Gifts, Hospitality and ‘Duit Kopi’: Where Malaysian Law Draws the Line

Gifts, Hospitality and ‘Duit Kopi’: Where Malaysian Law Draws the Line

From “speed money” and “under counter” payments to festive hampers, donations and business dinners: what the law allows, what it forbids, and how the courts decide

The Grey Zone of Everyday Business

In Malaysia, many people have heard the phrase “duit kopi”, literally “coffee money”, a small payment slipped to someone to make things move a little faster. Others speak of “under counter” payments, festive hampers for important clients, or a “donation” to a club or cause in exchange for goodwill. Some of these are perfectly lawful. Others are crimes that can lead to prison.

Since Section 17A of the Malaysian Anti-Corruption Commission Act 2009 (“MACC Act”) came into force on 1 June 2020, a company can be held criminally liable for bribes paid by its employees and associates to benefit the business. The Government’s Guidelines on Adequate Procedures specifically require companies to have policies on four key areas:

1. facilitation payments,
2. donations and sponsorships, including political donations,
3. gifts, entertainment, hospitality and travel, and
4. conflicts of interest.

These areas affect every business, from a small family firm to a multinational. This article explains where Malaysian law draws the line in each, using real court decisions.

1. Facilitation Payments: “Duit Kopi” and “Speed Money”

What are they?

The Global Infrastructure Anti-Corruption Centre (GIACC) describes a facilitation payment as an illegal or unofficial payment made for a service that the payer is already legally entitled to receive. It is usually a relatively small sum paid to a public official, or someone with a certifying role, to secure or speed up a routine action, such as issuing a visa or work permit or clearing goods through customs.

Why are they tempting, and why are they banned?

In business, time is money. A few days’ delay in a visa could mean missing a meeting that would secure a multi-million ringgit deal. Goods stuck in customs could lead to a contract being terminated. It is easy to see why some people treat small payments to speed things up as customary, or even as a “lesser” wrong.

The problem is what happens when such payments become the norm. Smaller businesses that cannot afford to pay lose out to competitors who can. Costs and uncertainty increase, and those costs may eventually be passed on to consumers, raising the cost of living for everyone.

Some countries, including Australia, New Zealand, South Korea and the United States, ban facilitation payments at home but may allow them when made abroad. The OECD’s commentary on its convention against foreign bribery also treats small facilitation payments as falling outside that particular offence, while noting their corrosive effect.

Small sums, real consequences

Malaysian courts have convicted many people for offering or asking for payments to speed up routine processes:

• In Rex v Teo Cheng Lian; Rex v Leck Kwee Ser, a man handed a registration clerk $4 to speed up a duplicate registration certificate. He was jailed for one month.
• In Ghazali bin Salleh & Anor v Public Prosecutor, a Sessions Court bailiff and a contract watchman accepted RM300 to speed up a petition for letters of administration. Their convictions and sentences of imprisonment and fines were upheld.
• In Abd Khalid bin Abd Hamid v Public Prosecutor, a Ministry of Finance officer abetted an Inland Revenue clerk in asking for RM1,300 to speed up an approval letter for contractor registration. He was sentenced to ten months’ imprisonment and a fine of RM7,000.

“Under counter” money in private business

Facilitation payments are not limited to dealings with public officials. They also arise between private businesses.

The book notes that the UK Serious Fraud Office decides whether to prosecute a facilitation payment based on whether the case is serious or complex and whether there is an offender who should be prosecuted. At the time of writing, the MACC had not published its own stance, so it remains to be seen whether it will take a similar approach.

What should companies do?

In practice, resisting facilitation payments can be hard, especially where a small payment has become “the way things are done”. The book suggests that companies:

• adopt a clear, written policy defining facilitation payments,
• state in strong language that they are prohibited in all circumstances,
• give examples relevant to the company’s business,
• assess the areas where requests are likely, and
• put control measures in place to prevent such payments.

2. Charitable Donations and Sponsorships

GIACC describes a charitable donation as giving cash, venues, equipment, staff time or other benefits to a charity, or to a person or organisation nominated by or connected with a charity. A sponsorship is giving cash or another benefit to help someone carry out or pay for an activity, such as a race, a cultural event, a conference or a sports team rebuilding its pitch.

Genuine donations and sponsorships are not illegal. However, the definition of gratification in Section 3 of the MACC Act expressly includes donations, and they can be used to disguise bribes. Warning signs include:

• money “donated” to an organisation that results in a public official doing the donor a favour, and
• funds channelled to a charity controlled by an official who will then show favour to the donor’s business.

