anti corruption laws in asia pacific

Anti-corruption laws in Asia PacificFINANCIAL INSTITUTIONS ⋅ ENERGY ⋅ INFRASTRUCTURE, MINING AND COMMODITIES ⋅ TRANSPORT ⋅ TECHNOLOGY AND INNOVATION ⋅ PHARMACEUTICALS AND LIFE SCIENCES

A norton rose grouP guide

Anti-corruption laws in Asia Pacific

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PrefaceWe are pleased to present Anti-corruption laws in Asia Pacific. This guide forms part of our key Asia Pacific publication series which currently includes Arbitration in Asia Pacific, Banking security law in Asia Pacific, Disclosure and privilege in Asia Pacific, M&A law in Asia Pacific, Joint ventures: protections for minority shareholders in Asia Pacific, Doing business in Asia Pacific and Renewable energy in Asia Pacific.

The purpose of this guide is to provide an overview of international and national anti-corruption regimes within an Asia Pacific context. It highlights how corporations should best approach anti-corruption compliance, transactional and third party due diligence and corruption investigations. It also examines related issues from anti-money laundering and whistleblowing regimes. For ease of jurisdictional comparison, we have arranged for each chapter to be organised according to the following headings:

• TI rankings

• International anti-corruption conventions and inter-governmental organisations

• Anti-bribery legislation and major offences

• Facilitation payments, hospitality and gifts

• Corporate liability for the acts of subsidiaries, employees and third parties

• Liability of individual directors and officers

• Anti-money laundering legislation

• Whistleblowing legislation.

We hope that this guide will provide a useful introduction to a field which has assumed a critical importance for companies, individuals and regulatory authorities alike.

The information contained here is as accurate and up-to-date as possible as at 1 November 2011. The guide is simply a summary of the key issues relevant to anti-corruption and is not a substitute for legal advice. If you would like to discuss any of the issues raised here, please get in touch with us.

Norton Rose Group is one of the few truly global practices with a proven expertise in handling international corruption matters, particularly, within Asia Pacific. The Business Ethics and Anti-Corruption Group advises clients on all matters relating to business ethics and anti-corruption and has acted in major corruption investigations within Asia Pacific.


Acknowledgements

The chapters on Australia, China, Hong Kong, Indonesia, Singapore, Thailand and Vietnam have been provided by Norton Rose Group and its associate offices. We gratefully acknowledge the assistance of the law firms who have contributed to the chapters on India, Japan, Malaysia, Philippines, South Korea and Taiwan. These firms are identified at the start of each chapter and further details on the contributors are given at the end of the guide.

Contents

08 Introduction

12 Australia

19 China

29 Hong Kong

35 India

39 Indonesia

42 Japan

47 Malaysia

53 Philippines

59 Singapore

64 South Korea

68 Taiwan

72 Thailand

76 Vietnam

80 Key anti-corruption issues

89 Anti-bribery regimes in the UK and US

96 Contacts

98 Contributing law firms

08 Norton Rose Group


Introduction

Anti-bribery regimes

The OECD Convention on “Combating Bribery of Foreign Public Officials” (OECD Convention) requires countries to criminalise the bribery of foreign public officials (OECD offence). The OECD Convention established a form of peer review through a Working Group which is tasked with assessing each country’s establishment of anti-corruption legislation, its implementation, enforcement and sector-related corruption issues. In December 2009, the OECD’s Anti-Bribery Recommendation for Further Combating Bribery of Foreign Public Officials in International Business (the OECD’s Recommendation) was released. The OECD’s Recommendation is designed to assist member countries in preventing, detecting and investigating allegations of foreign bribery. Under the OECD’s Recommendation, both individuals and corporations that bribe foreign public officials in international business will be subject to criminal sanctions.

The United Nations Convention against Corruption (UNCAC) requires each participating State to put in place and enforce legislation prohibiting bribery of both public officials and persons in the private business sector. In contrast to the OECD Convention, there is no ongoing monitoring mechanism of anti-corruption compliance. The UNCAC also requires the institution of legislation criminalising bribery of public officials (both domestic and foreign). States are required to include corporate liability in these offences.

A related convention is the United Nations Convention against Transnational Organized Crime (UNCTOC). UNCTOC entered into force in September 2003 and signifies a major step in the fight against transnational organised crime. States that ratify this convention agree to implement certain measures against transnational organised crime including the establishment of domestic criminal offences relating to, amongst other things, corruption and money laundering, mutual assistance and law enforcement cooperation.

In November 2001, the Asian Development Bank (ADB) and the OECD brought together 28 Asian and Pacific economies that have committed to implement the OECD anti-bribery instruments (ADB/OECD Asia Pacific Anti-Corruption Initiative). In 2004, the leaders of the Asia-Pacific Economic Cooperation (APEC) countries agreed to implement UNCAC and, in 2005, set up the Anti-Corruption and Transparency Task Force to conduct peer reviews of anti-corruption measures.

Civil society organisations, such as Trace and Transparency International (TI), which publishes the Bribe Payers Index (BPI) and the Corruption Perceptions Index (CPI), and online resources such as the FCPA Blog, have proved remarkably effective at drawing international attention to the absence of adequate national and corporate anti-corruption measures. In response to international conventions and the pressure exerted by civil society organisations, many countries have introduced draconian national anti-bribery and anti-money laundering laws which extend both to the private and public sectors. In particular, stringent and extensive anti-bribery legislation has recently come into force in the UK.

Norton Rose Group 09

Introduction

Most countries in Asia Pacific already have national and international anti-bribery legislation in place. China has recently amended its Criminal Law directed at international bribery of foreign public officials, while India and Indonesia are in the process of updating their legislation. Other countries are strengthening their laws or pledging to take tougher enforcement actions.

Anti-money laundering

Bribery and money laundering are often inter-related with one invariably giving rise to the other. The Financial Action Task Force (FATF), which was formed by the G7 in 1989, has responsibility for examining money laundering techniques and trends, terrorist financing, peer reviews and setting out the measures that need to be taken to combat money laundering. The obligations now imposed on most professional and financial institutions, to report suspicions of money laundering and not to tip off suspects, are in certain respects even more draconian than anti-bribery legislation.

Most Asia Pacific countries are members of the Asia Pacific Group on Money Laundering (APG) and have criminalised money laundering and instituted financial intelligence units to share information about suspicion of money laundering activities globally.

Most anti-money laundering systems will require professional and financial institutions and persons to report any suspicion of money laundering, often referred to as a suspicious activity or transaction report which will be underpinned by a “tipping off” offence to prevent prior disclosure of that report to the client or its advisers. A failure to submit such a report can lead to a prosecution and any unauthorised prior disclosure can be prosecuted as a “tipping off” offence.

Although there has been a lot of recent commentary on the need for companies to self-report instances of bribery, for those organisations which are already subject to anti-money laundering obligations, a self-reporting regime has already been in place for some time which requires effective compliance systems to be established in order to assess and detect potential money laundering risks. Many of those compliance systems will be similar to those now required to meet the challenges set by newly introduced anti-bribery legislation.

Whistleblowing

A number of countries in Asia Pacific have had long established whistleblowing regimes in place and others have recently introduced new whistleblowing legislation.

For many US companies operating in the Asia Pacific region, the Dodd-Frank Wall Street Reform & Consumer Protection Act (Dodd-Frank Act) may have serious implications. Section 922 of the Dodd-Frank Act has introduced a new external whistleblowing regime with significant financial incentives. Although the Dodd-Frank Act is primarily directed at infractions of US securities law, its scope is wide enough to include any company operating in Asia Pacific that is exposed to US securities law and the Foreign Corrupt Practices Act (FCPA). As the financial incentives range from 10 per cent to 30 per cent of monetary recoveries made by enforcement agencies, potential whistleblowers are incentivised to go directly to the regulators.



Corruption Perceptions Index and Bribe Payers Index

The CPI ranks countries according to the perceived levels of corruption in the public sector. The CPI is an aggregate indicator of information gathered by TI sources. The information is based on independent surveys and assessments relating to bribery of public officials. Countries are only ranked where at least three sources of information are available. The 2011 version of the CPI ranks 183 countries and territories, with the number one ranking being the country/territory with the lowest perceived level of corruption.

The BPI looks at the sources of corruption in the international marketplace, both in terms of where the bribes are paid and by which businesses. The results illustrate how corruption is viewed by senior business executives operating in a range of industries. The 2011 version of the BPI ranks 28 of the world’s most economically influential countries according to the likelihood of their firms to bribe abroad.

The rankings of countries in this guide under one or both of these indices will be listed in the following chapters. Please note that not all countries have been ranked on both surveys.


Introduction

Abbreviations

A number of abbreviations have been used throughout the guide. For ease of reference, they are as follows:

Institution/Convention/Legislation Abbreviation

Asia Pacific Group on Money Laundering APG

Bribe Payers Index 2011 BPI

Corruption Perceptions Index 2011 CPI

Dodd-Frank Wall Street Reform & Consumer Protection Act 2010 Dodd-Frank Act

Financial Action Task Force FATF

Financial Intelligence Units FIU

Foreign Corrupt Practices Act FCPA

Organisation for Economic Cooperation and Development OECD

OECD Convention on “Combating Bribery of Foreign Public Officials” OECD Convention

Transparency International TI

United Nations Convention against Corruption UNCAC

United Nations Convention against Transnational Organised Crime UNCTOC



AustraliaContributed by Norton Rose Group

TI rankings

8th on the CPI. 6th on the BPI.

International anti-corruption conventions and inter-governmental organisations

Ratified and implemented OECD Convention and ratified UNCAC. Member of ADB/OECD Asia Pacific Anti-Corruption Initiative. Ratified UNCTOC. Member of FATF and APG.

Anti-bribery legislation and major offences

LegislationStateState and Territory laws criminalise corruptly giving or offering an inducement or reward to an agent for doing or not doing something in relation to the affairs of the agent’s principal.

Generally, the giving or offering is done “corruptly” where the person gave or offered the inducement with the intention of influencing the agent to show favour.

The offences extend beyond rewards given to State and Territory Government officials and apply to rewards given to employees or agents of private or public companies and individuals.

Persons who aid, abet, counsel, procure, solicit or incite the commission of the offences are also guilty of an offence.

CommonwealthAustralia implemented the OECD Convention in 1999 by enacting anti-bribery provisions in the Criminal Code Act 1995 (Criminal Code). The Criminal Code applies to bodies corporate in the same way as it applies to individuals. Criminal responsibility of corporations also extends to situations where the corporation attempts to commit the offence, aids, abets, counsels, procures or incites the commission of the offence or conspires to commit the offence.

Private sectorThe Criminal Code does not apply to bribery in the private sector. State and Territory laws deal with private sector bribery.

Public sectorUnder Commonwealth legislation, bribery in the public sector can be broken down into bribery of a foreign public official and bribery of a Commonwealth public official.


Australia

Bribery of a Foreign Public OfficialUnder Division 70 of the Criminal Code, it is an offence to bribe a foreign public official. The offence has a number of elements which must all be satisfied. There must be an intention to provide a benefit (which includes not only actual benefits, but also offers or promises to provide benefits) which is not legitimately due, with the intention of influencing a foreign public official in the exercise of his duties in order to obtain or retain business or a business advantage which is not legitimately due.

The offence applies to Australian citizens, residents and corporations or any person who engages in conduct constituting the offence and that conduct occurs wholly or partly in Australia, aboard an Australian aircraft or ship, or occurs outside of Australia but is committed by an Australian citizen or resident or an Australian body corporate.

Criminal liability may extend to a person who attempts to commit the offence or aids, abets, counsels, procures or incites the commission or the offence or conspires with another person to commit the offence.

The category of persons who are “foreign public officials” for the purposes of the Criminal Code is broad. In particular, it includes, amongst others: employees, contractors or officials of foreign Government bodies which includes companies in which a Government has a controlling interest or stake or with which it has a special relationship. Accordingly, foreign state owned enterprises are generally a foreign Government body. The definition also includes individuals who are employed by or perform duties or services for a public international organisation. For example, the United Nations is a public international organisation.

Bribery in respect of Australian Commonwealth Public OfficialsUnder Division 141 of the Criminal Code it is an offence for any person or body corporate (Australian or foreign) to dishonestly provide a benefit (which includes not only an actual benefit but also an offer or promise to provide a benefit) with the intention of influencing a Commonwealth Public Official in the exercise of that official’s duties as a public official. It is also an offence for a Commonwealth Public Official to dishonestly ask for, receive or agree to receive or obtain a benefit with the intention that the exercise of the official’s duties will be influenced.

Criminal liability may also extend to a person who attempts to commit the offence or aids, abets, counsels, procures or incites the commission of the offence or conspires with another person to commit the offence.

The category of persons who are “Commonwealth Public Officials” is broad. It includes a member of Parliament, an administrator of a Territory, a Commonwealth judicial officer or public servant, persons who perform duties of an office established under the laws of the Commonwealth as well as any employee of a Commonwealth Authority or an individual who is contracted to or is an officer or employee of a service provider contracted to the Commonwealth.

The offence applies whether or not the conduct constituting the offence occurs in Australia, whether or not it was conducted by an Australian citizen or body corporate, and whether or not a result of the conduct constituting the offence occurred in Australia.



Under Division 142 of the Criminal Code, there is also an offence in respect of a Commonwealth Public Official giving or receiving a corrupt benefit. This involves similar elements to the offence of dishonestly providing a benefit to a Commonwealth Public Official except that it does not involve an intention to influence. Instead it involves “the receipt or expectation of the receipt of the benefit” which “would tend to influence the public official” in the exercise of the official’s duties.

Extra-territorial application Most State and Territory laws can apply extra-territorially if conduct constituting an element of the offence occurs partly in the State or Territory, or if the conduct occurs wholly outside the State or Territory but has an effect in the State or Territory.

The offence of bribing a foreign public official may be prosecuted where the requisite conduct occurs outside of Australia but is committed by an Australian citizen or resident or an Australian body corporate. Where the person alleged to have committed the offence is a resident but not a citizen of Australia the Attorney General must give written consent to the prosecution.

The offence of bribing a Commonwealth public official may be prosecuted where the conduct occurs outside of Australia. Where the offence occurs wholly in a foreign country and the person alleged to have committed the offence is neither an Australian citizen nor a body corporate under the law of Australia, the Attorney General must give written consent to a prosecution.

Defences and mitigation measuresIn relation to the offences discussed above, where a corporation is prosecuted because the contravening conduct was authorised or permitted (whether expressly or tacitly), the corporation will not be found guilty of an offence if it can prove that it exercised due diligence to prevent the conduct, the authorisation or permission. This will typically involve the corporation maintaining and implementing compliance programs and anti-corruption policies.

A person is not criminally responsible for an offence if it is carried out under duress (which involves having a reasonable belief that a threat made will be carried out) or is in response to circumstances of sudden or extraordinary emergency. In each case the conduct must be a reasonable response to the threat or emergency.

It is a defence to prosecution for bribery of a foreign public official if the benefit or advantage was permitted or required by the written laws that govern the foreign public official (Division 70.3). It is not sufficient to demonstrate that the benefit or advantage is consistent with business culture.

PenaltiesIndividuals who are found guilty of bribing a foreign public official will be liable to a maximum of 10 years imprisonment, a fine of AU$1.1 million or both except in the case of incitement (that is, persistently urging a person to commit an offence) for which the penalty is imprisonment for not more than five years or a fine of AU$33,000 or both.


Australia

Corporations found guilty of bribing a foreign public official may be subject to even more onerous pecuniary penalties of the greater of:

• AU$11 million

• three times the value of any benefit that the corporation has directly or indirectly obtained that is reasonably attributable to the conduct constituting the offence (including the conduct of any related corporation)

• if the court cannot determine the value of that benefit, 10 per cent of the annual turnover of the corporation during the 12 months preceding the offence.

Individuals who are found guilty of dishonestly providing or offering to provide a benefit to a Commonwealth Public Official, or a Commonwealth Public Official who is found guilty of dishonestly asking for, receiving or obtaining a benefit, will be liable to imprisonment for not more than 10 years or will receive a fine of not more than AU$1.1 million or both, except in the case of incitement for which the penalty is imprisonment for not more than five years or a fine of not more than AU$33,000 or both.

Corporations found guilty of dishonestly providing or offering to provide a benefit to a Commonwealth Public Official may be subject to pecuniary penalties which are identical to those in respect of bribing a foreign public official, described above.

Individuals who are found guilty of giving or receiving a corrupt benefit in relation to a Commonwealth Public Official will be liable to a maximum of five years imprisonment or a fine of not more than AU$33,000 or both. Corporations found guilty of this offence may be subject to a fine of not more than AU$165,000.

Under State and Territory laws individuals found guilty of bribery offences will generally be liable to a maximum of between three and 10 years imprisonment or fines (there is some variation between States and Territories). Corporations found guilty of bribery offences are liable to substantial fines.

Further, in some States individuals and corporations can also be ordered to repay the value of any benefit received.

Facilitation payments, hospitality and giftsCurrently, the Criminal Code permits facilitation payments for the performance of a routine Government action of a minor nature if the payment is of a minor value (Division 70.4). A corporation or individual who makes a facilitation payment must record that payment under Division 70.4(3) as soon as practicable after the conduct, and the record must adhere to the Section’s requirements. Failure to adhere to the exact requirements will result in the payer not having recourse to the defence. “Routine Government action” does not include any decision to award or continue new business, and the person receiving the payment does not need to have a legal entitlement to the payment for this defence to be available. Difficulties with this defence include identifying the exact recipient of the payment, as well as determining whether the payment was in fact a “minor benefit.”



However, in a consultation paper released in November 2011, the Australian Government has outlined its proposal to remove the facilitation payment defence under Division 70.4 in order to align Australian anti-bribery laws more closely with the UK Bribery Act 2010. It has been stated that this will bring the law into line with international best practice. This reform and others, which ensure that bribery is an offence irrespective of the value or benefit offered and that prosecutions can proceed where the recipient of a bribe cannot be identified, are being considered.

Corporate liability for the acts of subsidiaries, employees and third partiesA body corporate can commit any of the offences discussed above and also be held criminally responsible for the actions of its employees, officers or agents (which could include a subsidiary) acting within the actual or apparent scope of their employment or authority. In addition, an act of foreign bribery committed by an employee can be attributed to the company if it can be shown that the company created and maintained a corporate culture which resulted in the conduct occurring.

