Malaysia: Malaysia Announces Action Plan To Hold Listed Companies Accountable For Implementing Anti-Corruption Framework

Last Updated: 29 August 2019
Article by Calvin Chan, Jun Yi Ho and Jasmine M. Chan

The Securities Commission Malaysia announced, in late July 2019, that it will be implementing an anti-corruption action plan (the Action Plan). The Action Plan seeks to improve the standards of corporate governance in Malaysia “to prevent corruption, misconduct, and fraud.”1

The Action Plan complements recent anti-corruption legislative changes introduced by the Malaysian government – the corporate liability provisions under a new Section 17A of Malaysia’s primary anti-corruption law, the Malaysian Anti-Corruption Commission Act (the MACCA). These provisions apply to Malaysian companies and foreign companies doing business in Malaysia. Similar to the UK Bribery Act 2010, Section 17A of the MACCA provides an “adequate procedures” defense for commercial organizations. Malaysia’s prime minister has stated that Section 17A of the MACCA is expected to be enforced by the authorities by June 20202 (for more on this development, see our earlier article).

A key component of the Action Plan requires companies that are listed in Malaysia to put in place an “effective anti-corruption framework” that is in line with the Malaysian government’s Guidelines on Adequate Procedures issued in December 2018 (the Guidelines). This follows the Securities Commission’s May 31, 2019 review of companies listed in Malaysia. The review found that only 59 percent of these companies have an anti-corruption policy, with a majority of these policies having gaps vis-à-vis the Guidelines.3

Overview of the Guidelines

The stated aim of the Guidelines is to provide more information on the “adequate procedures” defense for commercial organizations under Section 17A of the MACCA.4

The Guidelines are not prescriptive in nature. Instead, they are centered on five principles that may be used as reference points for the anti-corruption policies, procedures, and controls commercial organizations may choose to implement, with the goal of establishing “adequate procedures.”5 These principles are: (i) top-level commitment, (ii) periodic risk assessment, (iii) appropriate control and contingency measures, (iv) systematic review, monitoring, and enforcement, and (v) anti-corruption training and communication.

The five principles substantially mirror the UK Ministry of Justice’s guidance on the UK Bribery Act 2010, issued on March 30, 20116 (the UK Guidance). The Guidelines emphasize that compliance programs do not have a “one-size-fits-all” standard. Notably, the concept of “proportionality” emphasized in the Guidelines is similar to the UK Guidance. In short, an organization’s compliance program should be proportionate to the scale, nature, industry, risk, and complexity of the organization.

Implications for companies operating in Malaysia

The UK Guidance, unlike the Guidelines, contains detailed commentaries and case studies that illustrate how each principle applies to small, medium-sized and large organizations.7 In anticipation of June 2020 (see above), the UK Guidance may therefore be a useful resource for any company operating in Malaysia that has not recently assessed the adequacy of its compliance program.

About Reed Smith’s Global Regulatory Enforcement Group

Reed Smith’s Global Regulatory Enforcement Group provides strategic guidance on regulatory compliance, regulatory investigations and other disputes related to anti-corruption, antitrust, competition, international trade, government contracts, government relations, and securities or fraud investigations. We advise clients on some of their most challenging contentious and non-contentious regulatory concerns in locations and across borders around the world. Reed Smith has proven strength in handling regulatory inquiries and investigations across the globe. Our team is currently ranked in the Global Investigations Review 100 and recognized as an “FCPA Powerhouse” by Law360. In Asia, the practice is led by Calvin Chan. Our Asia team based in Singapore, Shanghai and Hong Kong regularly handle anti-corruption and fraud internal investigations, as well as compliance matters, for major corporations in various industries.

Footnotes

1 SC to Implement Anti-Corruption Action Plan

2 PM launches guidelines for commercial organisations to minimise corruption risk

3 SC to Implement Anti-Corruption Action Plan

4 Guidelines on Adequate Procedures - Pursuant to Subsction (5) of Section 17A under The Malaysian Anti-Corruption Commission Act 2009

5 Id.

6 SFO - Bribery Act guidance

7 The Bribery Act 2010 - Guidance

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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