Blitz on corruption in private sector

ON June 11, three company directors were being held by the Malaysian Anti-Corruption Commission (MACC) under suspicion of involvement in a Tourism Malaysia contract worth over RM99 million involving a China-based firm to promote Malaysia via a digital advertising campaign. Prior to this, its former chairman and chief executive officer were also detained by the commission. The contract is said to have been approved in just one day and did not adhere to Tourism Malaysia's procurement regulations.

This along with the other piling number of corruption cases we read make us wonder when will it all end?

Most of us would regard the public sector as the most corrupted sector in our country. But the fact is, it takes two to tango where the private business sector (who pays) that holds the power to corrupt public officials (who gets paid) and which also practises corruption widely.

Private sector officials pay bribes to their counterparts from other private sector companies and public sector officials to get their work done. In fact, the private sector is not just a victim of corruption but also the perpetrator of corrupt practices and it is an instrumental often works hand-in-glove with corrupt public officers.

Collusion between internal and external parties are rampant in fraud and corruption cases. This seems to be the modus operandi of the fraudsters and white collar criminals because corruption is a win and win situation where both parties to the crime gets the benefit or advantage where it is rarely in practice givers ledge report to the authorities.

Global Infrastructure Anti-Corruption Centre revealed that the corruption in relation to private sector projects takes a similar form to corruption in the public sector, but the cost of corruption is not directly borne by public funds. It nevertheless can have widespread, an adverse effect and serious consequences on the cost and quality of the private sector works.

The World Economic Forum confirmed that corruption adds up to 10 percent to the total cost of doing business globally while PricewaterhouseCoopers Global Economic Crime and Fraud Survey 2020 (PwCs 2020) states that US$42billion is the total fraud losses reported by respondents.

Based on KPMG’s 2013 Fraud, Bribery and Corruption Survey, 90 percent of the respondents agreed that bribery and corruption were the biggest problem for businesses in Malaysia.

According to PwC’s 2020 survey, the number of economic crime experienced by respondents has risen to 43 percent, compared to 41 percent in 2018.

In one press conference, the MACC expressed concern of the bribery and corruption among businesses and considered it as "an alarming issue". It is to ensure that corrupt practices are kept at bay and effectively addressed in the private sector too.

Moreover, PwC’s 2020 states that fraud in Malaysian organizations remains at worrying levels, continuing threat with climbing cost and fighting fraud is a never ending battle. Corruption is affecting businesses in more diverse ways than ever before.

Trust continues to be fragile as organisations in this part of the world continue to grapple with bribery and corruption, asset misappropriation and cybercrime among other disruptive frauds.

Procurement fraud is seen as high in the private sector which involves billions of ringgit for each procurement. White elephant purchases are common especially in the purchase of medical devices as well as construction, telecommunications, education and defence sectors.

Corruption in the private sector is a familiar feature in their community and has been the focus of the MACC and other institutional reform. The types of corrupt behavior that occurs entirely within the private sector include, among others, bid rigging, corporate fraud and bribes to secure private contracts have, recently been more widely investigated and perpetrators charged.

More evidence is emerging to support the view that the level of private sector corruption is on the rise is true. MACC director of investigation division, Dato’ Norazlan Mohd Razali forsees there will be more reports on corruption in commercial organizations falling under Section 17A of the MACC Act 2009.

The penalty for corporate liability under Section 17A (2) for the corruption offence shall be a fine of not less than 10 times the value of the gratification in question or RM1 million, whichever is higher or imprisonment of not more than 20 years, or both.

This penalty is much higher compared to the existing financial penalty for a bribery offence which is a fine of not less than 5 times the value of the gratification in question or RM10,000, whichever is higher and no imprisonment.

Under Section 4 of Anti-Money laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001(AMLA), any person who commits a money laundering offence shall on conviction be liable to imprisonment for a term not exceeding 15 years and shall also be liable to a fine of not less than 5 times the sum or value of the proceeds of an unlawful activity or instrumentalities of an offence at the time the offence was committed or five million ringgits, whichever is higher.

Even offences of criminal breach of trust (CBT) under Section 409 of the Penal Code carries a mandatory jail term of between 2 and 20 years, together with mandatory whipping and a fine upon conviction.

As for the penalty for cheating under Section 420 of the Penal Code, the offender shall be punished with imprisonment for a term which shall not be less than one year (mandatory) and not more than 10 years with whipping, and shall also be liable to a fine, if found guilty.

Judges must not soften their stance on rooting out corruption. Sentences imposed should not only serve the offender but it should also be a lesson for others not to commit the offence. It will surely lead to the ruin of not only the bribe taker but his or her entire family as well.

A heavier penalty imposed can become a greater deterrent against corruption if it is used along with longer imprisonment.

* Datuk Seri Akhbar Satar is President of Malaysia Association of Certified Fraud Examiners ** The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of Astro AWANI.