CORRUPTION: It takes two to tango

December 9, 2014

by Tan Sri Abu Kassim, MACC Chief Commissioner
http://www.nst.com.my

CORRUPTION is a problem that needs to be addressed by all components of society. Our great film legend, Tan Sri P. Ramlee, had his own way to convey the message on this issue. For him, corruption is part of a process that involves two parties, both of whom, the receiver and giver, are willing to give up ethical values for their own profit.

In Malaysia, the government has addressed this problem since our independence. One of the significant actions taken by the Malaysian government was the establishment of the Anti-Corruption Agency (ACA) in 1967 to address corruption in the public as well as the private sectors. We then progressed by establishing the Malaysian Anti-Corruption Commission (MACC) six years ago as an independent body.

The important thing is not to be tempted into indulging in corruption. For an established company, you can continue to do business successfully, even without corruption. After all, huge profits is not the be-all and end-all of a commercial enterprise.

Corruption is detrimental to the economy. Corrupt practices create an unfavourable business environment that promotes anti-competitive practices, give unfair advantages and enables organised crime to flourish. Indeed, corruption is one of the most potent hindrances to the economic development of a country; it undermines the rule of law, weakens trust in public institutions and challenges democratic principles.

In today’s economic environment, more companies are operating in a complex global business environment. They are drawing in a sea of digital data, adapting to the perils of doing business in new markets, struggling to comply with increased regulation and trying to avoid costly enforcement actions and litigation.

Managing the risk of fraud and misconduct has never been more challenging and has taken centre stage in corporate boardrooms today. Many business leaders recognise the potential for significant reputational harm in public scandals, economic cost in the form of investigations, fines and penalties, and individual cost in the form of criminal prosecution.

Many companies are now begging to focus on assessing the risks to which they may be exposed and developing appropriate anti-fraud, bribery and corruption compliance initiatives.

The fallout from fraud, bribery and corruption can be significant, including punitive damages, tarnished corporate and brand image, loss of revenue, plummeting share value, and inability to attract and retain human capital.

Recent corporate scandals have suggested that there is a strong nexus between fraud, bribery and corruption with weak corporate governance. The investor community and stakeholder now expect company boards and audit committees to take the onus of proactively monitoring their companies’ effort to understand and mitigate the risks of fraud, bribery and corruption.

Non-executive directors are expected to play a major role in challenging management on the adequacy of their fraud risk identification and mitigation plans.

In such scenarios, it is useful to analyse the extent and extant of fraud risk management practices in corporations. Multinational organisations must be vigilant and be acutely aware that the extra territorial reach of the United States Foreign Corrupt Practices Act and the United Kingdom Bribery Act have significant impact on their operations, even if they have limited presence in the US and/or the UK.

Essentially, implementing and maintaining an effective anti-fraud bribery and corruption programme remains a prudent and recommended course of action to reduce the risk of violating anti-corruption statutes. This helps to prevent, detect and respond to improper conduct as well as to mitigate the risk of fraud.

According to the Transparency International Report 2012, the private sector is no more a victim of corruption. Instead, it is instrumental (in effecting it) and hand-in-glove with public officers.

Collusive corruption, where officials from public sector join hands with the private sector, is greatly present in today’s business environment, particularly in procurement, construction and development. The statement has clearly showed that the focus on combating corruption in the private sector is as important as combating corruption in the public sector.

Nevertheless, our actions need focus on both sectors.The government must install strong deterrent tools to curb corruption in the private sector. They (private sector officials) pay bribes to (their counterparts) from other private companies to get their work done. This shows that the bribery and corruption problem among businesses is an alarming issue that needs comprehensive, systematic and consistent methods to address it. Therefore, an urgent reform needs to draw anti-corruption agencies in combating corruption in the private and public sectors.

By having “Corruption Prevention in Private Sector” as a theme for the 10th SEA-PAC Meeting in Kuala Lumpur recently and hosted by Malaysia, the MACC believes that member countries had managed to share important strategies, policies, best practices and experiences in dealing with the issue of bribery and corruption in the private sector.

The meeting also adopted a six-point statement, including SEA-PAC member countries taking a significant effort to build a strong public and private sector cooperation to enhance anti-corruption compliance. The private sector’s role to ensure transparency and integrity in doing business is, indeed, very important to create a level playing field at the domestic and international levels.

The MACC has taken steps that are in the right direction to reduce these occurrences by putting in place relevant laws and programmes, such as MACC’s transformation programme, that also focuses on a constructive approach to curb corruption culture, along with the highest standards of conduct and behaviour amongst our citizens, starting with the top rung of leadership to the man in the street.

In a rapidly changing business environment, it is vital to develop integrated fraud and corruption measures as part of good governance and practice, but admittedly, there is still much to be done to increasing provisions in Malaysia.

The MACC has, as part of its initiative in fighting corruption, obtained more than 500 corporate entities in the private and public sectors to sign the Corporate Integrity Pledge (CIP). Whilst it is a great step in the right direction, this signing alone is not enough. The test is whether it is being applied in practice. It is widely recognised that what gets monitored, gets done. In this context, my expectation is that the board of directors should, as part of their corporate governance responsibility, prescribe that the compliance of the CIP be audited annually. Otherwise, it would be only akin to lip service after the fanfare of the signing ceremony.

That being the case, to help combat corruption, here are some of the roles of the private sector:

INTERNAL control mechanism — you can effectively help us combat this heinous crime by having in place your company’s internal control mechanism and enforcing it diligently. For example, there is an internal authority to ensure that the systems and procedures of your organisation are being adhered to.

OBLIGATION in providing information — you can assist us tremendously by coming forward discreetly in providing us with information that in your civic-minded judgment, merits further probing by us. After all, under Section 25 of the MACC Act 2009, you are legally-bound to give any information to the MACC when required to do so.

BOOMERANG effect of offering bribes — do you know that an attempt to bribe a Police Officer could land you in trouble because you could be arrested on the spot by that officer? For that matter, even any attempt to bribe a member of a public body or a public officer could still land you into trouble because it is the duty of the public officer to report the matter to the police or the MACC, failing which he would himself be committing an offence.

CHANNEL of complaint — although cases and information on corruption should be reported and referred to the MACC, there are times when, due to the peculiar nature of the case or information, the matter is best tackled expeditiously and effectively through internal means. For this reason, an effective channel of complaint within the organisation should be created. At the very least, malpractice and corrupt activities could be nipped in the bud before they grow out of control and become infectious.

To enable a comprehensive, effective and sustainable plan of action against corruption to be carried out, efforts must be made on a national scale that addresses the underlying as well as the outward manifestations and causes of corruption. In the Malaysian context, the multi-ethnic, sociocultural and religious beliefs have to be taken into account, apart from the normal measures advocated by Western writers.

We should not, at all costs, allow corruption to take root nor allow it to be a way of life in our soil. The penalty is too costly for us and for our future generation.

Economic progress through corruption will not last because corruption is evil and destructive.