A high-profile example discussed in the book is the case involving the funds of Yayasan Akalbudi. According to the book, eight of the 47 charges brought against Dato’ Seri Dr Ahmad Zahid Hamidi were corruption charges alleging that he received bribes from three companies, disguised as charitable donations, in return for helping them secure government projects while he was Home Minister. At the time the book was written, he had been ordered to enter his defence and the trial was ongoing. These were allegations, not findings of guilt.

What should companies do?

Donations and sponsorships can hide inflated payments and kickbacks. The book suggests that companies:

• have a written policy setting out when donations and sponsorships are allowed,
• carry out due diligence on recipients,
• use proper procedures, such as presenting and acknowledging donations in the presence of witnesses, as the High Court suggested in Khafasliza,
• set up a clear approval process and reporting line, and
• keep proper records.

3. Political Donations

GIACC describes a political contribution as giving cash, venues, equipment, staff time or other benefits to a political party, a candidate, or a person or organisation connected with them. Political donations are not illegal in themselves. A genuine donation that is not intended to make the recipient show favour in a decision affecting the donor does not break the law.

The difficulty is that there are no benchmarks or market rates for political contributions, which makes disguised bribes hard to detect. As the book notes, Malaysia had no law regulating political funding when it was written. In September 2022, the then Law Minister announced that a new law on political financing was being drafted, including a proposed agency to control political donations in every state.

An older principle remains important. In Datuk Haji Harun bin Haji Idris v Public Prosecutor, a conviction under the anti-corruption law was upheld even though the money received was not for the accused personally but for the funds of his political party. A bribe does not stop being a bribe because it goes to a party.

Other cases discussed in the book show the courts testing the “political donation” defence:

• In Public Prosecutor v Ahmad Zahid Hamidi [2022] 9 CLJ 713, involving payments from a contractor appointed by the accused’s ministry, the High Court said a political donation may be a good defence if it is proved that the money was received as a political donation and was spent purely for political purposes, with supporting evidence. On the facts, the court was not satisfied that a sum of RM200,000 had been spent for political purposes. The accused was nevertheless acquitted because the prosecution failed to prove that he had received the money.
• In the SRC International case against Dato’ Sri Mohd Najib Hj Abd Razak, the defence argued that money credited into his personal accounts came from Arab donations. The High Court held that he could not have honestly believed this and convicted him. According to the book, his appeals to the Court of Appeal and the Federal Court were dismissed.

What should companies do?

The book recommends a written policy on political contributions that:

• defines political donations and contributions,
• sets procedures and controls so that they are not used as a cover for bribery,
• states clearly when they are allowed, if the company permits them, or sets out the prohibition, if it does not, and
• ensures that every contribution is recorded accurately in the company’s books.

4. Gifts, Entertainment, Hospitality and Travel

GIACC describes a gift as something given voluntarily without expecting anything in return, hospitality as mainly meals and refreshments, such as refreshments at a business meeting or a reasonably priced working meal, and entertainment as an outside event such as a sporting event, the theatre or a nightclub. Section 3 of the MACC Act expressly includes gifts in the definition of gratification.

The Public Services Department’s Service Circular No 3 of 1998 (SC 3/1998), which governs gifts to and from public officers, gives a wide list of what counts as a gift: cash, free fares, shares, lottery tickets, travel, entertainment, services, club memberships, commissions, hampers, jewellery, decorative items and any item of high value.

Even cheap items can be gifts

A gift does not need to be expensive. In Mohd Nazri bin Hj Din v Dato’ Seri Raja Ahmad Zainuddin, an election petition, it was alleged that a winning candidate had 80 five-kilogram bags of rice distributed at a campaign event. The Federal Court recognised them as gifts. However, because none of the people who received them had been identified, the court held that the facts did not show an election offence.

The real test: why was it given?

In business, as GIACC observes, people rarely do things without some hope of something in return. That makes the line between courtesy and corruption hard to draw. The leading Malaysian case on this point is about a bag of fruit.

The key question, as the book puts it, is whether a gift, hospitality or entertainment was given without any expectation in return and without the intention of influencing someone to act improperly in the giver’s favour.

