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Navigating Corporate Liability – Why Upholding Integrity Standards is Crucial to Malaysian Companies

Corporate Governance

Navigating Corporate Liability – Why Upholding Integrity Standards is Crucial to Malaysian Companies

  • Navigating Corporate Liability – Why Upholding Integrity Standards is Crucial to Malaysian Companies Maintaining corporate integrity and prioritising ethical business practices are increasingly becoming an unwavering stance for firms doing business throughout the world and their clientele.
  • Date: Dec 15, 2023
  • Category: Corporate Governance
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Maintaining corporate integrity and prioritising ethical business practices are increasingly becoming an unwavering stance for firms doing business throughout the world and their clientele.

The challenging economic conditions post COVID-19 pandemic and the digital transformation of business processes adapting to the new and increasingly globalised operating landscape has led to more opportunities and pressures for fraud, bribery and corruption. For example, remote working arrangements created shortfalls in a company’s ability to monitor and deter misuse of company resources/ assets, while increased reliance on (domestic/ international) third parties to manage volatile supply chains exposed companies to greater corruption and bribery risks.

In the current operating environment where sustainability and corporate governance are prominent subject of discourse, regulators are increasing their scrutiny of fraud, bribery, and corruption risks within organisations. This is evident with the enforcement of Section 17A of the MACC Act with implications on corporate and personal liabilities, establishment of the integrity & governance units within government linked-companies, discourse on governance structural changes in the government. This regulatory thrust on corporate governance and anti-corruption is especially important as the perception on the level of corruption can affect the country’s attractiveness to business owners and investors, thus affecting market confidence and overall economic growth.

On the Corruption Perceptions Index (CPI) front where countries are ranked based on their perceived levels of public sector corruption, Malaysia has an uphill task of improving its ranking which dropped 6 points to 47 points (out of the highest score of 100) in 2022. Although Malaysia sits above the global average of 43 points, it lags behind Asia Pacific leaders such as New Zealand (87 points) and Singapore (83 points).

Paradigm Shift in Malaysian Corporate Governance

The Malaysian Anti-Corruption Commission (MACC) is the agency responsible for enforcing anti-corruption regulations. MACC’s role as an enforcement body is empowered by the law – the MACC Act 2009, which contains procedures and regulations that help them to regulate companies, government agencies, and individuals.

In 2018, the MACC Act was amended to include Section 17A on corporate (and personal) liability for corruption. The amendment, which came into effect in June 2020, represented a significant shift in the scope of prosecution for corruption in Malaysia. It is now mandatory for firms to tighten oversight over their staff, suppliers, agents, or consultants that are at risk of committing fraud, bribery, or corruption. Prior to Section 17A, legislation such as the Environmental Quality Act 1974 and the Employees Provident Fund Act 1991, senior executives previously could not be charged for criminal acts carried out by their staff or persons related to the organisation.

Prior to the Section 17A provision, the act only focused on the prosecution of individuals in corrupt acts. The new law, which was modelled after the UK Bribery Act, goes even further than the British Act by holding to account a firm’s leadership. Following the amendment, directors and senior management are now liable for the actions of any person involved in corrupt acts in their organisation, unless it can be proven that the organisation had undertaken “adequate procedures” to mitigate the fraud, bribery, or corruption risks from materialising.

This significant development serves as a wake-up call to Malaysian organisations with growing urgency and emphasis on managing fraud, bribery, and corruption risks.

Case studies on fraud and bribery in APAC


Several companies have been charged under Section 17A of the MACC Act since its gazettement in 2020.

  1. In March 2021, Pristine Offshore Sdn Bhd became the first company to be prosecuted under the new act. The offshore vessel company was accused of giving a bribe of RM 321,350 to the Chief Operating Officer of Deleum Prima Sdn. Bhd. to ensure that it was awarded a subcontract from Petronas Carigali Sdn. Bhd. for the supply of workboats, offshore support, and other related marine services.
  2. In April 2023, the director of Hydroshoppe Sdn Bhd was charged under the amended MACC Act for offering a bribe as an inducement to the Communications and Multimedia Minister to expedite the takeover process of KL Tower.

