BICA) – 2018 issued by Transparency International Malaysia, 15 March 2018, http://transparency.org.my/pages/news-and-events/press-releases/business-integrity-country-agenda-bica-2018.

7 MACC to use new provision to prosecute companies, not just individuals, The Star Online, 30 May 2019, https://www.thestar.com.my/news/nation/2019/05/30/macc-to-use-new-provision-to-prosecute-companies-not-just-individuals (quoting MACC Deputy Chief Commissioner (Operations), Azam Baki, as explaining that Section 17A of the amended MACC Act is intended to fulfil Malaysia's obligations under Article 26 of the UNCAC).

8 Guidelines on Adequate Procedures Pursuant to Subsection (5) of Section 17A under The Malaysian Anti‑Corruption Commission Act 2009 issued by Prime Minister's Department of Malaysia, 4 December 2018, http://integriti.my/giacc/wp-content/uploads/2019/01/Eng-Garis-Panduan-Tatacara-Mencukupi.pdf.

9 Id. at 2.

10 SC to Implement Anti-Corruption Action Plan, Media Releases and Announcements of Securities Commission Malaysia, 22 July 2019, https://www.sc.com.my/resources/media-releases-and-announcements/sc-to-implement-anti-corruption-action-plan.

11 Id.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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