Authorisation or permission can be established by proving:

• that the board of directors intentionally, knowingly or recklessly carried out the conduct or expressly, tacitly or impliedly authorised or permitted the commission of the offence

• that a high managerial agent intentionally, knowingly or recklessly engaged in the conduct or expressly, tacitly or impliedly authorised or permitted the offence

• that a corporate culture existed that directed, encouraged, tolerated or led to the commission of the offence

• that the company failed to create and maintain a corporate culture that required compliance.

A corporation’s criminal responsibility also extends to situations where the corporation attempts to commit the offence, aids, abets, counsels, procures or incites the commission of the offence or conspires to commit the offence.

Liability of individual directors and officers A director or officer of a corporation can be prosecuted for an offence committed by the corporation if the director or officer, aids, abets, counsels or procures or incites the commission of the offence by the corporation or conspires with another person to commit the offence. The director or officer must also have intended that his or her conduct would aid, abet, counsel or procure or incite the offence or conspired in the commission of the offence. It will not be adequate for that director or officer to simply have failed to engender an appropriate corporate culture.

Anti-money laundering legislation

The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML Act) was introduced in response to a critical FATF report that Australia was materially non-compliant with the FATF’s 40+9 recommendations. The legislation requires customer identification,


Australia

verification and ongoing due diligence, transaction monitoring, suspicious transaction reporting, record keeping, and AML/CTF risk based reporting and compliance programs.

In many cases, the money laundering offences catch a wider range of conduct such as receiving, possessing or disposing of money or other property that is merely “reasonably suspected” of being proceeds of crime. This means that the payment or receipt of a bribe may also infringe the AML Act. The Crimes Legislation Amendment (Serious and Organised Crime) Act (No 2) 2010 also amends the various money laundering offences to extend them to individuals or corporations who deal with proceeds or suspected proceeds of a criminal offence (such as foreign bribery) while overseas. This amendment means that Australian individuals and companies are at risk of prosecution for money laundering offences, even if the relevant proceeds never enter Australia. The penalty for the offence of dealing with money or property valued at more than AU$100,000 that is reasonably suspected of being proceeds of crime has also been increased to three years’ imprisonment or a fine of AU$19,800 or both for individuals and AU$99,000 for companies.

These amendments expand the ability of the Australian Federal Police to investigate and prosecute Australian companies suspected of involvement in foreign bribery. Further, if it is suspected that a benefit has been gained as a result of corrupt conduct, property or assets may also be seized under the relevant Proceeds of Crime legislation.

Whistleblowing legislation

Part 9.4AAA of the Corporations Act 2001, which was introduced in 2004 in response to a critical report by the Australian Prudential Regulation Authority (APRA), contains detailed whistleblowing provisions. An officer, employee or contractor will be a protected whistleblower provided that:

• pre-disclosure identification is given

• there are reasonable grounds for suspecting breaches of the Corporations Act, the ASIC Act or the relevant court rules and the revelations are made in good faith

• disclosures are made to the Australian Securities and Investments Commission (ASIC), the company’s auditors, a director, secretary or senior manager or a nominated person.

A protected whistleblower will have extensive protection against retaliation, defamation or any other civil or criminal liability for making the revelation.

A protected revelation must be handled in a prescribed manner. It can be passed on to ASIC, APRA or the Australian Federal Police without the whistleblower’s consent but only to someone else with consent.

Equivalent protections are contained in Part 29A of the Superannuation Industry (Supervision) Act 1993.



Enforcement agencies

Anti-briberyResponsibility for investigating corruption offences is divided between the State and Territory police forces, the Australian Federal Police and specialised bodies such as the Australian Crime Commission and ASIC. Once an investigating body has completed its investigation of a corruption offence, the case is referred to the relevant Director of Public Prosecutions, who makes an independent assessment whether to prosecute the case.

AML/CTFThe Australian Transaction Reports and Analysis Centre is the primary AML/CTF regulator and compliance enforcement agency. n


China

ChinaContributed by Norton Rose Group

TI rankings



Ratified UNCAC. Member of ADB/OECD Asia Pacific Anti-Corruption Initiative. Ratified UNCTOC. Member of FATF.

Anti-Bribery legislation and major offences

LegislationThe existing anti-bribery regime consists of a patchwork of legislation, with overlapping regimes, including:

• the PRC Criminal Law (which punishes the most serious cases of bribery)

• the PRC Unfair Competition Law (which covers cases of bribery undertaken by business operators for a business purpose which can be criminal or non-criminal in nature)

• the Interim Regulations on Prohibition of Commercial Bribery issued by the State Administration for Industry and Commerce

• other relevant interpretations issued by the Supreme People’s Court, the Supreme People’s Procuratorate or the State Administration for Industry and Commerce

• regulations issued by the Communist Party of China, targeted at officials who do not necessarily participate in bribery but act passively, ie, do not take action against bribery and corruption in the jurisdiction under their authority.

Criminal briberyThe PRC Criminal Law sets out eight different types of criminal bribery, distinguished by their type (active or passive) and the parties involved. Where the party receiving the bribe is a public official or entity, this will constitute an offence of Official bribery. Where the party receiving the bribe is a private individual or entity, this will constitute an offence of Commercial bribery.

On 25 February 2011, the PRC National People’s Congress passed an amendment to the PRC Criminal Law setting out a clear prohibition on the payment of bribes to “foreign officials” and “officials of international public organisations” (the Amendment). The Amendment came into effect on 1 May 2011. The Amendment consists solely of one additional sub-article to the PRC Criminal Law which provides as follows:



“whoever provides property to a foreign official or an official of an international public organisation for the purpose of seeking an improper commercial benefit, will be punished in accordance with the provisions applicable to commercial bribery.”

The Amendment has not been inserted into the “Graft and Bribery” chapter of the PRC Criminal Law which deals with corruption of public officials (where one may ordinarily expect it to be placed) but in the “Crimes against the Order of Socialist Market Economy” chapter, which deals with Commercial bribery.

While at first glance the placing of the Amendment in the PRC Criminal Law may appear surprising, it is consistent with China’s obligations under the UNCAC. Moreover, by stating that the purpose of the bribe should be the receipt of “an improper commercial benefit”, the Amendment itself suggests that an offence will only be committed when the purpose of the bribe is of a commercial nature.

Both companies and individuals can be punished under the Amendment.

In accordance with Articles 6 and 7 of the PRC Criminal Law, the Amendment will be applicable to PRC nationals both in the PRC and outside the PRC, and all PRC companies (and their managers) which carry business overseas (including Sino-foreign joint ventures, and wholly foreign-owned enterprises).

The Amendment will empower the Chinese authorities to exercise greater vigilance in monitoring the overseas activities of all PRC companies and PRC nationals when carrying on business outside of China. Chinese authorities will be able to conduct thorough investigations in China when they suspect that an offence may have been committed.

Unfortunately, the Amendment provides little detail on the behaviour that will actually be prosecuted by PRC authorities, or the prosecution thresholds, potential affirmative defences and potential exemptions. Implementing rules are expected to provide guidance and greater legal certainty regarding the operation of the Amendment in due course.

Official bribery Official bribery is punished as a crime under the following articles of the PRC Criminal law:

• acceptance of a bribe by a public official (Article 385)

• acceptance of a bribe by a public entity (including state-owned enterprises and other public entities) (Article 387)

• active bribery of a public official by an individual (Article 389)

• active bribery of an entity by an individual or an entity (Article 391)

• active bribery of a public official by an entity (Article 393)

• serving as an intermediary in the commission of an illegal bribe (Article 392).

The key provisions relating to public official bribery are Articles 385 and 389 of the PRC Criminal Law (the Official bribery rules). Under the Official bribery rules, a person is deemed


China

to have committed an offence of Official bribery if they have “given articles of property to state functionaries in order to seek illegitimate benefit”. The sanctions for individuals who commit Official bribery range from short-term detention to life imprisonment. The courts may also impose fines upon individuals or companies, and confiscate property.

The offence must concern state functionaries. This term “state functionaries” is defined in Article 93 of the PRC Criminal Code to include:

• persons who perform public service in state organs (in the legislative, administrative or judicial branches or the military), in state-owned enterprises or units, or state institutions

• such persons assigned by state-owned entities to companies, enterprises or institutions not owned by the state to perform public services

• other persons who perform public services according to law.

The definition is relatively wide. It not only refers to “public servants or officials” in the state organs but also includes employees in state-owned enterprises and other state institutions.

Strictly speaking, state functionaries are not allowed to take any bribes no matter how small the amount involved. However, as clarified by a circular issued by the Guidelines for Bribery Prosecution Standards issued by the Supreme People’s Procuratorate on 22 December 2000, official bribery cases will generally only be prosecuted if the amount at stake is over RMB10,000. Nevertheless, where the amount at stake is less than RMB10,000, the person giving the bribe is likely to be prosecuted if the purpose of the bribe was to seek illegal interests, if the bribes were given to a communist party official or Government leader, a member of the judiciary or police, or if more than three people at the same time have been bribed or if the bribery actions heavily damaged national or “social” interests.

Commercial briberyThe term “Commercial bribery” refers to acts of unfair competition committed by private individuals or companies. There is both a criminal and a non-criminal offence of Commercial bribery. For Commercial bribery to constitute a criminal offence under the PRC Criminal Law, the value of the transaction must be relatively large:

• at least RMB10,000 where committed by an individual

• at least RMB200,000 where committed by a company or other organisation.

An individual convicted of the criminal offence of Commercial bribery may be imprisoned for up to ten years and a fine. Companies and organisations may be fined, and officers or employees of the company or organisation who were directly responsible for commissioning the offence may be punished in the same way as private individuals.

The Unfair Competition Law and Commercial Bribery Regulations give a broader definition of Commercial bribery than the PRC Criminal Code. Article 8 of the Unfair Competition Law provides that business operators commit Commercial bribery if they offer business counterparts property or use “other means” to purchase or sell products in a manner that excludes competition.



Under the Commercial Bribery Regulations the term “property” includes cash, assets and disguised kickbacks (such as commission, payments for promotion, sponsorship, research, or consultancy services). “Other means” includes benefits such as subsidies for travel or entertainment.

Given the broad definition of Commercial bribery under the Unfair Competition Law and the Commercial Bribery Regulation, the giving of practically any gifts or benefits conferred in a commercial context is capable of constituting Commercial bribery.

Defences and mitigation measuresThere are two exceptions to non-criminal Commercial Bribery:

• discounts or commissions to intermediaries are permitted if they are recorded in a company’s financial accounts

• promotional goods of small value are permitted if they accord with commercial practice.

The use of third party agents for liaising with Government entities, applying for approvals, bidding for public procurement, etc, is ubiquitous in the PRC. The work of such agents should be closely monitored to ensure that no “grey payments” are made as any bribery offences committed by the agent will ultimately effect the company itself. Anti-bribery representations and warranties should also be included in any third party agency agreement.

There is no provision in PRC anti-bribery regulations stating that the implementation of anti-bribery measures by a company could provide a defence against prosecution by local authorities and the courts. However, since 2009 the PRC Government has initiated a new anti-corruption campaign, targeted indiscriminately at officials, state-owned enterprises, and domestic and foreign private companies. All business operators will be expected to have taken adequate measures in response to this campaign, including codes of conduct, employee policies, training, etc. The absence of such measures will be viewed unfavourably by local authorities, from both a political and legal perspective.

In practice, the implementation of bribery prevention measures by a company may be presented to the authorities or the courts as evidence that the illegal actions of the company’s agents were contrary to the company’s regulations and serve to prevent a prosecution of individuals from becoming a prosecution of the company.

PenaltiesIndividuals found guilty of Official bribery may be imprisoned for up to life imprisonment. The courts may also impose fines upon individuals or companies, or confiscate property.

Commercial bribery is punished as a crime under the following articles of the PRC Criminal law:

• acceptance of a bribe by a non-public official (Article 163)

• active bribery of a non-public official by an individual or an entity (Article 164).

While Official bribery is always considered a crime, no matter how small the bribe may be, Commercial bribery is only considered a crime where the amount offered as a bribe is “relatively large” (as discussed above). Non-criminal Commercial bribery (eg, bribery


China

that does not exceed the threshold amounts) will be investigated and prosecuted under administrative regulations set out below.

An individual convicted of the criminal offence of Commercial Bribery may be imprisoned for up to ten years and liable to pay a fine (of undefined value). Companies and organisations may be fined, and officers of employees of the company or organisation who were directly responsible for commissioning the offence may be punished in the same way as private individuals.

The penalty for individuals, companies and organisations guilty of the non-criminal offence of Commercial Bribery is a fine of between RMB10,000 and RMB200,000, and confiscation of any income generated from the illegal conduct.

Facilitation payments, hospitality and gifts

Facilitation payments are not permissible under PRC law. Internal regulations prohibit public officials from receiving any gifts over a certain value, and require public officials to hand over such gifts to the State if they cannot be returned to the giver.

Entertainment and hospitality should be considered “offers of property”, and shall not be provided to public officials for the purpose of obtaining an illegitimate benefit. Similarly, hospitality and entertainment which are provided to private individuals or companies may constitute the criminal or administrative offence of Commercial Bribery if the corresponding thresholds are met.

Corporate liability for the acts of subsidiaries, employees and third parties

In China, corporates can be held liable for the acts of their employees, directors and officers under criminal, administrative and civil regulations.

Under Article 30 of the PRC Criminal Law, any entity which commits a crime can be held criminally liable for this crime and fined accordingly. Although certain offences of the Criminal Law can only be committed by “entities”, the Supreme Court of the PRC has clarified that any crimes committed by the officers, employees and agents of an entity can be treated as crimes committed by the entity itself, if:

• the crime is committed on behalf of the entity

• the crime is committed for the benefit of the entity

• there is a gain of illegal income by the entity.

Under civil regulations, corporates will also be held responsible for the actions of their employees, directors and officers. In particular, Article 43 of the General Principles of the Civil Law of PRC provides that “an enterprise as a legal person shall bear civil liability for the operational activities of its legal representatives and other personnel.” In addition, Article 63 of the General Principles of the Civil Law of PRC provides that corporates shall also be liable for acts of their appointed agents. Finally, the Interim Regulations of the State Administration for Industry and Commerce on Prohibition of Commercial Bribery issued by SAIC provide that



“the conduct of commercial bribery by the staff of a business operator for the purpose of sale or purchase of commodities shall be regarded as the conduct of the business operator.”

As can be seen from the regulations quoted above, the PRC legal framework enables authorities and courts to hold companies responsible for the acts of their agents. However, the authorities and the courts will also consider separately the liability of agents and companies with a view to protecting jobs and the local economy.

Liability of individual directors and officers

Directors and legal representatives are at risk of individual liability for PRC companies’ activities.

The duties and liabilities of directors and legal representatives are set out in the PRC Company Law (PRC Company Law). Directors and legal representatives are required to perform their duties faithfully, to uphold the interests of the company and to refrain from using their position in the company to seek personal gain, or to accept bribes or other illegal income (Article 148 of the PRC Company Law).

Article 149 of the PRC Company Law specifies the following types of conduct as constituting a breach of legal representatives’ and directors’ duties towards the company:

• misappropriate the funds of the company

• deposit the funds of the company in a bank account opened in their personal name or in the name of another individual

• in violation of the articles of association of the company, lend the funds of the company to other persons or offer company property as security for other persons unless consent has been given at a shareholders’ meeting, a shareholders’ general meeting or by the board of directors

• take advantage of their position in the company to seek for themselves or other persons commercial opportunities that belong to the company, or operate by themselves or for another person the same type of business as the company, unless consent has been given at a shareholders’ meeting or shareholders’ general meeting

• accept as their own the commissions of a transaction between the company and other persons

• disclose company “secrets” without authorisation

• other acts that violate their fiduciary obligations to the company.

The PRC Company Law explicitly stipulates that all the income that a director or legal representative may derive from violating the provisions of Article 149 of the PRC Company Law shall belong to the company.


China

In addition to the above, some specific rules apply to legal representatives of companies. PRC Company Law specifies that a company’s legal representative may be subjected to administrative sanctions and fined and, if the offence constitutes a crime, criminal responsibility shall be investigated in accordance with the law, if the company has:

• conducted illegal operations beyond the range approved and registered by the registration authority

• concealed facts from the registration and tax authorities and practised fraud

• secretly withdrawn funds or hidden property to evade repayment of debts

• disposed of property without authorisation after the enterprise is dissolved, disbanded or declared bankrupt

• failed to apply for registration and make a public announcement promptly when the enterprise undergoes a change or terminates, thus causing interested persons to suffer heavy losses

• engaged in other activities prohibited by law, damaging the interests of the State or the public interest.

Legal Representatives and Directors’ liability to compensate the company and shareholdersArticle 150 of the PRC Company Law provides:

“if a director… of the company violates laws or administrative regulations or the company’s articles of association in the execution of company duties and causes losses to the company, he shall be liable for compensation.”

Under the PRC Company Law, shareholders may employ significant private enforcement mechanisms against management indiscretions. If a director or legal representative commits an offence under Article 150, any shareholder (in the case of a limited liability company) or shareholders holding jointly or independently one per cent of the shares (in the case of a company limited by shares), may require the supervisor or the supervisory board of the company to institute proceedings against this director or legal representative in a People’s Court, in order to recover the losses caused to the company.

Additionally, if in violation of laws or administrative regulations or the company’s articles of association, a director or the legal representative harms the interests of a shareholder, the shareholder may institute proceedings in a People’s Court to recover its losses.

Legal Representatives and Directors’ liabilities under the PRC Criminal Law Several PRC Company Law provisions impose criminal liability.

In addition, the PRC Criminal Law pierces the corporate veil by providing that where an entity engages in criminal activity, penalties can be imposed on both the entity and the personnel in charge.



The PRC Criminal Law stipulates penalties for crimes committed against companies or crimes arising from the acts of “directly responsible person(s) in charge” and other “directly responsible person(s)” in the course of business. Neither directors nor legal representatives bear criminal liability by virtue of their office, but may do so if they are held by the court to be “directly responsible person(s) in charge” or other “directly responsible person(s)”. Directors or legal representatives who are acting in good faith and without negligence are not criminally responsible for proscribed activities in the course of performing their duties.

Where they are deemed guilty of wrongdoing, directors and legal representatives may be punished by criminal detention and heavy fines. If they are mere accomplices, they may receive a lesser punishment, for instance:

• presenting falsified accounts: up to three years of prison

• concealing assets or presenting falsified accounts in the course of liquidation: up to five years of prison

• receiving bribes: up to five years of prison and confiscation of the bribe

• misappropriation of funds: up to 10 years of prison and confiscation of the misappropriated funds

• money laundering: up to five years of prison and confiscation of the laundered money.


