Employee Took a Bribery: 72-Hour Action Plan

Your Employee Took a Bribe: A 72-Hour Action Plan for Company Owners

What Malaysian business owners, directors and managers should do in the first three days after discovering corruption in the company, under the MACC Act 2009 and AMLA

Introduction

It usually starts with something small. A supplier’s invoice looks higher than it should be. A tender result does not quite add up. A staff member knocks on your door and says, quietly, that a colleague has been “collecting something” from a vendor. Or a customer drops a hint that your sales manager has been “taking care” of an officer to win jobs for the company.

For most bosses, the first reaction is shock, then anger, and then the urge to settle the matter quietly and move on. Under Malaysian law, that last instinct can turn out to be the most expensive mistake of all.

Since section 17A of the Malaysian Anti-Corruption Commission Act 2009 (MACC Act) came into force on 1 June 2020, a company can be prosecuted for bribes paid by its staff or agents, and its directors and senior managers can be treated as personally guilty of the same offence. The Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA) adds another layer. Bank accounts can be frozen, and careless talk can amount to the offence of tipping-off.

What you do in the first 72 hours often decides how the rest of the matter unfolds. This guide sets out a practical, step-by-step plan for company owners, directors and senior managers, based on the MACC Act, AMLA, the Government’s Guidelines on Adequate Procedures and decisions of the Malaysian courts.

Step Zero: what kind of bribe are you dealing with?

Before anything else, work out which side of the bribe your employee was on. The legal consequences for the company are very different.

In real life, the two scenarios often overlap. A “commission” arrangement with a supplier may involve money flowing both ways. If you are unsure, treat the matter as the more serious one until a lawyer has reviewed the facts.

Why directors cannot afford to wait

Section 17A(3) of the MACC Act is the provision that keeps directors awake at night. When a company commits a section 17A offence, every director, controller, officer or partner, and anyone concerned in managing the company’s affairs at the time, is treated as having committed the same offence. The prosecution does not have to prove that the person knew about the bribe.

The individual can only escape liability by proving two things: first, that the offence happened without his consent or connivance, and second, that he exercised the level of due diligence expected of someone in his position to prevent it. The burden is on the director, on a balance of probabilities. For the company itself, the only defence under section 17A(4) is to prove it had adequate procedures in place to prevent people associated with it from giving bribes.

Here is the practical point. “Connivance” can include knowing that corruption is happening, or is likely to happen, and simply doing nothing about it. In other words, the clock starts running the moment you find out. Everything you do, and everything you fail to do, in the next 72 hours may later be weighed by the MACC, the prosecution and the court.

The 72-hour action plan

1. Do not confront the employee in front of others. A public confrontation, an angry message in the office WhatsApp group or a dramatic walk-out gives the people involved time to delete evidence and line up their stories.
2. Preserve all evidence. Ask your IT person to make secure copies of email accounts, company phones, accounting records, purchase orders, payment vouchers, expense claims, CCTV footage and visitor logs. Where needed, quietly restrict the suspect’s access to systems. Do not delete anything, even items that look embarrassing for the company.
3. Hold suspicious payments. Where you can do so without breaching a contract, put on hold pending payments to the supplier, agent or consultant involved until the facts are clearer. Take legal advice if the contract is large or the terms are strict.
4. Set up a small response team. Keep it to the people who truly need to know, for example one director, a trusted senior person from finance or HR, and your lawyer. If the suspect is a director or senior manager, he must be kept out of the team completely.
5. Start a written log. Record what you learnt, when you learnt it, who you told and what you did, with dates and times. This log can later help to show that management acted promptly and in good faith.
6. Call a lawyer early. Communications with your lawyer for the purpose of legal advice are generally protected. AMLA and the MACC Act both recognise protection for privileged lawyer and client communications, and early advice helps you avoid steps that cannot be undone.

Quiet fact-finding. Before deciding on your next move, the response team should piece together the basics. Who was involved, how much money changed hands, over what period, and which contracts, tenders or approvals were affected?

Follow the paper trail. Procurement, payroll and expense claims are the areas where corruption most often hides. Look for repeat awards to the same vendor, split invoices that stay just below approval limits, unexplained “consultancy” or “commission” payments and approvals signed off by one person alone.

Talk to the person who raised the concern. Thank him, assure him that his identity will be kept confidential and ask him to put what he knows in writing. Do not promise him anything about the outcome.

Hold back on a full interrogation of the suspect. Questioning the suspect too early can alert others in the scheme. Your lawyer can guide you on the right timing, especially if a report to the authorities is likely.

Ask the hard question: was anyone at the top involved? If a director or the managing director is implicated, the independent directors or the shareholders should take charge. In the UK case of R v Skansen Interiors, a small refurbishment company, the corruption was carried out by its own managing director and only came to light when a new managing director took over.

Is there a legal duty to report?