Under the Act, the penalty for offences is a fine of not less than 10 times the value of gratification in question or RM1 million, whichever is higher or imprisonment for a term no more than 20 years, or both.


According to Transparency International, per their CPI 2022 for Asia Pacific, grand corruption remains a common issue in the Asia Pacific, with many governments in the region prioritising economic recovery over anti-corruption commitments. In Indonesia, there have also been several notable cases of corporate fraud and bribery:

  1. PT Nusa Konstruksi Enjiniring: The Jakarta Corruption Court in 2019 declared PT Nusa Konstruksi Enjiniring (NKE), an Indonesian public listed company, guilty of corruption in several government construction projects. NKE was the first case in Indonesia where a corporation has been found guilty of corruption.
  2. PT Garuda Indonesia: In May 2020, The former president director of Indonesian airline Garuda, Emirsyah Satar, was sentenced to eight years in prison after being found guilty of accepting bribes and laundering money related to the purchase of planes and engines from Rolls Royce and Airbus.
  3. Corruption Eradication Commission (KPK): In June 2023, employees at Indonesia’s anti-graft body, KPK, began investigating allegations that its own worker skimmed millions of rupiah from travel budgets of other KPK employees. This case emerged amid another investigation on allegations of corruption involving KPK detention centre officers who had allegedly taken bribes to smuggle in cash and communication devices into KPK detention centres.

These cases serve as a reminder for companies to be diligent in implementing robust anti-fraud, bribery and corruption measures, as well as conducting regular training & communication for employees and their business associates.

Mitigating Fraud and Bribery Risks

Under Section 17A of the MACC Act, a commercial organisation commits an offence if a person associated with the commercial organisation 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 organisation; or (b) to obtain or retain an advantage in the conduct of business for the commercial organisation.

In the event that a commercial organisation is charged under Section 17A, the effective implementation of the adequate procedures will be a defense to prove that the organisation had in place anti-corruption measures to prevent persons associated with the organisation from undertaking such an offense.

The Guidelines on Adequate Procedures issued by the Prime Minister’s department in December 2018 was derived based on the five ‘T.R.U.S.T.’ principles which may be used as reference points for the anti-corruption programme implemented by any organisation. As the Guidelines adoption is principle-based, it is suitable for any size of organisation while leaving room for adaptation and innovation by individual enterprises.

The following are some examples of the essential components that should be considered in the design and implementation of an organisation’s anti-corruption programme.

  1. Top Level Commitment

    1. Approved zero-tolerance corruption and compliance risk appetite statement; and
    2. Cultivation of a culture of high integrity
    3. Establishment and communication of anti-corruption policies and guidelines.
  2. Risk Assessment - Practice of a periodic corruption risk assessment with a comprehensive assessment performed once every three (3) years.

  3. Undertake Control Measures

    1. Due diligence review on any relevant parties or personnel;
    2. Establishment of a whistleblower programme1
    3. Establishment of policies relating to gifts, entertainment, hospitality, travels, conflicts of interest, donations & sponsorships
    4. Establishment of financial (e.g. approved authorities for transactions) and non-financial controls (e.g. proper segregation of duties, procurement process)
  4. Systematic Review, Monitoring and Enforcement – regular reviews and enhancement of the anti-corruption programme’s performance, efficiency, and effectiveness (e.g. via internal/ external audits)

  5. Training and Communication – develop and dissemination of internal and external training and communication relevant to its anti-corruption programme which can be carried out in various format and mediums.

It is important to recognise that upholding integrity standards and maintaining ethical business practices is an ongoing pursuit, which requires continuous vigilance and diligence by the organisation. Expert opinion and legal advice in developing their anti-corruption and whistleblower policies should be considered pragmatic investment of time and resources.

The adoption of good corporate governance practices2 and anti-fraud, bribery, & corruption measures based recognised anti-corruption standards (e.g. Corporate Integrity System Malaysia (“CISM") programme and ISO 37001 – Anti-Bribery Management Systems (“ABMS”) by the corporations in Malaysia are essential contributing elements in the effort to combat fraud, bribery and corruption; build trust and foster a sustainable business environment in Malaysia; and ultimately improve the country’s competitiveness.

  • Tags : Corporate Governance

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