The PRC Anti-Money Laundering Law (the AML Law) came into effect on 1 January 2007, the year China became a member of FATF. The AML Law aims to prevent money laundering activities which attempt to conceal or disguise, by any means, the sources of proceeds generated from criminal activities, including drug-related crimes, organised crimes, terrorist crimes, smuggling, corruption, bribery and financial fraud. The AML Law and the PRC Criminal Law form the basic legal framework for the prevention, monitoring, regulation, investigation and punishment of money laundering activities in China. The primary target of anti-money laundering legislation in China remains financial institutions who must implement certain measures (eg, maintaining client identity systems, establishing internal control systems designed to prevent and detect money laundering activities and reporting suspicious transactions) to fulfil their anti-money laundering obligations under the AML Law and related rules and regulations. Non-financial institutions are monitored but to a lesser extent.

Anti-money laundering obligations of financial institutionsA financial institution must implement measures to fulfil its anti-money laundering obligations under the Law and related rules and regulations. The main measures are set out below.

• Establish a designated anti-money laundering department: a financial institution must establish a special department or designate an existing internal department to handle anti-money laundering matters.


China

• Establish a client identity identification system: a financial institution must establish a client identity identification system to identify and verify the identity of any client who wishes to become a client of the financial institution.

• Retain documentary records: a financial institution must retain records of a client’s identification documents and transaction documents (including any account books) for a period of time. The duration of such period of time varies depending on the type of industry to which the financial institution belongs.

• Establish an internal control system: a financial institution must establish an internal control system, formulate internal operating procedures and control measures for the purposes of preventing potential money-laundering activities and monitoring compliance with the anti-money laundering obligations of financial institutions under the Law.

• Report large-sum transactions: a financial institution must report to the relevant authority any transaction involving a large sum of money in Renminbi or a foreign currency.

• Report suspicious transactions: if a financial institution reasonably suspects that the assets involved in any transaction are connected with a crime, it must submit a written report to the local branch of the People’s Bank of China and the local public security bureau.

• Provide training to employees: a financial institution must provide training to its employees on the anti-money laundering obligations of financial institutions under the AML Law.

InvestigationsIf the People’s Bank of China or (as the case may be) its branch department at the relevant provincial level suspects that a financial institution is involved in money laundering activities, it may conduct an investigation. During the course of the investigation, personnel of the financial institution may be interrogated. The investigators conducting the investigation may review and make copies of materials related to the financial institution or person(s) under investigation. Furthermore, client accounts which are relevant to the investigation may be temporarily frozen.

Legal consequences of a breach of the AML LawIf a financial institution in China breaches its anti-money laundering obligations under the AML Law, the relevant PRC Government authority has the right to order the financial institution to cure the breaches within a limited period of time. In serious cases, a fine of up to RMB 5 million may be imposed. In addition, the relevant PRC Government authority has the right to order the financial institution to (i) impose a disciplinary sanction on its directors, senior managers and any other persons responsible for the breach, (ii) remove them from their current positions or (iii) prohibit them from working in the financial industry sector. Furthermore, a fine of up to RMB 500,000 may be imposed. In exceptionally severe circumstances, the Government authorities may order the financial institution to (i) suspend its business operations while rectifying the breach or (ii) revoke its business licence.



Anti-money laundering obligations of non-financial institutionsPrior to the AML Law, anti-money laundering obligations were only imposed on banks and financial institutions. Since the AML Law came into effect on 1 January 2007, anti-money laundering obligations may also be imposed on non-financial institutions, such as law firms, real estate institutions, payment providers, and other businesses. Detailed implementing rules on the specific anti-money laundering obligations of these professions are anticipated.


China has established high profile 24-hour corruption hotline reporting systems with many Government entities including the Public Security Bureau, the Bureau of Administration for Industry and Commerce, and various court and prosecution departments. Hotline numbers and email addresses are easily accessible and have been made public in many regions. To ensure the proper use of public money and effective prevention of corruption in construction projects, China has introduced the Audit Law which entitles auditors to track and supervise the use of funds by companies and projects that have access to public money. Construction projects where Government investment exceeds 50 per cent, or those with less than 50 per cent Government investment but where construction and operation is Government controlled, must agree to be audited.


Anti-briberyResponsibility for enforcing anti-bribery regulations lies principally with the police and the People’s Courts. However, given the political importance of the fight against corruption (and the extent of the practice) a wealth of other official institutions also retain significant roles in the enforcement of anti-bribery measures and definition of anti-corruption efforts, especially for national-level or politically-sensitive cases, such as (i) the National Bureau of Corruption Prevention (established in September 2007), (ii) the Ministry of Supervision, (iii) the State Administration for Industry and Commerce, (iv) the General Administration for Combating Embezzlement and Bribery, (v) the Department for the Prevention of Crimes by State Functionaries (the last two being under the supervision of the Supreme People’s Procuratorate), and (vi) the CPC Central Commission for Discipline Inspection. All of these institutions also have provincial or local agencies.

Anti-money launderingThe main institution in charge of enforcing anti-money laundering regulations and conducting investigations of financial institutions is the Anti-Money Laundering Bureau of the People’s Bank of China. The Bureau regularly conducts investigations and imposes fines on infringing financial institutions. n


Hong Kong

Hong KongContributed by Norton Rose Group

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The Central People’s Government of the People’s Republic of China has declared that UNCAC and UNCTOC shall apply to Hong Kong. Member of ADB/OECD Asia Pacific Anti-Corruption Initiative. Member of FATF.


LegislationThe Prevention of Bribery Ordinance (POBO) is the primary anti-corruption legislation in Hong Kong. The POBO is directed at the corruption of public officers (public sector offences) and corrupt transactions with agents which includes employees of private companies (private sector offences).

The Independent Commission Against Corruption Ordinance (ICACO) sets out the scope and parameters of the Independent Commission against Corruption (ICAC), being the principal agency responsible for tackling corruption in Hong Kong.

Private sector Private sector bribery offences under the POBO relate to corrupt transactions with agents and include carrying out the following acts without lawful authority or reasonable excuse:

• a person offering an “advantage” to an agent without the permission of his principal, in connection with his performance or abstaining from performance of any act in relation to his principal’s affairs or business (Section 9 of the POBO)

• as an agent soliciting or accepting an “advantage” in connection with his performance or abstaining from performance of any act in relation to his principal’s affairs or business (Section 9 of the POBO).

Public sector Public sector bribery offences under the POBO include carrying out the following acts:

• any prescribed officer who, without permission of the Chief Executive, solicits or accepts any advantage (Section 3 of the POBO)

• any person who, whether in Hong Kong or elsewhere, without lawful authority or reasonable excuse offers an “advantage” to a public servant or the Chief Executive, in



connection with the performance or abstaining from performance of any act in his capacity as a public servant or the Chief Executive (Section 4 of the POBO)

• any public servant or the Chief Executive who, whether in Hong Kong or elsewhere, without lawful authority or reasonable excuse, solicits or accepts an “advantage” in connection with the performance or abstaining from performance of any act in his capacity as a public servant or the Chief Executive (Section 4 of the POBO).

In addition, there are specific public bribery offences relating to the giving of assistance in relation to contracts, bribery for procuring withdrawal of tenders, bribery in relation to auctions and bribery of public servants by persons having dealings with public bodies. It is also an offence for the Chief Executive (or a prescribed officer) to be in possession of unexplained property.

The POBO details a large number of entities which are considered “public” for the purposes of the POBO. These include a number of private companies or entities that carry out a public function in Hong Kong.

As a matter of common law, it is an offence to bribe a person performing a public duty or for such a person to solicit or accept a bribe. It is also an offence at common law for a person in public office to misconduct himself in the course of his public duties.

Extra-territorial applicationUnder Section 4 of the POBO, any person who, “whether in Hong Kong or elsewhere”, bribes the Chief Executive or any Hong Kong public servant will have committed an offence. Accordingly, the POBO expressly has extra-territorial effect with respect to the public bribery offences under this Section.

The private sector bribery offences under Section 9 of the POBO do not expressly have extra-territorial effect. However, where such an offence is committed outside Hong Kong resulting in a flow of criminal proceeds, this may give rise to an offence under Hong Kong’s anti-money laundering legislation and may also trigger whistleblowing obligations under such legislation (see below).

Bribery of foreign public officials in Hong Kong is not specifically prohibited under the POBO. However, foreign public officials may be caught under the broad definition of “agent” under the POBO, which includes “any person employed by or acting for another”. The Hong Kong Court of Final Appeal has confirmed that it is an offence for a foreign public official to solicit or accept an “advantage” in Hong Kong without his principal’s informed consent in connection with the performance or abstaining from performance of any act in his capacity as a foreign public official in that place outside Hong Kong. The rationale underlying this decision may also extend to foreign agents.

Defences and mitigation measuresWith the exception of public officials accepting bribes, the substantive bribery offences under Part II of the POBO have a built in statutory defence of “lawful authority or reasonable excuse”. The phrases “lawful authority” and “reasonable excuse” are not defined in the POBO and are not easy to construe or apply in practice. What amounts to “lawful authority” or “reasonable excuse” will be fact specific and dependent on the individual circumstances of each case.


Hong Kong

The burden of proof in establishing the defence rests with the accused and the question to be addressed is what lawful justification (ie, lawful authority or reasonable excuse) can there be for offering a bribe or for accepting one. Commentary suggests that in practice, lawful authority or reasonable excuse will invariably revolve around a principal’s consent having been obtained or a belief that it would, could or had been obtained. “Reasonable excuse” is an inherently vague term, but an honest and reasonable, although mistaken, belief in a state of facts which, if true, would create a “reasonable excuse” defence to the charge. It is not clear whether a company’s attempts to put in place adequate anti-corruption procedures would provide a defence of “reasonable excuse” to the company but it may impact the ICAC’s decision on whether to prosecute.

PenaltiesMaximum penalties for the above-mentioned offences under the POBO range from fines of HK$100,000 to HK$1 million and imprisonment from one year to ten years (Section 12). The Hong Kong courts have advocated the need for deterrent sentences, which means that immediate custodial sentences are normal.

There are also penalties for failing to cooperate with the ICAC involving fines and/or imprisonment.


Under the POBO, it is not a statutory defence to show that an “advantage” is of de minimis value or that it is customary in any profession, trade, vocation or calling to accept the “advantage”. However, the Acceptance of Advantages (Chief Executive’s Permission) Notice 2010 provides that a prescribed officer may accept low value gifts (for example, traditional gifts not exceeding HK$1,500 and other gifts not exceeding HK$250) where there are no official dealings between the persons offering the “advantage” and the department or organisation for which the prescribed officer works.


Although the ambit of the POBO is wide enough to hold corporates liable for offences committed by their employees, agents, etc, cases involving a prosecution against a corporate in relation to the substantive bribery offences set out in Part II of the POBO are rare. Instead prosecutions are usually brought against individuals.

Liability of individual directors and officers for acts of the company

There is no express provision under the POBO that attributes the liability of a company to its directors or officers. Generally, individual directors are unlikely to be held vicariously liable for the acts of the company or its employees under common law. Where individuals are the controlling mind of the company, these individuals may be more vulnerable to pursuit by the ICAC and the Department of Justice (DOJ) than the company and may be held liable for acts of their company which amount to offences under the POBO.



Under the Criminal Procedures Ordinance (CPO), where a director aids, abets, counsels or procures the commission by the company/employees of any offences (including the substantive bribery offences under Part II of the POBO), the director can be prosecuted for the same offences.


Hong Kong’s money laundering legislation currently includes the Organised and Serious Crimes Ordinance (OSCO) and the Drug Trafficking (Recovery of Proceeds) Ordinance (DTO).

Under the OSCO, it is an offence where a person deals with property, knowing or having reasonable grounds to believe that the property in whole or in part directly or indirectly represents another person’s proceeds of an indictable offence. Similarly, under the DTO it is an offence where a person deals with property, knowing or having reasonable grounds to believe that the property in whole or in part directly or indirectly represents another person’s proceeds of drug trafficking.

In addition, a person who knows or suspects that any property represents the proceeds of, or was/will be used in connection with, an indictable offence/drug trafficking is required to report this fact to a Hong Kong police officer or member of the Hong Kong Customs & Excise Department. In practice such reports are usually made through the Joint Financial Intelligence Unit (JFIU), a clearing house for suspicious transactions reports operated jointly by the Police and Customs & Excise.

The substantive offences under the POBO, whether committed in or outside Hong Kong, may constitute indictable offences for the purposes of the OSCO and may, therefore, trigger the whistleblowing obligations imposed under the OSCO.

The new Anti-Money Laundering and Counter-Terrorist Financing (Financial institutions) Ordinance (AMLO) will come into force on 1 April 2012. The AMLO will apply to various financial institutions (and their employees) regulated by the Securities and Futures Commission, the Hong Kong Monetary Authority or the Office of the Commissioner of Insurance. Unlike under current anti-money laundering legislation, contravention of the AMLO may result in criminal charges.


Section 30A of the POBO guarantees whistleblowers anonymity in relation to offences committed under the Ordinance. However, the right to anonymity may be revoked in the following circumstances:

• if the courts believe that justice cannot be done without revealing the identity of the informer

• if the whistleblower wilfully made a material statement that was not true, or which was believed to be false

• if the whistleblower is called as a witness to the proceedings.


Hong Kong

Whistleblowing is not compulsory under the POBO and there is no provision stating that whistleblowing leads to a reduction in the sentence of an offender, even if their act of informing could lead to their prosecution. In practice, however, the DOJ will take any information given by an offender into account when considering the prosecution or proposed sentencing of an offender.

Whistleblowing is compulsory under the OSCO in relation to the knowledge or reasonable belief of the proceeds of crime.


The ICAC is the principal agency responsible for tackling corruption in Hong Kong through investigation, prevention and community education. The ICAC is independent of the civil service and is answerable directly to the Chief Executive of the Hong Kong Special Administrative Region.

Pursuant to the ICACO, which sets out the scope and parameters of the ICAC’s investigative powers and duties, the ICAC is under a duty to investigate any alleged or suspected offence (or conspiracy to commit an offence) under, among other things, the POBO.

In the course of an investigation, the ICAC can, amongst other things:

• by court order, require a witness to provide information and produce documents

• arrest and require that person to attend interviews under caution

• by court order, require a suspect to disclose details of property, expenditure and liabilities

• generally, with the court’s sanction, search premises and, with or without court’s sanction, seize evidence

• by court order require a suspect to surrender his travel documents.

The ICAC may, without warrant, arrest a person if he reasonably suspects that that person is guilty of an offence under the relevant legislation.

The ICAC has powers under the POBO to make an ex-parte application to the court for a restraining order to freeze properties which may be the proceeds of a bribery/corruption offence pending the conclusion of the investigation or any prosecution flowing from it. A restraining order may cover property in the possession, or under the control, of the suspect as well as property held by a third party for or on behalf of a suspect.

As an investigatory body, the ICAC is not able to impose any sanction or sentence itself. A person under investigation by the ICAC will be prosecuted by the DOJ in the Hong Kong courts for the relevant offence(s) if the DOJ considers that (i) the evidence is sufficient to justify the institution of proceedings; and (ii) if the public interest requires a prosecution to be pursued.



Apart from prosecutions, ICAC investigations sometimes result in cautions. Cautions are administered to persons involved in minor cases that the DOJ considers not to be in the public interest to prosecute. The offenders involved must have made full admissions of the offences concerned. The ICAC also refers cases of misconduct or malpractice of civil servants to Government departments for disciplinary or administrative action.

In terms of prevention, the ICAC has a statutory duty to examine the practices and procedures of Government departments and public bodies and to secure the revision methods of work or procedures which may be conducive to corrupt practices. It is also required by law to provide corruption prevention assistance on request to any member of the public. n


India

IndiaContributed by Amarchand & Mangaldas & Suresh A. Shroff & Co.

TI rankings



Ratified the UNCAC and the UNCTOC in May 2011, but has not yet implemented either. Member of ADB/OECD Asia Pacific Anti-Corruption Initiative, APG and FATF.


Primary LegislationThe primary Indian legislation dealing with the offences of corruption and bribery is the Prevention of Corruption Act, 1988 (PCA). The PCA criminalises the acceptance of gratification (pecuniary or otherwise) other than the acceptance of legal remuneration by public officials which is paid by their employers in connection with the performance of their duties. Aiding and abetting the commission of bribery is also an offence. The provisions of the PCA apply regardless of the location/jurisdiction of the commission of an offence under it, as long as the same is committed by a “public servant” as defined under it. Further, the PCA creates an adverse presumption if a public servant’s assets are disproportionate to his income.

The Indian Penal Code, 1890 (IPC), the primary Indian criminal legislation, also contains provisions criminalising corruption and bribery, as well as the abetment of either offence. Facilitating the commission of an offence under the PCA, as well as voluntary concealment of facts by an illegal act or omission, or the making of a false representation that facilitates the commission of an offence of corruption, are also punishable under the IPC.

In addition to the above, several service rules and codes of conduct regulate the conduct of public officials. They set out disclosure obligations and thresholds for acceptance of gifts and hospitality, etc. Examples of such codes of conduct include the “All India Services (Conduct) Rules, 1968” and the “Directorate of Personal Services, Discipline and Welfare, 2006 (Regulations for the Air Force, 1964)”. Various Government departments also routinely issue lists of “Do’s and Don’ts”, and other procedures to be followed by public servants.

Facilitating and Enforcement MechanismsThe operation of the above anti-corruption legislation is supported by the following key statutes: (i) the Right to Information Act, 2005 (RTI); (ii) legislation empowering the Lok Ayukta at the State level; and (iii) Central Vigilance Commission Act, 2003.

The RTI mandates that information under the control of a public authority be furnished to any person who makes an application for the same under its provisions. The RTI provides for certain limited exceptions.



The Lok Ayukta is an authority constituted at the State level to investigate allegations of corruption and maladministration against public servants.

The Central Vigilance Commission Act, 2003 governs the Central Vigilance Commission (CVC) which is the apex anti-corruption enforcement institution in India, monitoring all vigilance activity pertaining to the central Government and advising central Government organisations in planning and executing their vigilance work.