Section 25 of the MACC Act places a reporting duty on two groups of people:

• Anyone who is given, promised or offered a bribe must report it, together with the name of the giver if known, to the nearest MACC officer or police officer. Failing to do so can lead to a fine of up to RM100,000, jail of up to ten years, or both.
• Anyone from whom a bribe is asked for or obtained must report it at the earliest opportunity, with a full description and the name of the person involved if known. Failing to do so can lead to a fine of up to RM10,000, jail of up to two years, or both.

So if a supplier offered money to your staff, or if an official asked your company for a “fee”, the people approached have a personal duty to report. If the offer or request came to you as the owner, the duty is yours.

Even where no duty applies, reporting early protects you

A business owner who discovers the problem after the event may not always fall squarely within section 25. But for directors, the real question is whether you can later prove that you did not consent to or connive at the wrongdoing, and that you acted with due diligence. Prompt action is the strongest evidence of both.

The courts have been sceptical of directors who act only when the story is already out. In the Megan Media Holdings case, discussed below, police reports lodged by a chairman after the financial scandal had become public were treated as a cover-up and an afterthought. The court also said that, at the very least, he should have recorded his disagreement.

Practical steps for this stage

1. Hold an urgent board meeting. Minute the facts known so far, the steps already taken, the board’s clear condemnation of the conduct and the decision on reporting.
2. Lodge the report with the MACC (SPRM) or the police, with your lawyer’s help. A clear, factual report is better than a long, emotional one.
3. Make sure whistleblowers within the company report through proper channels. Protection under the Whistleblower Protection Act 2010 applies only when the disclosure is made to an enforcement agency, such as the MACC or the police, as the Rokiah case below shows.
4. Decide on the employee’s status. Suspension pending a proper disciplinary inquiry is common. Follow a fair procedure: give clear charges, allow the employee to respond and keep proper records.
5. Do not take any action against the staff member who blew the whistle. Under section 10 of the Whistleblower Protection Act 2010, causing a whistleblower to be sacked, demoted, harassed or otherwise disadvantaged is an offence, punishable by a fine of up to RM100,000, jail of up to 15 years, or both.

Be ready for a raid

A “dawn raid” is an unannounced visit by MACC officers to search premises and seize evidence. Under section 31 of the MACC Act, officers acting on a written order from the Public Prosecutor, or a senior MACC officer authorised by him, may enter premises, search for and seize documents and data, search people on the premises and break open containers. In urgent cases where delay could defeat the search, an officer may act without first obtaining the written order.

Refusing officers entry, delaying them, failing to hand over documents they are entitled to or threatening anyone involved in the investigation are all offences under section 48 of the MACC Act. Cooperation is not optional. The courts do, however, expect enforcement officers to act within their legal powers. In Majlis Bandaraya Shah Alam v Only One Foot Reflexology Sdn Bhd, a business recovered damages after a city council raid went beyond what the law allowed.

If you or your staff are called to give a statement

Under section 30 of the MACC Act, an investigating officer may order any person to attend and be questioned, to produce documents or to give a written statement on oath. A person who is questioned must disclose what he knows and answer truthfully, and he cannot refuse to answer on the ground that the answer might incriminate him. Once a document has been specified in an order, it must not be hidden, destroyed or altered.

There is a useful protection here. A person who discloses information or produces documents under such an order cannot be sued for breach of contract or confidentiality because of that disclosure. So a company should not hold back documents merely because a contract with a customer or supplier contains a confidentiality clause.

Can your lawyer sit in? A witness giving a statement does not have a constitutional right to have a lawyer present, because that right belongs to persons who have been arrested. In practice, the MACC may allow a lawyer to attend, but, as the Latheefa Beebi Koya case below shows, a lawyer who insists on staying in the room after being warned may himself be asked to give a statement. Get advice beforehand on how best to prepare.

Plan for frozen bank accounts

Under section 44 of AMLA, an enforcement agency, including the MACC, may freeze property, including bank accounts, once an investigation into an unlawful activity has begun and there are reasonable grounds to suspect a money laundering offence, or that the property is the proceeds of an unlawful activity. The order expires after 90 days unless the person is charged under AMLA within that time, but in the meantime the business may struggle to pay salaries and suppliers.

Section 44A allows an application to the enforcement agency to vary or revoke the freezing order. In the BERSATU case, Datuk Kapten (B) Muhammad Suhaimi Yahya v Tan Sri Dato’ Sri Hj Azam bin Baki, accounts frozen by the MACC under section 44 were the subject of a judicial review, where the applicants had sought variations to cover operating costs and salaries. The High Court allowed the challenge to proceed, but refused to release the frozen funds in the meantime, stressing that requests for variation at the investigation stage should go to the enforcement agency.

The lesson for business owners is to prepare a cash-flow contingency plan, keep clear records showing the legitimate source of the company’s funds and be ready to apply for a variation quickly if a freeze happens.

Control the message

• Tell staff only what they need to know, for example that the company is reviewing a matter and that they must not destroy any records.
• Prepare a short holding statement for customers, banks and the media. Do not name suspects or speculate.
• Remind everyone that discussing the matter with the suspect, the supplier involved or outsiders can harm the investigation.
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Look at the contracts and your losses

A contract to pay a bribe is void as being against public policy under section 24(e) of the Contracts Act 1950. In Merong Mahawangsa Sdn Bhd v Dato’ Shazryl Eskay bin Abdullah, the Federal Court refused to enforce a RM20 million promise made in return for using influence with Government ministers to secure a project.

