Prevention most effective vaccine for private sector corruption

Going by the current buzz phrase "social distancing", we should introduce the need to practise "corruption distancing" to effectively contain this equally deadly scourge.

Today, corruption is borderless in both public and private sectors making it highly complex.

It is likened to a contagious disease and wreaked on our economy and institutions.

For every crooked politicians and bureaucrats, there will be a businessmen willing to grease their palm.

Large corporates that have deep pockets engage in unethical business practices are able to influence and lobby governments to their whims and fancies.

Such activities may erode the integrity, reduce the trust of each citizen and corrode the rule of law that eventually undermines democracy.

On July 27, Ibrahim Omar, the director of an advertising company was charged with 12 counts of falsifying documents related to a RM90 million contract from Tourism Malaysia.

The Malaysian Anti-Corruption Commission (MACC) has constantly warned that the level of corruption in Malaysia’s commercial and business sector is alarming.

It is not too far fetched to say that even this description in an understatement.

Data between 2019 and June 2020 shows that there were 390 individuals arrested which represented 26.1 per cent of the total arrests.

Over the last five years, MACC has arrested more than 800 individuals due to corruption cases involving commercial organisations.

The illicit assets seized were worth billions of ringgits.

The MACC has urged the private sector not to offer bribes and to take a more pro-active role to combat corruption.

The truth of the matter is, if there are no givers, then there will be no takers.

The real culprits are the givers who bribe and offer attractive rewards to corrupt public officials in return to win contracts or to gain an unfair advantage over their competitors.

To stem and manage the risk of private sector corruption and to protect themselves in the future, a comprehensive, systematic and consistent method needs to be introduced.

Stringent reforms have been drawn up by the MACC to curb corruption in the private sector.

In another EY Global Fraud Survey 2016, 83 per cent of respondents view enforcement against management as an effective deterrent against fraud, bribery and corruption in the private sector.

The private sector should set up an Integrity and Governance Unit or IGU within the organization similar to the public sector to promote good governance.

The IGU should be tasked to improve existing policies, systems, monitoring, enforcement and awareness programs to prevent corruption and malpractices.

In this regards, the key legislative change in the fight against corruption in the private sector is enforcement of the new Section 17A in the MACC Act 2009, which imposes criminal liability on commercial organizations for their failure to prevent corruption.

The purpose of this new provisions is to ensure a corruption-free environment in their wheelings or dealings but take adequate measures to prevent corruption in their day to day activities.

Section 17A (3) provides an offence has been committed by a commercial organization, a person who is a director, controller, officer, partner or employee or he is a person who performs services for or on behalf of the commercial organization such as contractor, vendor, supplier and agent.

The onus has shifted to the directors, partners and management and their defence is to prove that they had put in place adequate procedures to prevent persons associated from committing corrupt practices.

The adequate procedures provided by the MACC guideline are: a) top level commitment to practise b) risk assessment c) undertake control measures d) Systematic review, monitoring and enforcement e) training and communication.

The MACC expected more companies to be charged under this section.

The offence carries a penalty of maximum 10 times the sum or value of the gratification or RM1 million, whichever is higher or imprisonment of maximum 20 years or both.

Under this law, the company can be imposed with fines.

A company’s culture reaps many fruits such as a good corporate image and is dictated by the core values and work environment which must be instilled by the top management especially at the Board Level to enhance business integrity.

Good governance promotes creation of value at the Board level and at the company level. Boards must do enough to comply with the corporate liability rules, strengthen the weaknesses and avoid company and the office-bearers to be personally liable.

In an article in Forbes, Dr Fred Kiel found that high-integrity CEOs had a multi-year return of 9.4%, while low-integrity CEOs had a yield of just 1.9%.

What’s more, employee engagement was 26% higher in organisations led by high-integrity CEOs as they were often humble.

They appeared to have very little concern for their career success or their compensation.

Local and foreign industries and trade organisations or associations in Malaysia must collectively support MACC’s efforts to curb corruption by practising good governance.

The Association of Certified Fraud Examiner (ACFE) in their Report to Nations 2020, stated that any corporate that did not practise a culture of anti-corruption and integrity may suffer losses of up to 5 percent of their profits.

Besides conducting courses on productivity and profitability, it is advisable for companies to hold talks on how to prevent bribery and corruption. By doing so, each company may be able to save 2 or 3 percent of their profits that were used for corruption.

The proposed long overdue Political Funding Bill if it ever sees the light of day and approved by Parliament will enable political parties to be more transparent on the reporting of political spending, business dealings.

It will be able to curb partake in money politics particularly during any by- and general elections.

Lack of political integrity and negative influence of money politics can undermine trust in government institutions' integrity and ultimately their democracy.

The Sabah state Legislative Assembly, only two years old after the 14th general election, has just been dissolved to pave the way for a fresh state election amidst allegations of corruption against elected representatives involved in party-hopping to cause a change of government in mid-stream.

The MACC is now looking into these allegations and expectations are running high of some hot news coming up any time now.

Even if the public sector is soliciting from the private sector as is believed to be in most cases, do not give in and report to MACC.

Companies have to report misconduct and not to turn a blind eye to unacceptable behaviours. It is an offence if any person who knows and fails to report an act of giving

and offering of bribes under Section 25 (1) and (2) of the MACC Act 2009 impose a fine not exceeding RM100, 0000; and/or imprisonment not exceeding 10 years or to both.

The biggest disease is still corruption. However, integrity, honesty and transparency are the touchstones of business ethics as well as the ultimate vaccine to business success and all of us need to get this right.

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Datuk Seri Akhbar Satar is President of Malaysia Association of Certified Fraud Examiners