The CVC is empowered to inquire into offences under the PCA. All proceedings conducted by the CVC are deemed to be judicial proceedings and the CVC has all the powers of a civil/criminal court with respect to the proceedings conducted by it. The Central Bureau of Investigation also has an “Anti Corruption Division” that deals with cases of corruption and fraud committed by public servants of Central Government Departments, Central Public Sector Undertakings and Central Financial Institutions.

In addition to the above existing legislation, key proposed legislation includes: (i) the proposed “Lok Pal” Bill; (ii) Prevention of Bribery of Foreign Public Officials and Officials of Public International Organisations Bill, 2011; and (iii) proposed legislation to protect whistleblowers as detailed separately below.

An evolving development in relation to anti-corruption legislation in India is the drafting of the “Lok Pal” Bill which seeks to create an independent central ombudsman to investigate offences and redress grievances related to corruption in India. This bill is proposed to be passed at the 2011 winter session of the Indian Parliament. The contents of the Bill, including exclusion of certain classes of officials, the ambit of its investigative body, punishment for vexatious complaints, and several other key aspects of the bill are currently being debated between the Government and other stakeholders, including civil society.

The Prevention of Bribery of Foreign Public Officials and Officials of Public International Organisations Bill, 2011 that was proposed in May 2011 is yet to be passed. This bill is intended to facilitate the implementation of the UNCAC in India.

In addition to the above legislation, a draft “National Anti-Corruption Strategy” (NACS) prepared by the CVC was issued for public comment in September 2010. The NACS aims at shifting the focus of anti-corruption legislation in India from a punitive approach to a more holistic approach which inter alia involves preventive measures to minimise the scope for corruption, strengthening legal and regulatory framework, capacity building in relevant institutions and enhancing collaboration amongst all stakeholders to ensure that cases of corruption or bribery are detected, reported, and prosecuted effectively.

Private sectorThe provisions of the IPC are more suitable for application to private entities.

Public sectorThe PCA is primarily directed at public officials.

Extra-territorial applicationThe provisions of the PCA would apply whenever an offence is committed. This may be construed as an extra-territorial application of the PCA in a limited manner.


India

Defences and safeguardsNo action can be taken against a public servant under the provisions of the PCA unless sanction for such action is obtained from the authority competent to remove the accused person from office. This provision is intended as a safeguard against frivolous prosecution of public servants.

Bona fide acts of public officials are protected from prosecution and/or conviction under the PCA.

PenaltiesThe PCA permits the imposition of a penalty of imprisonment for a term of between six months and seven years and a fine. Further, for repeated offences, imprisonment for a term of between two and seven years and a fine may be imposed.

Under the IPC, bribery is punishable with imprisonment for a period of up to one year or a fine or both. “Criminal breach of trust” committed by a public servant is punishable with imprisonment for life, or simple/rigorous imprisonment which may extend to ten years, or a fine. “Criminal breach of trust” as per the IPC, is the dishonest misappropriation/use of property entrusted to a person in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract entered into by such person, express or implied. The abetment of offences under the IPC is punishable as though the person who abetted the offence had committed it.

Corporate liability for the acts of subsidiaries, employees and third parties The provisions of the PCA are applicable only to public servants.

Those of the IPC are applicable to all persons. “Persons” include any company or association or body of individuals, whether incorporated or not.

Corporate criminal liability is recognised under Indian penal law. Such liability may be attributed to a corporation if the person who commits such offence is someone who plays a crucial role in the functioning of such corporation. In such cases, the corporation could be held liable for an act committed by a director, officer or employee. The law laid down in Assistant Commissioner, Assessment-II, Bangalore v Velliappa Textiles Limited [AIR 2004 SC 86] in this regard is an example. In cases where the law prescribes imprisonment and fines as penalties for criminal acts, courts can impose fines on a company which is found guilty of a crime.

The anti-corruption legislation does not specifically impose liability on corporate entities for the acts of its employees and third parties.


The anti-corruption legislation does not specifically impose liability on directors and officers of a corporate entity for the commission of an offence of corruption by a corporate.

Ordinarily, it is not possible to impose liability on a director or officer of a company even if the company is guilty of having committed an offence of corruption. S.K. Alagh v State of Uttar Pradesh [AIR 2008 SC 1731] is a case on this point.



However, directors and officers of a corporation may be held liable for various offences, including corruption, independently and in their individual capacities under relevant legislation.

Anti-money laundering legislation and reporting obligations

The Prevention of Money Laundering Act, 2002 (PMLA) is the principal Indian legislation to combat money laundering. The PMLA and the rules notified under its provisions came into force with effect from 1 July 2005.

The PMLA defines the offence of money laundering to include being involved “in any process or activity connected with the proceeds of crime and projecting it as untainted property”.

The offence of money laundering is punishable with rigorous imprisonment for a term ranging from three to five years and a fine. For certain offences, the penalty may be enhanced to imprisonment for up to ten years.


The PCA contains a provision prohibiting a whistleblower from being prosecuted if he has made a statement to the police in a proceeding against a public servant. However, at present, no specific whistleblowing legislation exists in India. Although the Whistle-Blowers (Protection in Public Interest Disclosures) Bill – which proposed to protect whistleblowers and encourage the public to report corrupt practices – was passed in 2006 by the Parliament, the Act has not received the assent of the President that is required for it to become effective. In August 2010, another similar bill (the Public Interest Disclosure and Protection to Persons Making the Disclosure Bill, 2010) was discussed in the Parliament. However, the bill, if passed, would apply only to corruption committed in public office, or by public officials as≈opposed to the 2006 bill which would apply to the private sector. n


Indonesia

IndonesiaContributed by Susandarini & Partners (associate office of Norton Rose Group)

TI rankings

100th on the CPI, 25th on the BPI.


Ratified UNCAC and UNCTOC. Member of ADB/OECD Asia Pacific Anti-Corruption Initiative and APG.


LegislationThe primary piece of legislation is Law No 31 of 1999 regarding the Eradication of Criminal Act of Corruption as amended by Law No 20 of 2001 (Indonesian Anti-Corruption Law). At present, legislation has been presented to implement the OECD offence under Indonesian Law (New OECD offence).

Public sectorIndonesian corruption laws primarily target public official corruption crimes and seek to cover public corruption crimes in the widest sense. Article 2 of the Indonesian Anti-Corruption Law stipulates that an act of corruption is committed by any person who or a business entity that illegally enriches itself or another person or business entity, at the expense of the state’s finances or economy. Article 3 of the Indonesian Anti-Corruption Law provides that any person or business entity who derives benefits for themselves, others or any (other) business entity by misusing their authority, resulting in an opportunity or facility being conferred upon them by their office or their official status and which causes a loss to the state’s finances or economy, is guilty of an offence.

Private sectorAs mentioned above, the Indonesian Anti-Corruption Law’s primary objective is to regulate and prevent public officials from committing corrupt activities.

Extra-territorial applicationExtra territorial application is explained in brief in the Indonesian Anti-Corruption Law and is stipulated under Article 16. Any person or any corporation outside of the jurisdiction of the Republic of Indonesia committing corruption contrary to the Indonesian Anti-Corruption Law will be sanctioned to the same degree as any person or any corporation committing corruption within the jurisdiction.

Defences and mitigation measuresUnder Law No 30 of 2002 on Corruption Eradication Commission (Komisi Pemberantasan Tindak Pidana Korupsi or KPK), gratification may be regarded as a defence or mitigation measure. However, gratification must first be reported to KPK by the public official receiving



the gratification. If KPK decides that the object of gratification should be considered to be some sort of fee, it will be regarded as state property. However, in the unlikely event that the gratification is considered to be peripheral in nature, it will be returned to the public official.

PenaltiesCriminal sanctions under the Indonesian Anti-Corruption Law include life imprisonment or a sentence ranging from one year to 20 years and a minimum fine of IDR 50 million to a maximum of IDR 1 billion.

The Indonesian Anti-Corruption Law provides that where a person or business entity is convicted of any offence, they must pay compensation to the state body or agency that has borne the consequential loss as determined by the panel of judges hearing the case. It should be noted that pursuant to Article 4 of Indonesian Anti-Corruption Law, a payment of compensation is taken as a mitigating factor in the sentencing process. However, paying compensation will not prevent imprisonment. Where a corrupt act is deemed to be committed by a business entity, penalties may be imposed on the business entity and its management.


The Indonesian Anti-Corruption Law does not deal specifically with hospitality payments, eg, where an individual or a business entity pays for any accommodation, food or beverages for a public official. With respect to gifts, Indonesian Anti-Corruption Law provides that any gift to a public official must first be approved by the Commission on the Eradication of Corruption (KPK). KPK will have the power to decide whether the public official may keep the gift or consider the gift to be a state owned asset. Any undisclosed gift will amount to an offence. There is no provision authorising facilitation payments.


Under Article 20 of the Indonesian Anti-Corruption Law, any act of corruption made by or made in the name of a business entity is punishable by criminal fine.

Law No 31 does not expressly state that a corporate may be liable for corrupt acts of its subsidiaries, employees and third parties, however a broad interpretation of the wording in Article 20(1) Law No 31 highlights that anyone helping a corporation – whether a subsidiary, employee or any third party – may be punished under this law.


Under Article 20 of the Indonesian Anti-Corruption Law, any act of corruption made by or made in the name of a business entity is punishable not only for the business entity but also its management, ie, its board of directors and board of commissioners, as well as any officers involved. It should be noted that sanctions for corporate corruption are criminal fines and may result in closure of all or part of the company for a maximum duration of one year. The corporation’s rights and Government issued facilities granted by the Republic of Indonesia may also be wholly or partly revoked.


Indonesia


In 2002, Indonesia enacted Law No 15 of 2002 regarding the Crime of Money Laundering which was amended by Law No 25 Year 2003, imposing anti-money laundering requirements on financial institutions.

The law was replaced by the enactment of Law No 8 regarding the Prevention and Eradication of Money Laundering Crime, in 2010 (the AML Law). The AML Law increased the role of Indonesia’s financial intelligence unit, giving it a full range of anti-money laundering regulatory and supervisory powers including sanctioning powers. The law also extended the responsibility for investigating cases of money laundering beyond the national police to include the KPK, Customs, the National Narcotics Agency, and the Taxation Directorate General. Under the AML Law, KPK detectives have access to financial intelligence reports processed by the Financial Transaction Reports and Analysis Centre (Pusat Pelaporan Dan Analisis Transaksi Keuangan – PPATK).

The provisions under the AML Law also enhance the PPATK’s powers of investigation, allowing it to freeze transactions as well as to collate, analyse and disclose suspicions of money laundering. Financial service providers will be subject to a new reporting threshold under the AML Law. Financial institutions must report any cross border financial transaction and international fund transfer instructions to the PPATK with a minimum value equivalent to IDR 500 million, regardless of whether there are any grounds for suspicion.


Although no one specific piece of legislation refers to, or deals with, the protection of whistleblowers, protection can be afforded in the form of Law No 13 of 2006 regarding the Protection of Witnesses and Victims (Law No 13). Pursuant to Law No 13, an institution called Witness and Victim Protection Institution (Lembaga Perlindungan Saksi dan Korban – LPSK) may be assigned and authorised to provide protection and other rights for witnesses and/or victims. It should be note that even though Law No 13 was designed with the protection of court witnesses in mind, and does not afford anonymity to whistleblowers, subject to the discretion of LPSK, in certain cases, witnesses and/or victims may be given a new identity and/or new domicile.


Law No 30 of 2002 as amended by Government Regulation in lieu Law No 4 of 2009 established the KPK, to combat corruption crimes and a special anti-corruption court. The KPK has the right to initiate investigations into corruption cases and bring them to the anti-corruption court.

The AML Law requires financial institutions to submit suspicious transaction reports to the Indonesian Financial Transaction Reports and Analysis Centre. n



JapanContributed by Atsumi & Sakai

TI rankings



Ratified and implemented OECD Convention. Signed but has not yet ratified UNCAC. Member of ADB/OECD Asia Pacific Anti-Corruption Initiative. Signed but has not yet ratified UNCTOC. Member of FATF and APG.


LegislationThe Unfair Competition Prevention Act (Act No 47 of 1993) (UCPA) criminalises the bribing of foreign public officials. The Penal Code (Act No 45 of 1907) (Penal Code) criminalises the bribery of domestic public officials.

Secondary anti-corruption legislation exists in the form of the National Public Service Ethics Act (Act No 129 of 1999) (Ethics Act), which provides fundamental rules of national public service, one of which is a rule prohibiting a public officer from receiving a bribe from any person over whom the officer exercises his authority. The Ethics Act also sets out the cases in which a public official is required to disclose and report the details of gifts or compensation received. The National Public Service Ethics Code (Government Ordinance No 101 of 2000) was established under the Ethics Act, and sets out the cases where a public official will be prohibited from receiving gifts or entertainment from parties interested in the public official’s duties.

The Act Prohibiting Acceptance of Profits for Intermediation by those Engaged in Public Service (Act No 130 of 2000) (Profits for Intermediation Act) criminalises influence peddling by a member of the Diet, etc (see below).

Private sector Surprisingly, private sector bribery (eg, bribery not involving public officials but agents including, for example, employees of public companies) is not currently an offence under the Penal Code. However, the Companies Act punishes the:

• giving of a bribe to, or acceptance of a bribe by a director, or auditor, etc

• giving or acceptance of a bribe in relation to exercise of rights of shareholders, etc

• giving of benefits by a director or auditor, etc, at the cost of a company or its subsidiaries in relation to the exercise of rights of shareholders.


Japan

In addition, the Financial Instruments and Exchange Act punishes giving a bribe to, or acceptance of a bribe by, an officer or official of a Financial Instruments Business Operator and the Bankruptcy Law punishes giving a bribe to, or acceptance of a bribe by, a trustee in bankruptcy.

Public sectorBribery of Foreign OfficialsIn accordance with Japan’s ratification of the OECD Convention, the UCPA was amended in 1998 to provide for the criminalisation of the bribery of foreign public officials. However, in its most recent report, Transparency International considered that there was a lack of awareness of this new offence, especially within the legal profession.

If an individual Japanese citizen bribes a “Foreign Official” whether in Japan or elsewhere, in respect of an offshore commercial transaction, he and his Japanese employer may be liable to a fine under the UCPA. The elements of the UCPA offence require the giving, offering, or making of a promise to give money or other benefits to a Foreign Official, for the purpose of having the Foreign Official:

• perform, or refrain from performing, a certain action relating to his duties

• use his position to influence another Foreign Official to perform, or refrain from performing, a certain action relating to his duties,

with the intent to obtain illicit commercial benefit or advantage as regards international commercial transactions.

The UCPA does not criminalise the acceptance of bribes and accordingly, the Foreign Official will not be liable under the UCPA. Broadly put, a “Foreign Official” is an officer of a foreign Government or a foreign special institution, a state company or an international institution.

The UCPA has extra-territorial effect and this raises interesting issues as to the position of sovereign wealth funds, which may be state companies under the UCPA. Dual criminality is not required. Accordingly, the briber may be punishable under the UCPA even if the conduct is not criminalised in the foreign state where it occurred.

Bribery of domestic public officialsIf a public officer accepts, solicits or promises to accept a bribe in connection with his duties (Acceptance of Bribes) or causes a bribe in connection with those duties to be given to a third party or solicits or promises such bribe to be given to a third party (Passing of Bribes), he may be punished by imprisonment with labour under the Penal Code. The Penal Code also punishes a public officer who accepts, solicits or promises to accept a bribe as consideration for influence which the official exerted or is to exert, in response to a request, upon another public officer so as to cause the other to act illegally or refrain from acting in the exercise of official duty by imprisonment with labour (Acceptance for Influence). In addition to punishing a public officer, a person who gives, offers or promises to give a bribe to a public official may be punished by imprisonment with labour or fined (Giving of Bribes).

The Penal Code applies to bribery of a Japanese public officer which takes place outside of Japan.



As regards bribery in Japan, the Profits for Intermediation Act provides that it is an offence to make a payment or provide a benefit to a member of the House of Representatives, the House of Councillors or a member of a local assembly to have him use his influence or authority over an employee or an officer of a company with more than 50 per cent of its subscribed capital owned by the national or a local Government, in order to have the employee or officer perform or refrain from performing a certain action relating to his duty. The member and the person who provided the money to the member are both liable to punishment by imprisonment or (in the case of the latter) may be fined.

Defences and mitigation measuresJapanese corporations, as distinct from natural persons, are not directly subject to the Japanese criminal anti-bribery laws, though they may be so if they procure acts of bribery by their employees or fail to put in place adequate measures to prevent bribery by their employees. There is no written definition of what would constitute “adequate measures” to prevent bribery and the Japanese courts examine the issue strictly on a case-by-case basis. It is, however, accepted that the scope for a company to escape liability in such cases should be narrow, with the company required to prove it has made an active and concrete effort to prevent any illegal action by its employees; merely issuing cautions and/or holding compliance seminars would probably not be sufficient.

PenaltiesIn June 2005, the Diet passed an amendment that increased the sanctions for natural persons convicted of foreign public official bribery under the UCPA. The monetary sanction was increased from a maximum of 3 million yen to 5 million yen, and the maximum sentence of imprisonment was increased from three years to five years. In addition, natural persons can now be sentenced to both a fine and imprisonment, whereas previously only one of the two penalties could be imposed.

Penalties under the Penal Code for bribery of domestic public officials include:

• Acceptance of Bribes: imprisonment with labour for not more than five years, or seven years if the official agrees to perform an act in response to a request from the person to/from whom the official accepts, solicits or promises to accept a bribe in connection with his duties.

• Passing of Bribes: imprisonment with labour for not more than five years. When a public officer commits such an offence and consequently acts illegally or refrains from acting in the exercise of his duty, imprisonment with labour for a term of not less than one year may be imposed and the same may apply when a public officer accepts, solicits or promises to accept a bribe, or causes a bribe to be given to a third party or solicits or promises a bribe to be given to a third party, in connection with having acted illegally or having refrained from acting in the exercise of the official’s duty.

• Acceptance for Influence: imprisonment with labour for not more than five years.

• Giving of Bribes: imprisonment with labour for not more than three years or a fine of not more than 2,500,000 yen.


Japan


Facilitation payments are not expressly prohibited under the UCPA. Whilst the Penal Code does not expressly prohibit facilitation payments, it is generally accepted that they are not allowed.

The Ethics Act has established a gifts register and requires middle and senior level public officials to disclose gifts in excess of 5,000 yen.