Where your company is the victim, for example because a supplier bribed your employee to win a contract, the position is different. Courts in other common law countries have held that the innocent party may choose either to cancel the contract after discovering the bribe or to keep it. The company may also be able to recover the bribe or its actual losses from the dishonest employee and the person who paid him. The MACC Act does not set out a specific civil remedy, so these claims are usually brought under the general law.

The first three days are about damage control. What follows is about proving that the company takes corruption seriously. The Guidelines on Adequate Procedures, issued by the Prime Minister’s Department under section 17A(5) of the MACC Act, are built on five principles, known as T.R.U.S.T.:

Size is no excuse. In R v Skansen Interiors, a UK company with about 30 employees argued that its simple controls were enough for a small business. It had anti-bribery clauses in its contracts, a multi-level invoice approval system and staff who understood that bribery was not allowed. The court rejected the defence. Even for small and medium enterprises (SMEs), a reporting channel can be as simple as a dedicated email address, as suggested in the case studies published by the National Centre for Governance, Integrity and Anti-corruption (GIACC).

Large companies that cleaned house after bribery scandals abroad show what serious remediation looks like. Rolls-Royce reviewed 250 intermediary relationships, suspended 88 of them and took disciplinary action against 38 employees. Airbus parted ways with 63 top and senior managers and redesigned its controls on third parties.

Do’s and don’ts at a glance

What the courts have said

Other lessons from the cases

The afterthought report: Public Prosecutor v Datuk Dr Mohd Adam Che Harun (Megan Media Holdings). The executive chairman was held personally liable for a false financial statement made by the company under a deemed liability provision similar to section 17A(3). The court said that not consenting was not enough. He was expected to take active steps to prevent the offence and, at the very least, to put his disagreement on record. His police reports, made only after the scandal broke, were treated as an afterthought.

The reversed burden is fair: Public Prosecutor v Gan Boon Aun [2017] 3 MLJ 12 (Federal Court). In the Transmile case, the Federal Court upheld a provision similar to section 17A(3), which requires directors to prove their own innocence. The court reasoned that only directors and officers know whether they consented to or connived at the company’s offence, so it is not unfair to ask them to prove it.

No such thing as a sleeping director: Azmi bin Sulaiman v Public Prosecutor. A director who claimed he did not even know he was a director had his excuse rejected as a bare denial and wilful blindness under a similar deeming provision. The High Court held that a person who accepts a directorship takes on its duties, and cannot hide behind the label of a silent or non-executive director.

Frequently asked questions

Can I just sack the employee and keep the matter quiet? You may be able to dismiss the employee after a proper inquiry, but keeping the matter quiet is risky. If the bribe was paid to win business for the company, silence can later be seen as connivance by the directors. Concealing property linked to a corruption offence is also a crime under section 26 of the MACC Act.

Must I report if my company was only the victim? Anyone who was offered a bribe, or from whom a bribe was asked for, has a personal duty to report under section 25. Even where no strict duty applies to you, an early report is usually the best evidence that the company and its directors acted properly.

Will reporting make my company the target? Reporting does not create liability that is not already there. If the company is exposed under section 17A, what matters is proving adequate procedures and, for directors, the absence of consent or connivance and the exercise of due diligence. A prompt, honest report supports all of these.

Can the MACC freeze my company’s bank account? Yes. The MACC is an enforcement agency under AMLA and may freeze property under section 44 where the legal conditions are met. The order falls away after 90 days unless an AMLA charge is brought, and you may apply to the agency to vary or revoke the order under section 44A.

Can my staff refuse to answer the MACC’s questions? Generally, no. A person ordered to attend under section 30 must answer truthfully and cannot refuse on the ground of self-incrimination. Giving false statements is a separate offence. Staff should be prepared with legal guidance before attending.

I am a non-executive director. Am I safe? Not automatically. Deemed liability under section 17A(3) covers directors in general, and the courts have rejected the excuse of being a “sleeping” director. What protects you is showing that you did not consent to or connive at the bribe and that you exercised the due diligence expected of your role.

Conclusion

Discovering that an employee has taken or paid a bribe is unsettling for any business owner. But the law in Malaysia now looks closely at how a company and its directors react, not just at what the employee did. Acting quickly, preserving evidence, reporting through the proper channel, protecting whistleblowers and fixing the weakness are what separate a company that is a victim of one dishonest employee from a company that ends up in the dock.

If you have just discovered corruption in your business, or have received a notice from the MACC, speak to a lawyer before you take your next step. Our team can guide you through the investigation, help you deal with the MACC and frozen accounts, and help you put adequate procedures in place.

Disclaimer: This article is for general information only and does not constitute legal advice. The law and its application may change, and every case depends on its own facts. Please seek specific legal advice before acting on any matter discussed here.

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