Practical benchmarks from SC 3/1998

SC 3/1998 applies to public officers, but the book suggests it offers useful guidance for anyone deciding whether a gift raises a red flag. The general rule for public officials is no gifts, with some leeway:

SC 3/1998 stresses that whatever its value, a gift is still an offence if it is given with corrupt intent as an inducement, or received from someone with whom the officer has official dealings. However, value is a useful yardstick. Modest gifts that are part of normal courtesies, like the fruit in Choong Oi Choo, are unlikely to be treated as bribes in ordinary circumstances.

What should companies do?

Because the line is so fine, the book recommends written policies making sure gifts, hospitality and expenses are transparent, proportionate, reasonable and genuine. The policies should cover:

• a clear definition of each category,
• thresholds for what is allowed and what is not,
• procedures and controls to comply with the laws of every country where the company operates, and
• proper documentation.

5. Conflicts of Interest

A conflict of interest is not corruption in itself, but it can lead to it. A well-known example discussed in the book is JPMorgan, which agreed in November 2016 to pay US$264 million to settle a US investigation into its practice of hiring well-connected children of senior Chinese officials, known as “princelings”, to win business. The programme was described as nothing more than bribery by another name.

Other examples given by Transparency International UK include:

• an employee or director awarding a contract to a company in which he, a relative or a friend has an interest,
• staff running their own businesses or holding roles in political or community organisations, and
• an employee who is a director, shareholder or consultant of another company, which may compromise his duty to his employer.

What should companies do?

Company policies on conflicts of interest should include:

• a clear definition and practical guidance on avoiding conflicts and when to disclose them,
• identification of risks and how to manage them,
• situations requiring due diligence,
• when employees and third parties must declare conflicts before being engaged, and
• training so staff can recognise conflicts and know what to do.

Quick Guide: Where Is the Line?

Practical Checklist for Businesses

• Adopt a written zero-tolerance policy on facilitation payments and train staff on how to refuse requests.
• Set clear thresholds and approval steps for gifts, hospitality, entertainment and travel.
• Keep a gifts and hospitality register so every item given or received is recorded.
• Carry out due diligence before making any donation or sponsorship, and hand it over formally with proper acknowledgement.
• Decide your company’s position on political contributions, and if they are allowed, pay only the proper recipient and record them accurately.
• Treat public officials exactly like any other customer. Avoid special discounts, payment flexibility or upgrades.
• Require conflict of interest declarations from staff and business partners, and update them regularly.
• Remember that calling something a gift or donation does not change what it is. Courts look at purpose, handling and records.

Conclusion

Malaysian law does not ban generosity, hospitality or support for good causes. What it bans is using them to buy favours. The courts have consistently looked past the labels, whether “duit kopi”, “under counter” money, a “donation” or a “gift”, to ask one simple question: what was it really for?

For businesses, the safest approach is to be transparent, keep things modest and proportionate, record everything, and never offer anything to someone who is about to make a decision affecting your business. With Section 17A now making companies liable for the bribes of their people, clear policies in these four areas are no longer optional.

Cases Referred To

• Public Prosecutor v Chan Kit Tong Sally [1991] 1 MLJ 358 (Supreme Court)
• Public Prosecutor v Khafasliza bt Shafii [2018] 10 MLJ 805 (High Court)
• Tengku Adnan Tengku Mansor v Public Prosecutor [2022] 1 CLJ 917 (Court of Appeal)
• Hamidon Mat Yatim v Public Prosecutor [1995] 3 CLJ 724 (High Court)
• Syed Afendy Ali bin Syed Abid Ali v Public Prosecutor [2021] 8 MLJ 643 (High Court)
• Choong Oi Choo v Public Prosecutor & Another Case [1986] CLJ Rep 325 (High Court)
• Public Prosecutor v Ahmad Zahid Hamidi [2022] 9 CLJ 713 (High Court)
• Dato’ Sri Mohd Najib Hj Abd Razak v Public Prosecutor [2022] 1 CLJ 491 and (No 4) [2022] 8 CLJ 393
• Datuk Haji Harun bin Haji Idris v Public Prosecutor [1977] 2 MLJ 155
• Mohd Nazri bin Hj Din v Dato’ Seri Raja Ahmad Zainuddin bin Raja Haji Omar & Others [2009] 3 MLJ 589 (Federal Court)
• Ghazali bin Salleh & Anor v Public Prosecutor [1993] MLJU 143 (High Court)
• Abd Khalid bin Abd Hamid v Public Prosecutor [1995] 1 MLJ 692 (High Court)
• Rex v Teo Cheng Lian; Rex v Leck Kwee Ser [1949] 1 MLJ 170