As noted above, Japanese corporations are not directly subject to the Japanese anti-bribery laws, though they may be so if they procure acts of bribery by their employees or fail to put in place adequate measures to prevent bribery by their employees.


The directors of a Japanese company which is liable to a fine under the UCPA and the Penal Code would not be personally liable for that fine or liable to a direct fine under the UCPA or the Penal Code simply as a consequence of holding office.

Directors of Japanese companies can be liable under the Companies Act (Act No 86 of 2005) for the acts or omissions of the company if such actions or omissions result from his negligence (ie, if it could be deemed as a breach of his fiduciary duty which includes the duty to monitor the actions of other directors). The fiduciary duties under the Companies Act apply only to directors of Japanese companies; they are not applicable to the acts of directors of non-Japanese companies as far as the fiduciary duties are not governed by the laws of Japan, even if such acts take place within Japan and whether the directors are Japanese nationals or not.

Incoming directors are not liable for past actions of the appointing company unless they incur liability through their own actions or inaction, eg, by breach of fiduciary duty in failing to cure a known past wrong.


The Act on Prevention of Transfer of Criminal Proceeds (Act No 22 of 2007), Japan’s money laundering law, only applies to specified entities such as banks, insurance companies, lawyers, accountants etc, in connection with the benefit/money received from organised crime or drug related crimes. Such specified entities have duties to confirm the identity of customers when conducting certain dealings as stipulated in the Act, and to create and keep a record of customers’ identities and deals.




The Whistleblower Protection Act (Act No 122 of 2004) provides comprehensive protection for employees who wish to whistleblow. This protection includes:

• the nullification of the whistleblower’s dismissal (if the dismissal is a result of the whistleblowing)

• the nullification of the cancellation of a worker dispatch agreement (if the cancellation of the agreement is a result of the whistleblowing)

• the prohibition of disadvantageous treatment, such as a demotion or reduction in salary (if the treatment is a result of the whistleblowing).

However, no protection of anonymity is afforded to the whistleblower under the Act. The Act is currently subject to review.

There is currently no express obligation conferred by any statute requiring members of the public to whistleblow when they encounter corrupt practices in Japan.


The National Public Services Ethics Act (NPSEA) established the National Public Service Board which has anti-corruption investigative and disciplinary powers.

If the Board of Audit of Japan finds illegal or unjustified items during an examination of a company of which 50 per cent or more of the shares are owned by the Japanese Government, it may immediately present its view to the administrator or other related parties or request them to take appropriate action and may also have them take steps to correct subsequent accounting irregularities. n


Malaysia

MalaysiaContributed by Zaid Ibrahim & Co

TI rankings

60th on the CPI, 15th on the BPI.


Ratified both the UNCAC and UNCTOC. Member of the ADB/OECD Asia Pacific Anti-Corruption Initiative and the APG.


LegislationThe primary statute governing anti-bribery and similar offences is the Malaysian Anti-Corruption Commission Act 2009 (MACCA) which came into force on 1 January 2009 (and repealed the Anti-Corruption Act 1997).

In addition to the MACCA, other statutes and codes provide a patchwork of overlapping provisions that prohibit bribery in both the private and public sectors. Those statutes and codes include:

• Penal Code

• Customs Act 1967

• Election Offences Act 1954

• Societies Act 1966

• Trade Unions Act 1959

• Youth Societies and Youth Development Act 2007

• Banking and Financial Institutions Act 1989

• Companies Act 1965.

Private sector The MACCA prescribes that any person or his agent involved in a bribery transaction shall be guilty of a criminal offence. For the receipt or giving of any gratification to amount to bribery under the MACCA, it must be proven that:



• The person soliciting, receiving or agreeing to receive any gratification as an inducement to or as a reward on account of any person doing or forbearing to do anything must have solicited, received or agreed to receive the said gratification corruptly.

• The person giving, promising or offering any gratification as an inducement or as a reward on account of any person doing or forbearing to do anything must have done so corruptly.

In addition to the MACCA, there are other general provisions in other legislation that govern the private sector. For example, the Companies Act 1965 stipulates that any director or officer of a company who, without the consent or ratification of a general meeting, uses his position to directly or indirectly gain benefit for himself or any other person, is guilty of an offence.

Public sector Officers in the public sector, who are broadly defined to include any person receiving remuneration from public funds, are subject to the provisions of the MACCA and such officers include foreign public officials. The MACCA imposes a similar standard and burden of proof on officers in the public sector as it does on persons in the private sector. Generally, any officer in the public sector who corruptly receives any gratification for the inducement or forbearance of any act commits an offence.

In addition to the general rule above, the MACCA also provides additional clauses that relate to public officials and bodies and persons dealing with them. For example, any person who offers any gratification to an officer of a public body for the purposes of:

• the officer voting or abstaining from voting at any meeting of the public body in favour of or against any measure, resolution or question submitted to the public body

• the officer performing or abstaining from performing or aiding in procuring, expediting, delaying, hindering or preventing the performance of, any official act

• the officer aiding in procuring or preventing the passing of any vote or the granting of any contract or advantage in favour of any person

• the officer showing or forbearing to show any favour or disfavour in his capacity as such officer, commits an offence.

The fact that the officer did not have the power, opportunity or intention to do so is irrelevant. Furthermore, the MACCA extends the scope of the offence by stating that the inducement or reward need not be in relation to the affairs of the public body to which the officer is employed.

Where there is a charge of corruption against an officer of a public body and it has been proven that gratification has been accepted, a presumption is placed on such officer notwithstanding that the gratification may have been accepted without corrupt intent. This presumption applies to both domestic and foreign public officers.

The Penal Code similarly provides that the taking of gratification by public servants, by corrupt or illegal means, is a criminal offence. In addition, any person who aids and abets the commission of the offence is likewise guilty of a criminal offence.


Malaysia

General offencesIn addition to the actual act of corruption being an offence, the MACCA also imposes mandatory duties on persons who are given, promised or offered any gratification in contravention of the MACCA to report the same to an officer of the Malaysian Anti-Corruption Commission (MACC) or a police officer. Similarly, a person from whom gratification is solicited or obtained, or an attempt to obtain gratification is made from that person, is under a statutory duty to report the incident to the MACC or a police officer.

Extra-territorial applicationThe MACCA imposes liability on persons who commit offences under its provisions regardless of the offender’s geographical location provided that part or the whole of the subject matter of the offence is within the jurisdiction of the Malaysian courts.

PenaltiesOn conviction, penalties under the MACCA include a term up to 20 years and a fine of not less than five times the sum or value of the gratification which is the subject matter of the offence where such gratification is capable of being valued or is of a pecuniary nature, or RM10,000, whichever is the higher.

The Penal Code also provides penalties of imprisonment for up to three years, fine or both for the taking of gratification by or for public officers.

In addition to the above, the Companies Act 1965 which applies to the private sector prescribes that a person who gains a benefit for himself or for any other person without the consent of a general meeting may be imprisoned for up to five years or fined RM30,000.

Defences and mitigation measuresEach charge of corruption creates a prima facie presumption of guilt on the accused, who must then rely on statutory provisions to rebut the ingredients necessary to prove corruption. Generally, the defences available to the accused are dependant on the nature of the charge brought against him.

For example, in the MACCA, any allegation of bribery must satisfy the requirement that the bribe was either given or received “corruptly”. The term “corrupt” is not defined in the MACCA and must be determined on a case-by-case basis by the courts at trial.

Another example can be found in the Companies Act 1965 where it provides that directors are not responsible for offences committed by their delegates if they had reasonable grounds to believe that duties were being performed in conformity with the law and if the directors had at all times acted in good faith. Again, the terms “reasonable grounds” and “good faith” must be determined on a case-by-case basis at trial.


The Public Officers (Conduct and Discipline) Regulations 1993, prescribe the circumstances and types of gifts that may be accepted by public officers. Generally, gifts to a public officer or to persons related to the public officer are prohibited. However, the Head of Department to which the officer is part of may allow the officer to retain the gift provided it is not inconsistent with the provisions of the Public Officers (Conduct and Discipline) Regulations 1993.



The Public Officers (Conduct and Discipline) Regulations 1993 and The Public Officers (Conduct and Discipline) (Amendments) Regulations 2002 generally allow public officers to give or accept any form of entertainment provided it does not influence the performance of their official duties and such entertainment is not inconsistent with other provisions therein.

Corporate liability for the acts of employees and third parties

Under Malaysian law, a company may be found liable for corruption and charges may be brought against the offending company. This is due to the fact that the word “person” includes “a body of persons, corporate or unincorporated” and the provisions of the MACCA and other statutes apply equally to companies as they do to individuals.

While companies are technically subject to similar standards as individuals, case law suggests that prosecutions are usually brought against individuals. Prior to the MACCA, actions brought under the Anti Corruption Act 1997 also tend to be against individuals and not companies.


Generally, directors will not be found liable for any offence committed by the company or its employees unless the directors were privy, or involved in the act of corruption itself. The Companies Act 1965, which is the primary statute governing companies and its directors, does not expressly provide for liability of directors for the offences of the company. The general rule can be ascertained from Section 132(1G) of the Companies Act 1965, which provides that directors are not liable for the acts of its delegates provided that the directors have reasonable grounds and in good faith believed that the delegate would exercise the power in conformity with the duties imposed on the directors and is competent to exercise such power.

Directors may however be liable if they fail to exercise reasonable care, skill and diligence in the performance of their duties. It must be noted that this liability is for the conduct of the director’s duties and not the act of corruption itself. An illustration of a director being found liable is where the director fails to discover an act of corruption which should have been discovered with reasonable care, skill and diligence.

In addition to the above, directors are also subject to the MACCA and are under similar duties to other persons with regard to the disclosure of bribery transactions.


Anti-money laundering is primarily governed by the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (AMLA). Money laundering is generally defined as the act of a person who engages in a transaction that involves the proceeds of any unlawful activity or deals, conceals, disguises or impedes the establishment of the true nature, origin and other details of the proceeds of unlawful activities.

The AMLA defines “unlawful activities” as activities which are related, directly or indirectly, to any serious offence or foreign serious offence. A list of serious offences is provided in


Malaysia

the Second Schedule of the AMLA. With regard to corruption offences, the following among others are considered serious offences:

• accepting gratification

• giving or accepting gratification by agent

• bribery of officer of public body

• bribery of foreign public officer

• offence of using office or position for gratification.

It must be noted that AMLA also has extra-territorial jurisdiction as it applies to foreign serious offences as well as domestic serious offences.

To detect and curb money laundering in Malaysia, the AMLA requires that “reporting institutions” must keep a record of any transaction involving domestic or foreign currency exceeding such amount as may be specified by the competent authority, the Bank Negara Malaysia (BNM). “Reporting institutions” are any person, including bodies corporate or unincorporated, that carry out specific activities as prescribed by the AMLA and generally include banking, insurance and securities businesses. Records of such transaction must be reported to the BNM promptly or where the reporting institution or its employee suspects involves the proceeds of an unlawful activity.

In addition to the provisions of the AMLA, other general reporting obligations are prescribed by the MACCA. Please refer to the section above titled General offences.


The Whistleblower Protection Act 2010 (WPA) which came into force on 15 December 2010 facilitates protected disclosures and protects whistleblowers against any retaliatory action from their employers through criminal sanctions. Under the WPA, any detrimental action taken against the whistleblower in reprisal is an offence, and the penalty could be up to RM100,000 or a jail term of up to 15 years or both. It must however be noted that pursuant to Section 9 of the WPA, the whistleblower is only protected from the act of disclosure of improper conduct. The whistleblower cannot rely on the WPA to escape liability if the whistleblower himself is involved in the bribery transaction.

The MACCA also provides protection to whistleblowers in Section 65 by providing that the identity of informants or the place in which the information was given by the informant to the MACC cannot be revealed or disclosed in any civil, criminal or other proceedings in any court, tribunal or other authority.




The MACC is given extensive powers to investigate corruption and may order any person to appear before it to be examined. In addition, officers of the MACC are empowered by the MACCA to have similar powers and immunities afforded to police officers in the performance of their duties, for example, powers of search and seizure of property. n


Philippines

PhilippinesContributed by SyCip Salazar Hernandez & Gatmaitan

TI rankings

129th on the CPI.


Ratified UNCAC and UNCTOC. Member of ADB/OECD Asia Pacific Anti-Corruption Initiative and the APG.


LegislationThe Revised Penal Code (Act No 3815) (RPC) and the Anti-Graft and Corrupt Practices Act (Republic Act No 3019) (ACPA) are the principal anti-bribery laws in the Philippines. Under the RPC, direct bribery is committed when “[a]ny public officer shall agree to perform an act… in connection with the performance of his official duties, in consideration of any offer, promise, gift or present received by such officer, personally or though the mediation of another… ” (Art. 210); while indirect bribery happens when a public officer “accept[s] gifts offered to him by reason of his office” (Art. 211). The ACPA enumerates “corrupt practices of public officers” (Section 3) which may include bribery. These corrupt practices include:

• directly or indirectly requesting or receiving any gift, present, share, percentage, or benefit, for himself or for any other person, in connection with any contract or transaction between the Government and any other party, wherein the public officer in his official capacity has to intervene under the law (Section 3(b))

• directly or indirectly requesting or receiving any gift, present or other pecuniary or material benefit, for himself or for another, from any person for whom the public officer, in any manner or capacity, has secured or obtained, or will secure or obtain, any Government permit or license, in consideration for the help given or to be given… (Section 3(c))

• accepting or having any member of his family accept employment in a private enterprise which has pending official business with him during the pendency thereof or within one year after its termination (Section 3(d)).

Other anti-bribery statutes include Republic Act No 6713 and the Code of Conduct and Ethical Standards for Public Officials and Employees (COCES). While primarily an administrative statute on Government officers, the COCES imposes a criminal liability for solicitation or acceptance of gifts by public officials “in the course of their official duties or in connection with any operation being regulated by or any transaction which may be affected by the functions of their office” (Section 6(d) in relation to Section 11). Presidential Decree No 46 also makes it an offence for “public officials and employees to receive, and for private persons to give, gifts on any occasion, including Christmas.”



Private sector There is as yet no offence of private sector bribery. However, private persons involved in public sector bribery are punished in the same way as public officers and employees either as co-conspirators or for the separate felony of Corruption of Public Officials (defined as the crime committed by the “person who shall have made the offers or promises or given the gifts or presents as described in [the provisions on bribery]”, RPC, Section 212; ACPA, Section 3 and 9).

Public sector Anti-bribery legislation in the Philippines focuses on the public sector. Based on the definition of “public officers”, the statutes have a broad coverage which extends to any person occupying a position in the Philippine Government (which term is also broadly defined as the national and local Governments, Government-owned and controlled corporations and all other instrumentalities and agencies of the Republic of the Philippines and their branches, ACPA, Section 2(a); cf. COCES, Section 3(a)). The RPC defines a public officer as “any person who, by direct provision of the law, popular election or appointment by competent authority, shall take part in the performance of public functions in the Government of the Philippine Islands, or shall perform in said Government or in any of its branches public duties as an employee, agent or subordinate official, of any rank or class” (Art. 203). On the other hand, the ACPA defines them as “includ[ing] elective and appointive officials and employees, permanent or temporary, whether in the classified or unclassified or exempt service receiving compensation, even nominal, from the Government… ” (Section 2(b)).

The ACPA and the COCES require public officials to submit a Statement of Assets and Liabilities every year, “including a statement of the amounts and sources of his income, the amounts of his personal and family expenses and the amount of income taxes paid for the next preceding calendar year” (ACPA, Section 7; cf. COCES, Section 8). Moreover, there is a prima facie presumption that a public officer or employee has unlawfully acquired property if such is “manifestly out of proportion to his salary… and to his other lawful income and the income from legitimately acquired property” (Republic Act No 1379, Section 2). If the public official is unable to rebut the presumption, the property will be forfeited to the Philippine Government (id.) and this will be ground for his dismissal or removal from service (ACPA, Section 8), without prejudice to criminal prosecution.

Extra-territorial application The RPC is given extra-territorial application if public officers or employees commit an offence in the exercise of their functions such as bribery (RPC, Section 2(4)). In other words, if a public officer receives or accepts a gift in consideration of an act related to his official duties, he is liable for bribery, despite the fact that he did so outside the Philippines. The act punished in bribery is the receipt or acceptance of a gift by a public officer; thus the RPC’s extra-territorial application does not extend to bribery of foreign officials (ie, the act of bribe-giving) or to private Filipino citizens accepting bribes — for they do not constitute bribery or an offence in the exercise of public functions under Philippine law.

Defences and mitigation measuresThe anti-bribery laws are subject to general defences and mitigation measures under Philippine law such as burden of proof, justifying and mitigating circumstances.


Philippines

PenaltiesAnti-bribery laws in the Philippines are criminal. The RPC imposes penalties which depend on the nature of the act that the public officer agreed to perform (eg, whether the act itself constitutes a crime; a form of desistance from official duties or if the officer received the gift by reason of his office). The penalty that can be imposed may range from two to eight years imprisonment (and a fine of not less than the value of the gift for direct bribery), subject to the general rules on graduation of penalties (Art. 210-212). The RPC specifically punishes a law enforcer for qualified bribery when such law enforcer refrains from arresting or prosecuting an offender who has committed a crime punishable by 20 to 40 years imprisonment (reclusion perpetua). The law enforcer is made to suffer the penalty for the offence which was not prosecuted (Art. 211-A). Moreover, the foregoing carry accessory penalties such as special temporary disqualification for direct bribery (ie, deprivation of the office and disqualification from holding similar offices during sentence, RPC, Art. 210 in relation to Art. 31).

The ACPA penalises corrupt practices of public officers “with imprisonment for not less than six years and one month nor more than fifteen years, perpetual disqualification from public office, and confiscation or forfeiture in favor of the Government of any prohibited interest and unexplained wealth manifestly out of proportion to his salary and other lawful income” (Section 9). The COCES also punishes solicitation or acceptance of gifts by public officers with less than five years imprisonment and/or a fine of PhP5,000 unless a heavier penalty is applicable under another law (Section 11).


The anti-bribery regime in the Philippines makes no distinction with regard to facilitation payments, hospitality and gifts. Generally, all forms of consideration in connection with the performance of official duty are covered by Philippine anti-bribery statutes. However, the ACPA makes an exception for “[u]nsolicited gifts or presents of small or insignificant value offered or given as a mere ordinary token of gratitude or friendship according to local customs or usage… ” (Section 14). Similarly, the COCES excludes unsolicited and nominal gifts that are not “given in anticipation of, or in exchange for, a favor from a public official or employee” (Section 3(c)). Nonetheless, the COCES has been interpreted as prohibiting the mere receipt of a gift, whether solicited or not, “so long as the value of the gift is neither nominal nor insignificant; or the gift is given in anticipation of, or in exchange for, a favor” (Mabini v Raga et al., A.M. No P-06-2150, June 21, 2006). Philippine jurisprudence has not yet provided further guidance on what constitutes “nominal” or “insignificant” value or a gift “according to local customs or usage”. These standards are determined by the courts on a case-to-case basis.


The concept of a corporation’s criminal liability is not widely recognised in Philippine law, in the sense that the laws focus on individuals rather than the corporations they may represent and who may benefit from such acts.



A corporation, however, can be held civilly liable (for liability arising out of private relations which can be expressed in monetary terms). The RPC establishes civil liability of corporations for felonies (ie, crimes defined under the RPC and not under special laws like the ACPA) committed by their employees in the discharge of their duties (Art. 103; see Gosiaco v Ching and Casta, G.R. No 173807, April 16, 2009). In other words, the civil liability of a corporation attaches when only its employees are convicted but are unable to satisfy the monetary component of the judgment.

Generally, a corporation is not liable for acts of its subsidiaries and third parties in view of its separate personality.


While Philippine law recognises the limited liability of corporations, this is subject to the doctrine of piercing the corporate veil. Thus, individual directors and officers are generally not liable for acts of a corporation unless it is proved that they are using the corporate personality “to defeat public convenience, justify wrong, protect fraud, or defend crime” (Suldao v Cimech System Construction, G.R. No 171392, October 30, 2006). However, if directors and officers approved or participated in the bribery, they are individually liable for the crime, despite the fact that they did so in the name of the corporation.


The Philippines enacted Republic Act No 9160 or the Anti-Money Laundering Act of 2001 (AMLA) to address its inclusion in FATF’s list of non-cooperative countries in the fight against money laundering. The AMLA defines a money laundering offence as “a crime whereby the proceeds of an unlawful activity (as defined by the AMLA) are transacted, thereby making them appear to have originated from legitimate sources” (Section 4). The statute identifies three modes of committing the offence:

• Any person knowing that any monetary instrument or property represents, involves, or relates to, the proceeds of any unlawful activity, transacts or attempts to transact said monetary instrument or property.

• Any person knowing that any monetary instrument or property involves the proceeds of any unlawful activity, performs or fails to perform any act as a result of which he facilitates the offence of money laundering referred to.

• Any person knowing that any monetary instrument or property is required under AMLA to be disclosed and filed with the Anti-Money Laundering Council, fails to do so (Section 4).

The definition of “unlawful activity” is restricted to 14 crimes penalised in other laws such as the corrupt practices under the ACPA, securities fraud, kidnapping for ransom, robbery, extortion and swindling under the RPC (AMLA, Section 3(i)). At present, this Section does not include bribery as defined under the RPC, but acts of bribery may be covered by the corrupt practices under the ACPA or under “felonies or offences of a similar nature that are punishable under the penal laws of other countries” (ACPA, Section 3(i)(14)).


Philippines

The AMLA created the Anti-Money Laundering Council as its enforcement body which has the power to, among others, implement the reporting obligations under the statute, investigate possible money laundering offences and issue freeze and bank inquiry orders with prior court approval (Sections 7, 10 and 11). Covered institutions like banks, trust entities, insurance companies, securities dealers and money changers have reporting obligations for covered and suspicious transactions (Sections 3(a) and 9(c)). Failure to do so may constitute a money laundering offence under the third mode of commission. A “covered transaction” is defined as “a transaction in cash or other equivalent monetary instrument involving a total amount in excess of five hundred thousand pesos (PhP500,000.00) within one (1) banking day” (Section 3(b)). On the other hand, suspicious transactions are transactions with covered institutions, regardless of the amounts involved, which fall within defined circumstances under the AMLA.

Consistent with the AMLA’s policy to “extend cooperation in transnational investigations and prosecutions of persons involved in money laundering” (Section 2), the Anti-Money Laundering Council is empowered to request for assistance from a foreign state and conversely, act on a request from another country to (i) track down, freeze, restrain and seize certain assets; (ii) give information needed by the foreign State; and (iii) apply for a court order of forfeiture of any monetary instrument or property (Section 13).


Presidential Decree No 749 is an immunity statute for “givers of bribes [and] their accomplices in bribery and other graft cases against public officers.” While the title seems to be limited to bribe givers, the decree covers “any person who voluntarily gives information” about the commission of bribery under the RPC and violations of “other laws, rules and regulations punishing acts of graft, corruption and other forms of official abuse” (Section 1). Particular conditions must be established under the decree before immunity will be granted.

Moreover, the Ombudsman (the constitutional body mandated to investigate and prosecute unlawful acts of public officials) has the power to grant “immunity from criminal prosecution to any person whose testimony or whose possession [of] evidence may be necessary to determine the truth in any hearing, inquiry or proceeding… in the furtherance of [the Ombudsman’s] constitutional functions and statutory objectives” (The Ombudsman Act of 1989, Section 17). General immunity laws are also available such as the discharge of an accused to be a state witness under the Rules of Court (Rule 119, Section 17) and the Witness Protection Program (Republic Act No 6981).

There is currently no express obligation conferred by any statute requiring the public to whistleblow when they encounter corrupt practices in the Philippines.


The 1987 Philippine Constitution invested the Office of the Ombudsman with plenary investigative and prosecutorial powers for acts of public officials which “appears to be illegal, unjust, improper and inefficient” (Art. XI, Section 13(1); Department of Justice et al. v Liwag, G.R. No 149311, February 11, 2005). Given such broad mandate, the Office of the Ombudsman concurs with the Department of Justice, which is the general prosecutorial



arm of the Philippine Government (Administrative Code of 1987, Book IV, Title III, Sections 1-3). However, the Ombudsman has primary jurisdiction over cases of high-ranking officials cognisable by the Sandiganbayan (the Philippine anti-graft court; cf. Presidential Decree No 1606, Section 4) and “it may take over, at any stage, from any… agency of Government, the investigation of such cases” (The Ombudsman Act of 1989, Section 15(1)).

Moreover, the Ombudsman has disciplinary authority over all public officials and employees, except members of Congress and the Judiciary and officials who may only be removed by impeachment (id., Section 21). This disciplinary authority also concurs with the Civil Service Commission, the “central personnel agency” created under the Constitution (Phil. Constitution, Art. IX-B, Section 3; Antonio et al. v Villa et al., G.R. No 144694, March 28, 2005).

Finally, the Office of the President and local legislative bodies are given disciplinary authority over local elective officials which concurs with the authority of Ombudsman and the Civil Service Commission (Local Government Code of 1991, Sections 60-68). Graft and corrupt practices by public officials and employees give rise to civil, administrative and criminal liabilities which may be enforced by these agencies. In addition to Government bodies, various NGOs have been at the forefront of targeting official graft. n


Singapore

SingaporeContributed by Norton Rose Group

TI rankings



Ratified the UNCAC and UNCTOC. Member of ADB/OECD Asia Pacific Anti-Corruption Initiative. Member of FATF and APG.


LegislationIn Singapore, the primary anti-corruption statutes which prescribe corruption as substantive offences are:

• the Prevention of Corruption Act (the PCA)

• the Penal Code.

Private sector Section 5 of the PCA creates public and private offences of active and passive bribery by both individuals and companies. Section 6 creates agency bribery offences involving either the corrupt offer or acceptance of gratification to an agent in relation to the performance of his principal’s affairs or for the purposes of misleading that principal.

Public sector In addition to the above, specific provisions in the PCA (Sections 11 and 12) prohibit bribery of domestic public officials. Section 11 addresses both active and passive bribery in relation to Members of Parliament, while Section 12 creates offences in respect of “members of the public body”. Section 10 creates an offence in relation to offering or accepting gratification in relation to Government tenders.

The Penal Code also contains provisions that deal specifically with the bribery of domestic public officials (Sections 161 to 165). Sections 161 to 163 create offences where “gratification” is accepted. The term “gratification” is broadly defined under the PCA to include money, gifts, loans, fees, rewards, commissions, valuable security, property, interest in property, employment contracts or services.

Both pieces of legislation cover a broad range of domestic public officials. The PCA applies to a “member, officer or servant of a public body.” The definition of “public body” under the PCA includes any corporation, board, council, commissioners or other body which has power to act under and for the purposes of any written law relating to public health or to undertakings or public utility or otherwise to administer money levied or raised by rates or charges in



pursuance of any written law. The provisions of the Penal Code use the term “public servant.” This has been defined under the Penal Code to include judges and officers of a court of justice, arbitrators, Government officers and army officers.

The PCA and Penal Code do not specifically target the bribery of foreign officials, although such bribery could fall under the ambit of the general provisions of the PCA (at Sections 5 and 6).

Extra-territorial applicationA Singapore citizen will be liable under Section 37 of the PCA for corrupt behaviour, even if such behaviour took place outside Singapore.

The Penal Code provides that an act committed outside Singapore by a Singapore public servant (being a Singapore citizen or permanent resident) purporting to act in the course of his or her employment that would constitute an offence within Singapore, will be deemed to have been committed in Singapore. Accordingly, if the Singapore public servant accepted a bribe overseas, he or she would be liable under Singapore law.

Defences and mitigation measuresThere is no express defence of adequate anti-bribery compliance procedures under the various key statutes pertaining to corruption in Singapore. Having adequate procedures in a company to guard against corruption may be a relevant factor at the mitigation stage, and also may be viewed favourably by regulators/prosecutors when deciding whether to pursue a case against the company/directors of the company. Further, having such adequate procedures in place may be an argument against liability for a director/officer in respect of civil claims brought by the company or shareholders of the company for breach of fiduciary or other duties or for failing to take steps to guard against corruption.

Prosecutorial discretion is granted to the Public Prosecutor to initiate, conduct or discontinue any criminal proceedings. It may be possible for a person under investigation to try to convince the Public Prosecutor not to initiate criminal proceedings against him, to send letters of representation making requests of the Prosecutor, or to plead guilty in return for either a lesser sentence or resolution of the matter without trial. Discretion lies with the Public Prosecutor in responding to any of these requests.

There is presently no formal plea bargaining procedure prescribed under the PCA. However, the Attorney-General recently announced a signature project to put plea bargaining laws in place by 2012. The proposed laws would allow defendants to plead guilty to a lesser charge or to plead guilty to the original charge for a sentence lighter than the maximum. The formal plea bargaining structure will include safeguards for unrepresented defendants. Prosecutors are also considering the use of deferred prosecution agreements under which defendants who agree to cooperate with investigators pay fines, implement corporate reforms and/or subject themselves to the scrutiny of independent monitors and have charges against them dismissed if they fully comply.

PenaltiesThe PCA imposes a fine and/or custodial sentence for the contravention of the general offence provisions. The guilty individual/company may be liable to a fine not exceeding S$100,000 and/or imprisonment (for individuals only) for a term not exceeding seven years.


Singapore

There are civil remedies available for a victim of corruption to recover property of which it has been deprived. The PCA also provides for the recovery as a civil debt, by the principal, of an amount paid to its agent (Section 14).


Facilitation payments are not exempt from the provisions of the PCA or the Penal Code, and the giving of such payments will constitute an act of bribery.

There are no express restrictions in the PCA or the Penal Code on the provision of gifts, travel expenses, meals or entertainment. However, anything provided with the requisite corrupt intent will fall under the general provisions of the PCA and the Penal Code and could constitute an offence.


Companies can be held liable for bribery offences. The various provisions of the PCA and the Penal Code set out certain offences which may be committed by a “person”. The term “person” has been defined in the Interpretation Act (Cap 1) to include “any company or association of body of persons, corporate or unincorporated.” Thus, companies can be liable for offences under the PCA and the Penal Code.

In addition, Singapore case law indicates that corporate liability can be imposed on companies for crimes committed by their employees, agents, etc. This will depend on whether the person who has committed the crime can be regarded as “the embodiment of the company”, or whose acts “are within the scope of the function of management properly delegated to him”.


Generally, individual directors and officers of a company will not be held strictly liable for an offence found to have been committed by the company if they were not personally responsible for, or otherwise involved in, that particular offence. There are no express provisions in the various key statutes which would seek to attribute the criminal liability of a company to its directors and officers.

However, it may be possible for the individual directors and officers who are not personally guilty of the corrupt acts committed by the company to be potentially liable for consequential offences related to such corrupt acts, including money laundering and the failure to report the suspicion that certain property is connected to criminal conduct.

The directors and officers (whether of Singapore-incorporated companies or companies incorporated in other jurisdictions) who are personally involved in the corrupt activities may be liable beyond bribery offences for abetment/conspiracy, breach of fiduciary duties, breach of disclosure requirements under the Companies Act, breach of reporting obligations, and could potentially be exposed to civil liability arising out of the corrupt acts.




The Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA) criminalises any dealing with the proceeds of certain criminal conduct, including predicate corruption offences under the PCA. Both the CDSA and the Criminal Procedure Code (CPC) prescribe various reporting obligations in respect of corrupt behaviour.

Section 39 of the CDSA requires a person who “knows or who has reasonable grounds to suspect” that any property represents, was used in connection (or intended to be used in connection) with any act which may constitute “criminal conduct”, to disclose such knowledge or suspicion to the relevant authorities. This Section imposes an obligation to disclose knowledge or suspicion of a corrupt act, whether such corrupt act is committed in Singapore or outside Singapore.

Section 44 of the CDSA, which prohibits a person from assisting another to retain benefits from “criminal conduct” extends to property derived from corruption outside of Singapore. This is because “criminal conduct” has been defined in the CDSA to include the “doing or being concerned in, whether in Singapore or elsewhere, any act constituting a… serious offence or a foreign serious offence”.

A “foreign serious offence” refers to an offence that, if it had been committed in Singapore, would have been a “serious offence”. Offences under Sections 5 and 6 of the PCA would constitute “serious offences” under the CDSA.

Section 47 of the CDSA, which prohibits the acquiring, possessing, using, concealing or transfer of benefits of “criminal conduct”, extends to benefits derived from corruption outside of Singapore on similar grounds as those discussed above.

The duty to report under Section 424 of the CPC extends to certain corruption-related offences, in particular, Sections 161 to 164 of the Penal Code. As discussed above, these offences have extraterritorial effect – there will be thus be a duty to report them even if they are committed outside Singapore.


There is currently no overarching whistleblowing legislation in Singapore. As regards corruption, Section 36 of the Prevention of Corruption Act (Cap 241) affords anonymity to whistleblowers. However, the right to anonymity may be revoked in the following circumstances:

• if the courts believe that justice cannot be done without revealing the identity of the informer

• if the whistleblower did not believe that the statement he was making was true or actually knew that the statement was false.

Currently, no provision exists to protect or reduce the sentence of whistleblowers who have participated in the illegal activity they have reported on. In such instances, the discretion of the court will be exercised when determining whether or not the act of whistleblowing should


Singapore

result in a reduced sentence or fine. The exercise of discretion will depend, in part, on the motivation of the whistleblower.

The public are obliged to provide any information they are in possession of (relating to corrupt acts) if the Director of the Corrupt Practices Investigation Bureau (CPIB) requires them to do so.


The main Government enforcement agency is the CPIB, which derives its powers from the PCA. The CPIB carries out investigations into complaints of corruption, but does not prosecute cases. Where appropriate, the CPIB refers cases to the Public Prosecutor for prosecution.

The Economic Crimes and Governance Division (EGD) was established within the Attorney-General’s Chambers in January 2011. It is one of three divisions in the Attorney-General’s crime cluster, with the Criminal Justice Division and State Prosecution Division being the other two. Originally, the EGD was established to focus on and specialise in sophisticated financial crimes and regulatory offences, as well as quasi-criminal matters potentially involving cross-border elements. However, following a re-organisation of the Attorney-General’s Chambers, the EGD is now responsible for the enforcement, prosecution and all related appeals in respect of financial crimes and corruption cases within and outside Singapore investigated by the Commercial Affairs Department (CAD) and the CPIB, as well as regulatory enforcement matters affecting the financial services sector, judicial review relating to criminal law proceedings and contempt of court cases.

The CAD is the specialist department within the Singapore Police Force which investigates complex fraud, white collar crime, money laundering and terrorism financing. There are three branches within the CAD that deal with such issues:

• The Financial Investigation Branch is in charge of investigating money laundering under CDSA.

• The Suspicious Transaction Reporting Office is Singapore’s Financial Intelligence Unit. It is the central agency in Singapore for receiving, analysing and disseminating Suspicious Transaction Reports.

• The Proceeds of Crime Unit is responsible for conducting financial investigations concerning property that directly or indirectly represents the proceeds of criminal conduct. The unit will confiscate such proceeds of crime under CDSA. n



South KoreaContributed by Lee & Ko

TI rankings

43rd on the CPI. 13th on the BPI.


Ratified and implemented the OECD Convention and has ratified UNCAC. Member of ADB/OECD Asia Pacific Anti-Corruption Initiative. Has signed but not ratified UNCTOC. Member of FATF.

Anti-bribery legislation, offences and enforcement

Legislation Criminal sanctions with respect to corruption offences including bribery are made pursuant to the Criminal Act, the Act on Aggravation of Punishment, etc, of Specific Crimes and the Act on Aggravation of Punishment, etc, of Specific Economic Crimes.

Importantly, the Korean National Assembly enacted the Anti-Corruption Act of Korea on 24 July 2001 in order to prevent corruption and promote transparency in Korean society. The Anti-Corruption Act was partly repealed and amended by the Act on the Prevention of Corruption and the Establishment and Management of the Anti-Corruption and Civil Rights Commission (new Anti-Corruption Act). The purpose of the new Anti-Corruption Act is to improve unreasonable administrative systems in processing civil petitions for grievances and effectively prevent and regulate acts of corruption. The new Anti-Corruption Act established the Anti-Corruption and Civil Rights Commission (ACRC) whose role is to improve unreasonable administrative systems pertaining to the processing of civil petitions for grievances and to assist in the prevention and regulation of acts of corruption.

The Act on Combating Bribery of Foreign Public Officials in International Business Transactions (Foreign Public Officials Act) governs the bribery of foreign public officials.

Generally, the term “act of corruption” refers to an:

• abuse of position or authority, or violation of acts by a public official in connection with his or her duties in order to seek gains

• infliction of damages on the property of any public institution in violation of laws while executing the budget of the relevant public institution, acquiring, managing, or disposing of the property of the relevant public institution, or entering into and executing a contract to which the relevant public institution is a party

• coercing, urging, proposing and inducing any act referred to above or covering it up.


South Korea

A public official who commits an “act of corruption,” may be subject to an administrative reprimand due to a breach of duty of honesty and may also be subject to a criminal sanction if such the act of corruption falls under one or more crime(s) under the relevant criminal law statute(s).

Major offencesIn the public domain, bribery is one of the most common crimes in South Korea. An act of bribery will be established where a public official, in connection with his/her duty, receives a bribe as consideration for performance (Criminal Act 129-132, Act on Aggravation of Punishment, etc, of Specific Crimes, Article 3).

In this context “public official” means, in principle, any person or category of person recognised as such under the State Public Officials Act and/or the Local Public Officials Act, but does not extend to cases where bribes are given to foreign officials. In addition, in exceptional cases, the offence of bribery will extend to Korean citizens who are not “public officials” under the State Public Officials Act or the Local Public Officials Act but who are deemed to be “public officials” (eg, if that person has temporarily taken on an official role).

The bribe must be given to the public official as consideration for the performance of an act that falls within, or is closely related to, the public official’s duties (ie, his/her general official authority) and the public official must be aware that the bribe is being given in this context. Accordingly, giving money or other valuables to a public official as consideration for an act outside of his/her official duty will not constitute bribery. In addition, where money or other valuables are given to a public official as a social courtesy or in circumstances where such is clearly acknowledged as a friendly gesture based on personal friendship, bribery will not be established.

Crimes of corruption are not limited to the public domain. Where an individual or employee of a private company, who is not an official, solicits an illicit favour from another non-official in connection with business and for his or her benefit (or the benefit of a third party), and pays consideration for such favour, Korean law will view such an act as a corrupt practice subject to criminal liability. In the private domain, a representative type of crime is the “crime of receiving or giving a bribe by breach of fiduciary duty” prescribed in Article 357 of the Criminal Act. This crime, unlike the crime of “bribery” requires an “illicit solicitation of favour” (eg, a request to perform an illicit or unfair act or not to perform a just act) in disregard of fair competition. Where the purpose of such request is for simple convenience or to secure the requestor’s rights within the scope of fairness, such request will not constitute an “illicit solicitation of favour”.

In Korea, financial institutions are considered to have characteristics of public institutions and consequently, Korean law imposes strict ethical obligations on financial institutions’ officers and employees. By way of example, the Act on Aggravation of Punishment, etc, of Specific Economic Crimes imposes criminal sanctions on any officer or employee of a financial institution who violates such ethical obligation in connection with their work (eg, by accepting bribes in relation to the approval of loan applications).

Extra-territorial applicationSouth Korea has been a party to the OECD Convention since 1999 and has adopted the OECD’s Recommendation.



In accordance with the provisions of the OECD Convention, Korea enacted the Foreign Public Officials Act. Article 3 of the Foreign Public Officials Act, provides that a person who promises, offers or discloses an intention to offer a bribe to a foreign public official (including any person holding a judicial office of a foreign Government, exercising a public function for a foreign Government or public international organisation, or working for a public enterprise carrying out a specified public function), in connection with the relevant official duty in an international commercial transaction, for the purpose of gaining an improper benefit, will be subject to criminal sanctions. Where the value of the benefit received is less than KRW10 million, potential sanctions include a term of imprisonment of up to five years or a fine of up to KRW20 million. Where the value of the benefit received exceeds KRW10 million potential sanctions include imprisonment of up to five years or a fine of up to twice the value of the benefit.

Unlike the crime of offering a bribe to a domestic public official, the provisions of the Foreign Public Officials Act provide that, if a representative, agent, officer, or employee of a company promises, offers or discloses an intention to offer a bribe to a foreign public official in connection with that company’s business, the company itself could be subject to a fine up to KRW1 billion. However, if the company can show that it has performed its duty of care to prevent such bribery, it will not be subject to criminal sanctions.


The Foreign Public Officials Act allows small payments that are made to foreign officials in order to facilitate official functions.


A director or an officer of a company will not be held liable for acts that the official is not involved with. However, where there is evidence of conspiracy or abetment on the part of the director or officer, then the director or officer may be held liable.

Employment restrictions are also imposed on public officials who are dismissed for corruption. They are prohibited from obtaining a job in any other public institution or profit-making company which has maintained close ties to the post to which he/she has belonged for three years before he/she resigns or any corporation or organisation which has been established to seek a common interest and mutual cooperation of a profit-making company for five years from the date on which he/she resigns (new Anti-Corruption Act Article 82).


Korea has enacted anti-money laundering and combating the financing of terrorism laws:

• The Proceeds of Crime Act criminalise money laundering and provides for the confiscation of proceeds of serious crimes. Pursuant to the Proceeds of Crimes Act, anyone who disguises the acquisition or disposition of criminal proceeds or the origin of criminal proceeds or conceals criminal proceeds commits an offence which is punishable by imprisonment of a term not exceeding five years or a fine not exceeding KRW30 million.


South Korea

• The Financial Reports Act is a key anti money laundering (AML) and combating the financing of terrorism (CFT) law which provides for the establishment and operation of the Korean Financial Intelligence Unit (KoFIU).

The KoFIU is made up of AML and CFT experts from the Financial Services Commission, the Ministry of Justice , the National Police Agency, the National Tax Service, the Korean Customs Service and the Financial Supervisory Service.

The KoFIU works as an institutional link between financial institutions and law enforcement agencies. Its functions include:

• receiving suspicious transaction reports (STRs) from financial institutions

• analysing STRs

• disseminating STRs to law enforcement agencies for further action

• formulating and implementing AML and CFT policies

• AML/CFT supervision and education of financial institutions.


Under the new Anti-Corruption Act public officials are obliged to report acts of corruption by another public official to any investigative agency, the Board of Audit and Inspection, or the ACRC (Article 56).

In the context of bribery involving foreign public officials, it is envisaged that “whistleblower” protection will be adopted upon the enactment of the Act on the Protection of Public Interest Whistleblowers on 30 September 2011. The Reports Act and the Proceeds of Crimes Act also include whistleblower related provisions, such as imposing reporting obligations on employees of financial institutions and penalties for failing to report. However, these acts do not provide any protection for the “whistleblower”.

Enforcement Agencies

The ACRC and the KoFIU do not have independent powers to investigate corruption offences. The Ministry of Justice and its Public Prosecutors have an exclusive authority to bring charges against crimes relating to all types of corrupt acts. n



TaiwanContributed by Huang & Partners

TI rankings

32nd on the CPI. 19th on the BPI.


Member of APG.

Anti-Bribery legislation and major offences

LegislationThe Anti-Corruption Statute and the Criminal Law are the main sources of anti-corruption legislation.

Private sectorAlthough private sector bribery is not an offence under the Anti-Corruption Statute, the Criminal Law may be enforced against a private sector offender. Pursuant to Article 342 of the Criminal Law, a person who manages the affairs of another with the intention of procuring an illegal benefit for himself, for a third person or to harm the interests of his principal, and who acts contrary to his duties and thereby causes loss to the property or other interest of such principal, shall be guilty of an offence punishable by way of imprisonment for a term of not more than five years, detention and/or a fine of not more than NTD500,000. Thus, an agent, acting contrary to his duties, who solicits or accepts a bribe thereby causing loss to his principal, may be in breach of Article 342 of the Criminal Law.

Public sectorIn accordance with the provisions of the Anti-Corruption Statute, it is a criminal act for a person to offer a bribe to a public official (including a person commissioned to undertake specific public affairs duties) and for a public official to receive a bribe. Such acts are subject to the specified penalties (which can include imprisonment and/or fines) set out below:

• Person offering a bribe:

(a) A person who offers, promises, or gives a bribe or other improper benefit to a public official to procure a breach of his official duties may be punished by way of imprisonment for a period of between one and seven years and, in addition, may be ordered to pay a fine of up to NTD3 million.

(b) A person who offers, promises, or gives a bribe or other improper benefit to a public official to perform his official duties may be punished by way of imprisonment for a period not exceeding three years or detention and/or may be ordered to pay a fine of not more than NTD500,000 (Article 11 of Anti-Corruption Statute).


Taiwan

• Person receiving a bribe:

(c) A public official (or a person commissioned to undertake specific public affairs duties) who corruptly demands, solicits, receives, accepts or agrees to receive or accept any bribe or other unjust enrichment in return for being induced to execute or to refrain from executing any act in violation of his official duties, shall be sentenced to a term of imprisonment of not less than ten years (with a maximum sentence of life imprisonment) and, in addition, may be fined up to NTD100 million (Article 4 of Anti-Corruption Statute).

(d) A public official who corruptly demands, solicits, receives, accepts or agrees to receive or accept any bribe or other unjust enrichment in return for being influenced in the performance of official acts, shall be sentenced to a term of imprisonment of not less than seven years (with a maximum sentence of 20 years), and, in addition, may be fined up to NTD60 million (Article 5 of Anti-Corruption Statute).

• Person stealing or misappropriating property or equipment:

(e) A public official who steals or misappropriates public equipment or property, shall be sentenced to a term of imprisonment of not less than ten years (with a maximum sentence of life imprisonment) and, in addition, may be fined up to NTD100 million.

(f) A public official who steals or misappropriates private property or equipment that is in the Government’s possession, shall be sentenced to a term of imprisonment of not less than five years (with a maximum sentence of 20 years), and in addition, may be fined up to NTD30 million (Article 6 of Anti-Corruption Statute).

The provisions in the Criminal Law dealing with corruption in the public sector are similar to those contained in the Anti-Corruption Statute. However, the Anti-Corruption Statute, being a specialised corruption focussed statute, takes precedence on corruption matters.

A person who commits an offence under the Anti-Corruption Statute outside Taiwan shall be penalised pursuant to the Statute, regardless of whether there is a law punishing such an offence in the place where the crime was committed.

Defences and mitigation measuresPotential penalties under the Anti-Corruption Statute may be mitigated or exempted in the following circumstances:

• A person offering a bribe who commits an offence specified in Article 11 of the Anti-Corruption Statute and voluntarily surrenders himself for trial may have his punishment waived; where such person confesses during the investigation or trial, his punishment may be reduced or exempted (Article 11 of Anti-Corruption Statute).

• A person offering a bribe that commits an offence stipulated in Article 11 of the Anti-Corruption Statute in the form of money or property having a value of less than NTD50,000 dollars may have his penalty reduced (Article 12 of Anti-Corruption Statute).

• A person accepting a bribe who subsequently voluntarily surrenders himself after committing any of the offences listed in Articles 4 through 6 of the Anti-Corruption Statute and has



returned all proceeds of the crime, may have his punishment reduced or exempted. Such person may be exempt from punishment if as a result of his surrender and his assistance to the police, other accomplices are arrested (Article 8 of Anti-Corruption Statute).

• A person accepting a bribe who confesses during the process of custodial Interrogation that he has committed one or more of the acts listed in Articles 4 through 6 of the Anti-Corruption Statute and has returned all proceeds of the crime may have his punishment reduced or exempted. Such person shall be exempt from punishment if as a result of his surrender and his assistance to the police, other accomplices are arrested (Article 8 of Anti-Corruption Statute).

• A person accepting a bribe who commits any of the offences stipulated in Articles 4 through 6 of the Anti-Corruption Statute that has a value less than NTD50,000 may have his penalty reduced (Article 12 of Anti-Corruption Statute).


Facilitation payments are not permitted. Hospitality accepted by a public official may only be allowed in the limited circumstances stipulated in the Integrity and Ethics Directions for Civil Servants (公務員廉政倫理規範) (the Code). Pursuant to the Code, generally, the value of each gift should not exceed NTD500. However, for certain special occasions, such as an engagement, wedding, promotion, retirement, and other occasions stipulated in the Code, the value of each gift should not exceed NTD3,000. The total value of gifts received from the same source in one year cannot exceed NTD10,000.


A corporation is not directly subject to the Anti-Corruption Statute, which is applicable only to individuals. Likewise, the Criminal Law does not provide for any corporate offences.


Under the Anti-Corruption Statute, the directors or officers of a company will not be automatically responsible for the transgressions of an employee, unless such directors or officers had approved or instructed the employee to perform such illegal act. The Criminal Law likewise does not contain any provisions which would hold directors and officers responsible for the transgressions of other employees.


Pursuant to Article 11 of the Money Laundering Control Act, a person who disguises or conceals the property or property interests obtained from a serious crime committed by himself shall be sentenced to a term of imprisonment of up to five years and, in addition may be fined up to NTD3 million. A person who conceals, accepts, transports, stores, intentionally


Taiwan

buys, or acts as a broker to manage the property or property interests obtained from a serious crime committed by others shall be sentenced to a term of imprisonment of up to seven years and, in addition, may be fined up to NTD5 million.

In addition, Article 7 and Article 8 of the Money Laundering Control Act impose certain obligations on financial institutions to ascertain the identity of customers and to report suspicious financial transactions to the Investigation Bureau of the Ministry of Justice.


Pursuant to the Anti-Corruption Informant Rewards and Protection Regulation, a person who informs the investigating agency or internal affairs agency of an act of corruption committed by a public official before such offence is known, may be granted a reward following the conviction of the public official. The reward may range from NTD300,000 to NTD10 million depending on the severity of the sentence given.


The Ministry of Justice (MJ) has established the:

• Department of Government Ethics (MJDGE) which is responsible for the promotion of Governmental ethics/integrity and the prevention of corruption

• Investigation Bureau (MJIB) which is responsible for the prevention and investigation of corruption.

The MJIB reports to the MJ but the District Court Prosecutors Offices, the High Court Prosecutors Offices, and/or the Supreme Court Prosecutors Office are all entitled to request the MJIB to assist with their respective investigations of corruption.

In 2007, the Supreme Court Prosecutors Office established the Special Investigation Division (SID). SID is responsible for the criminal investigations of high-ranking corruption (eg, the President, the Vice President, a Minister, or a General) and other serious corruption or serious economic crime. n



ThailandContributed by Norton Rose Group

TI rankings

80th on the CPI.


Ratified UNCAC on 1 March 2011. Member of ADB/OECD Asia Pacific Anti-Corruption Initiative.


LegislationThe principal anti-corruption regimes in Thailand are found in the Penal Code B.E. 2499 (1956) (Penal Code) and the Organic Act on Counter Corruption B.E. 2542 (1999) (OACC). Both the Penal Code and the OACC deal with only corruption involving public officials and other types of abuse of public office.

Private sector At present, there is no private bribery offence under Thai law.

Public sector The Penal Code deals with different types of corruption, including bribery. However, the regime is limited to corruption involving public officials or other types of abuse of public office for personal gain by bureaucrats and elected officials (Public Officials). The law distinguishes between active (offering) and passive (accepting) bribery and penalises Public Officials and any person who assists in the commission of the offence. The mere offer or agreement to give a benefit to a Public Official to undertake, avoid or delay an act which is contrary to the functions of the Public Official is an offence under the Penal Code.

The OACC prescribes offences for bribery, abuse of public power and accumulation of “unusual” wealth by Public Officials. For offences under the OACC the burden is on the Public Official charged with an offence to prove that he/she did not commit the offence. For offences under the Penal Code the burden is on the prosecutor to prove that the Public Official has committed the offence. Under the OACC, the National Anti-Corruption Commission (NACC) can conduct an investigation to examine the assets of a Public Official where the Public Official is suspected to have accumulated wealth in an “unusual” manner. A notification issued under the OACC (which will come into force on 1 January 2012) will require all Government procurement projects with budgets exceeding THB50,000 to be declared, separate accounts to be maintained, and all bank accounts and reports to be submitted to the Department of revenue together tax filings.

There are also various other public sector acts set up to provide additional tools to tackle corruption, such as the Official Information Act B.E. 2540 (1997) which sets out certain rights


Thailand

of an individual to access public information held by public agencies; the Act Regulating the Offence Relating to the Submission of Bids and Tender Offers to Government Agencies B.E. 2542 (1999) which prescribes certain offences in respect of the bidding process for Government contracts; the Act on the Management of Partnerships and Securities Owned by Ministers B.E. 2543 (2000) which limits, among others, the quantity of shares in private companies which can be held by Government Ministers; and the Regulation of the Prime Minister’s Office on Procurement sets up the framework for procurements by Government agencies.

Extra-territorial application As of 1 November 2011, bribery of foreign officials by Thai nationals abroad is not an offence under the Penal Code.

Defences and mitigation measuresThere are no specific pieces of legislation or guidelines dealing with defences or mitigation measures by a company to prevent bribery. Generally, setting up and implementation of bribery prevention measures by a company may demonstrate good corporate governance and support an argument that the company has a policy against and does not support any corrupt practice by its employees or agents.

PenaltiesPenalties for bribing Public Officials under the Penal Code are imprisonment for a term not exceeding five years or a fine not exceeding THB10,000, or both. Only monetary fines will apply to corporations. Generally, a director of a corporation who is complicit in the commission of an offence by that corporation will be subject to the prescribed penalties, including imprisonment. Penalties under the OACC include removal from public office and forfeiture of property.


In 2000, the NACC issued supplemental rules governing the acceptance of property or other benefits by Public Officials. Gifts cannot be accepted unless there is in an appropriate occasion or circumstance. Gifts given in an appropriate occasion or circumstance and with a value not exceeding THB3,000 can be accepted without committing an offence under the OACC. Gifts given in an appropriate occasion or circumstance and with a value in excess of THB3,000 must either be notified to, and approved by, a superior officer or returned. The rules apply for a period of two years after a Public Official leaves the public service. There are no specific guidelines or definitions on what are “appropriate occasions or circumstance”.

The Regulation of the Prime Minister’s Office on Giving or Receiving Gifts by Public Officials B.E. 2544 (2001) sets out similar rules with respect to the acceptance of property or other benefit, but extends to cover family members of Public Officials.

Corporate liability for the acts of subsidiaries employees and third parties

There are no specific laws imposing criminal liabilities on companies where an offence relating to corruption is committed by an employee, agent or officer of the company. Generally, there is a risk that a company may also be guilty and subject to the same fine as the employees or agents who committed the offence where there is evidence that: (i) the



relevant employee or agent acted within the company’s objectives, as a representative of and for the benefit of the company, or (ii) the company (acting through its directors) has knowledge of, ratified or otherwise enjoyed the benefit of, the offence or (iii) the company has not taken reasonable steps to prevent such offence.


Under the Penal Code, a person who has taken part in the commission of an offence or aided or abetted in the commission of an offence by another person will be considered as the “principal” or “supporter” (as the case may be) in the commission of such offence and punishable accordingly. As a result, an individual director or officer of a company can be held liable for the offence with the company, if he or she is considered to have taken part in the commission of an offence or aided or abetted in the commission of an offence by the company.


One of the principle objectives of the Anti–Money Laundering Act B.E. 2542 (1999) (AMLA) is to stop the concealment or disguise of proceeds from offences specified under the AMLA (Underlying Offences). The Underlying Offences include the improper exercise of power by Public Officials under the Penal Code. The AMLA also established the Anti-Money Laundering Commission to monitor and suppress money laundering activities.

The principal offences under the AMLA are to:

• transfer, receive, or change the form of an “asset involved in the commission of the Underlying Offence” for the purpose of concealing or disguising the origin or source of that asset, or for the purpose of assisting another person before, during, or after the commission of an offence, to enable the offender to avoid or receive a lesser penalty for the relevant offence

• conceal or disguise the true nature, location, sale, transfer, or interest in an “asset involved in the commission of the Underlying Offence”.

For the purposes of the AMLA, “asset involved in the commission of an offence” means (i) money or property derived from the commission (or aiding or abetting in the commission) of an Underlying Offence, (ii) money or property derived from the sale, distribution, or transfer of the money or property referred to in (i) above, and (iii) any interest derived from money or property referred to in (i) or (ii) above.

A person who (i) commits an offence under the AMLA, (ii) aids or abets in the commission of an offence under the AMLA or (iii) attempts to commit an offence under the AMLA, may be subject to imprisonment for a term of one to 10 years, or a fine of between THB20,000 to 200,000, or both. The “asset involved in the commission of the Underlying Offence” may be subject to forfeiture at the court’s discretion. These offences apply to both individuals and corporations. Where a corporation has committed certain specified offences under the AMLA, a director, managing director, or any person responsible for the operation of that corporation may be subject imprisonment, a fine or both, unless he or she can prove that he or she had no part in the commission of the offence.


Thailand

The AMLA imposes an obligation to report suspicions of anti-money laundering activities to the Anti-Money Laundering Office. However, such obligation is imposed on only financial institutions, the Land Offices (the Government land department which records dealings involving land) and any person who is engaged in (or advising on) investment transactions or investment funds.


The 2011 amendment to the OACC introduced provisions which established protective measures for whistleblowers. Such protections include a safe house, a police escort, allowance and changing the name and other registrations or identification cards of a whistleblower. The protections also extend to cover close family members of a whistleblower.

The OACC also provides incentives for whistleblowers in respect of the corrupt practices under the OACC. The NACC may award a prize to a whistleblower who has reported or provided evidence or testified in proceedings or, in cases where the whistleblower is a Public Official, propose to the Ministerial Cabinet to promote the whistleblower. There is currently no express obligation under any statute requiring the public to whistleblow when they encounter corrupt practices in Thailand.


Allegations of corruption under the Penal Code are generally prosecuted by the Office of the Attorney General in the criminal court either directly or on the recommendation of an independent anti-corruption commission. Prosecutions of corrupt politicians are brought before the Supreme Court’s Criminal Division for Persons Holding Political Positions established under the OACC. Prosecutions of other Public Officials are brought in the general criminal court system.

The two principal independent anti-corruption commissions are the NACC, which was established by the OACC, and the Office of Public Sector Anti-Corruption Commission (PACC), which was established by the Act on the Administrative Measures for Anti-Corruption B.E. 2551 (2008). The NACC investigates allegations of corruption involving bureaucrats at or above a specified rank and elected officials, while the PACC investigates allegations of corruption involving other bureaucrats. Both commissions are empowered to conduct their own investigations and collect evidence (including the authority to compel production of documentary and oral evidence) and make recommendations to the Office of the Attorney General. The OACC also allows the NACC to seek information from banks holding the client and account information on Government procurement projects suspected of bribery or corruption. In practice, allegations of corruption are more often brought before the NACC or PACC, rather than the Office of the Attorney General directly, as the commissions have the relevant specialist resources and skills. n



VietnamContributed by Vision & Associates Legal (associate office of Norton Rose Group)

TI rankings

112th on the CPI.

International anti-corruption conventions and governmental organisations

Ratified UNCAC. Member of ADB/OECD Asia Pacific Anti-Corruption Initiative.


LegislationIn Vietnam, the primary anti-corruption statute which prescribes the various forms of corruption as separate, substantive offences is the Law on Anti-Corruption (No 55/2005/QH11). Other statutes that deal with corruption and bribery include the Penal Code (No 15/1999/QH10 as amended by Law No 37/2009/QH12) and the Law on Thrift Practices and Anti-Wastefulness (No 48/2005/QH11).

In addition to the statutes, there are many ministerial decrees, circulars from ministries and other legislative instruments that are important. These include Decree 37/2007/ND-CP on Asset and Income Transparency which has been amended by Decree 68/2011/ND-CP. This provides that a very wide range of State officials, from members of the National Assembly to school principals, must file confidential statements of their assets and income. The confidentiality that attaches to these statements is in contrast to the lack of anonymity afforded to whistleblowers under the legislation.

The National Assembly has announced that it will prepare amendments to the Law on Anti-Corruption in 2012. On 7 April 2010, the Prime Minister issued Decision 445-QD-TTg Approving a Plan on Implementation of the United Nations Convention against Corruption. Article 2(a) of the Decision comments that “Fundamentally the law of Vietnam is consistent with the contents of the Convention but lacks specific items and is incomplete.”

Private sector Although Vietnam’s legislation does not generally focus upon private sector corruption and bribery, developments in this area are occurring. In 2007, Decree No 47/2007/ND-CP on Implementing the Law on Anti-Corruption was introduced to encourage the private sector to assist in the reduction of anti-corruption and bribery through reporting its existence.

Public sector The Law on Anti-Corruption and the Penal Code create domestic bribery offences involving public officials accepting or giving bribes. The main corruption offences involve the receipt of bribes connected with the performance of duties, the offering of such bribes and the abuse of position, by reason of a bribe, in order to obtain an advantage. Both sets of laws include civil servants and managers of State-owned companies.


Vietnam

The Law on Anti-Corruption prohibits officials from committing “corrupt acts,” which includes “taking bribes” and “taking advantage of positions while performing official duties” (Articles 3 and 10). Overall, the Law on Anti-Corruption prescribes systems that are designed to discourage bribery and other forms of corruption, whereas the Penal Code prescribes offences and penalties. The Penal Code Article 279 provides offences for receiving and giving bribes respectively. The elements for the offence of receiving a bribe are:

• the recipient must have powers or a particular responsibility that they have taken advantage of

• the recipient has received (either directly or through a middle man) money, property or a material interest with a value of VND2 million or more (or under VND2 million in particular circumstances)

• the recipient has performed or not performed certain jobs for the benefit or request of the bribe offeror.

The elements for the offence of offering a bribe are that the bribe must be offered and must be VND2 million or more (or under VND2 million but causes serious consequences or be committed more than once).

The Law on Thrift Practices and Anti-Wastefulness prohibits the use of public funds by public officials for certain restricted activities such as parties and dinners.

Bribery of foreign public officials is not yet an offence, but an attempt to bribe a foreign public official may fall within the general ambit of the Penal Code offences and persons who “abuse their positions and/or powers to act contrary to the interests of the State and the society and/or the legitimate rights and interests of citizens”.

Extra-territorial applicationWhile the Law on Anti-Corruption is silent on extra-territorial application, it works in parallel with the Penal Code. The Penal Code applies equally to all offences committed by Vietnamese citizens within or outside of Vietnam. Foreigners who commit offences outside of Vietnamese territory may also be tried under the Penal Code within Vietnam (subject to applicable international law – Articles 5 and 6 of the Penal Code).

Defences and mitigation measuresThe Penal Code articles provide for particular defences and mitigation measures. Under Article 289.6, “persons who are coerced to offer bribes but take initiative in reporting them before being detected may be exempt from penal liability”.

PenaltiesFor giving a bribe between VND2 million to 10 million (or below VND2 million which causes serious consequences), the punishment is between one to six years’ imprisonment. For giving a bribe between VND10 million (about US$500) and VND50 million (about US$2,500), the punishment is between six months and 13 years’ imprisonment. For giving bribes between VND50 million and VND300 million (about US$15,000), the punishment is between 13 and 20 years’ imprisonment. For giving bribes in excess of VND300 million, the sentence is 20 years’ or life imprisonment.



The sanctions for receiving bribes are equally harsh: for bribes between VND2 million and 10 million (or below VND2 million but causing serious consequences) the penalty is two to seven years’ imprisonment. For bribes between VND10 million and 50 million, the punishment is seven to 15 years’ imprisonment. For bribes between 50 million and 300 million, the punishment is 15 to 20 years’ imprisonment. For bribes over VND300 million, the penalty is 20 years’ or life imprisonment, or death.

For each offence, the offender may be subject to a fine in addition to imprisonment, and officials may also be subject to confiscation of assets and administrative sanctions and may be banned from holding certain posts.

Acting as an intermediary for a bribe also carries very serious punishments, although they are less severe than those listed in above.

Facilitation payments and gifts

Decision 64/2007/QD-TTg of the Prime Minister regulates the giving and acceptance of gifts by State Officials. Decision 64 provides that gifts under VND500,000 may be accepted in certain circumstances but otherwise all other gifts much be refused and/or reported.


Current legislation does not expressly refer to corporate liability for bribery offences. However, note that under Article 87 of the Law on Anti-Corruption, companies must report corrupt acts.


Individual directors and officers may be liable under the general offences of the Penal Code. In addition, the Law on Enterprises required all directors and managers to act honestly and in the best interests of the company, to act in accordance with the law, and not to use their position to benefit other individuals.


The main legislation addressing this topic is Decree 74/2005/ND-CP and Circular 22/2009/TT-NHNN of the State Bank of Vietnam.

The regulatory authority is the Anti-Money Laundering Authority, which is part of the State Bank. In Decision 470/2009, the Prime Minister established the Anti-Money Laundering Steering Committee to administer and co-ordinate activities to fight money laundering.

A new Law on Anti-Money Laundering is scheduled to be passed at the sittings of the National Assembly towards the end of 2011.


Vietnam

At present, money laundering is addressed as a criminal offence by Articles 250 and 251 of the Penal Code. It can carry up to 15 years’ imprisonment.


Although the Law on Anti-Corruption 2005 purports to offer protection and anonymity to whistleblowers, in practice for a complaint to be processed by the Office of the Steering Committee for Anti-Corruption, the whistleblower must give their name and address when submitting their complaint.

There is currently no express obligation conferred by the Law requiring the public to whistleblow when they encounter corrupt practices in Vietnam. However, public officials are obliged to report any corrupt practices that they encounter.


Vietnam has five main agencies which assist in the detection, and investigation, of people caught engaging in corrupt practices.

• The Office of the Central Steering Committee for Anti-Corruption, which was established by the Law on Anti-Corruption 2005, and is chaired by the Prime Minister. Its duties include overseeing the Government’s anti-corruption initiatives.

• The Ministry of Police.

• The Government Inspectorate oversees all complaints of corruption, the inspection of that corruption and any disputes that may ensue. It is also working jointly with the World Bank on the Vietnam Anti-corruption Initiative Program 2011.

• The People’s Procuracy manages the prosecution of persons involved in the perpetration of corruption.

• The State Audit of Vietnam is in charge of auditing the Government’s budget, and ensuring that no corruption occurs. n



Key anti-corruption issues

Anti-corruption compliance

Although there are great challenges for companies seeking to drive out corruption without losing their competitive edge, it is a mistake to view anti-corruption compliance as an obstacle to achieving a successful business. Instead, good compliance systems should lead to more efficient operations. Undoubtedly, the key to effective anti-corruption compliance both in the private and public sectors is the quality and integrity of senior management and officials. They can set “the tone” by putting in place and maintaining effective anti-corruption policies to secure compliance.

Key compliance considerations should include:

• Clear anti-corruption policies which should address the following:

– procurement

– gifts and hospitality

– facilitation payments

– charitable donations and political contribution

– third party due diligence.

• Assessing the risk of operations in high risk or “Red Flag” countries, particularly transactions involving politically exposed individuals and Government entities.

• Documenting all dealings with Governmental bodies. Lack of such records will be highly prejudicial in any corruption investigation and, for certain regulated entities, an offence in itself.

• Assessing the risk of third party transactions, such as agencies and distributorships, which can mean that effective control over transactions is lost but with potential corruption liabilities retained. The company should ensure that, where possible, business partners, joint venture partners, vendors and suppliers carry on business in a manner that accords with its policies.

• Carrying out effective investigative due diligence when appointing employees, agents, brokers, particularly so, in “Red Flag” countries.

• Considering whether the structures setting compensation and commission levels for employees and agents creates or indicates a corruption risk. Overly generous commission levels may serve to allow corrupt inducements. An embedded corporate culture of selling or securing contracts at all costs has been identified as a major driver of corruption.

• Using independent corporate compliance monitors and an autonomous board committee with responsibility for ensuring ethical compliance.



• Auditing with unrestricted access to sensitive commercial information.

• Training employees and third parties on corruption policies not merely, box ticking or multiple choice exercises, but through live and online training.

• Using IT systems which are capable of analysing all aspects of an organisation’s financial, accounting and business activities.

M&A transactional due diligence

Considering the potential violations of anti-corruption laws has now become a critical component of transactional due diligence. However, in the first instance, it is the potential seller who should be forewarned of the nature and risk of such a due diligence exercise. Where necessary, the seller, by carrying out appropriate pre-transaction due diligence may be able to identify deficiencies and take the necessary remedial action. Doing so may avoid an abortive transaction and limit its exposure to financial and criminal penalties. The seller must also consider the type of confidentiality undertakings that should be sought or given and what warranties and indemnities should be given. The seller should appreciate that, where a bidder’s due diligence uncovers corrupt practices, matters may take a course of their own if the existence of corruption is reported by a bidder or its advisors.

A due diligence process should not be viewed as a mere box ticking exercise, but as a common sense, often intuitive process, which must be structured, measured and organised. The absence of information or any concrete facts or proof of corruption may not by itself constitute an “all clear”. A due diligence team should therefore remain alert to spotting red flags and look into the substance of the matter rather than the form.

The target or the seller could, for instance, produce volumes of incorporation documents, references and contracts in respect of the target’s transaction counterparty, but if there is lack of business objective for such counterparty’s engagement, or it lacks the skill and expertise to provide the services for which it has been engaged, or no evidence exists as to the services provided in return for the payments made to it, it can potentially be a sham structure for channelling bribes.

Where a buyer is concerned about the risk of corruption, it may be advisable to establish a process whereby the due diligence review must be approved by a team within the buyer which is separate and independent of the team which is responsible for completing the transaction.

Without adequate corruption due diligence, acquirers and their officers run the risk of post-acquisition financial and criminal liabilities for the target company’s violations. An unforeseen corruption investigation or trial will almost certainly mean that the price paid would not reflect the target’s true value. It will inevitably result in meeting investigation and potential trial costs, loss of management time, suspension or loss of existing contracts, disgorgement of benefits received and a consequent loss of goodwill and reputation.



Although the nature of the due diligence exercise depends on the nature of the particular transaction and the target’s activities, pre-acquisition steps may include:

• carrying out an initial corruption risk assessment of the target

• preparing anti-corruption questions to establish the existing compliance culture

• assessing the information produced to determine:

– the likely risk and value of the target

– the warranties and indemnities that should be extracted and whether or not indemnities will actually be effective, particularly, in respect of criminal or quasi-criminal sanctions

– whether there should be self-reporting or guidance sought from the relevant authorities

– whether remedial action or regulator approval or the exclusion of a particular intermediary should be made a pre-condition for entering into the transaction.

A client should appreciate that discovery of anti-corruption violations may jeopardise transactions unless effective and transparent action is taken prior to closing deals. Subject to anti-money laundering reporting obligations, such action may involve self-reporting and giving undertakings to the relevant authorities that independent investigations will be carried out into the disclosed violations, that the results of such investigations will be disclosed, that effective and remedial action will be taken and that new compliance procedures will be put in place. It is also possible that professional advisers may be unwilling or unable to act in the face of unacceptably high corruption risks.

Following completion of a transaction, the buyer must consider what remedial action is required, the extent to which a new compliance system should be introduced and carrying out further and more detailed due diligence into the target both for operational purposes and bringing any warranty or indemnity claims. That due diligence exercise would normally include a thorough examination of relevant accounts, records, emails and interviews with all relevant staff.

On discovery of corrupt practices the buyer must quickly consider, with its external advisers, the advisability or otherwise of referring/reporting of corrupt activities and taking the necessary remedial action.



Impact on M&A transactions

Due Diligence Finding a problem Protecting a buyer

The SPA: • Post-exchange DD

and pre-completion undertakings

• CPs/MAC/Termination rights

• Warranties and indemnities

• Continuing dialogue with regulator

• Deferred consideration, retentions/escrow

• Put option• Post completion:

– Access to accounting and other records

– New contracts for employees and agents

– New or improved procedures

• Cross contamination of group

• Communication channels for reporting issue

• Suspicious transaction or activity reports to be lodged with relevant authorities

• Self-reporting? • Impact of

investigation on timetable

• What further investigations need to be carried out?

• Potential liability issues for your client

• Reputational issues• Debarring from public

procurement

• Anti-corruption DD is increasingly the norm especially if “red flags” are present

• Engage compliance risk experts, forensic accountants, if high risk issues arise

• Identify the “red flags” and use a specific DD request list to draw out information

• Gap analysis of existing procedures of the Target group

• Q&A with Target’s management and compliance officers



Red flags

The presence of red flags indicates that something is out of the ordinary and may need to be investigated further. Red flags can be identified either at the very initial stage of the transaction (for example, the target being based in a high risk jurisdiction can by itself signify a red flag), or later on in the transaction, as the target’s arrangements are further scrutinised and/or further information is made available (for example, suspicious activity by an agent or the discovery of facilitation payments).

Red flags are not intended to indicate guilt or innocence, but merely to provide warning signs of the risk of corruption, bribery and/or fraud. The following examples of red flags should be used as guidance rather than as an exhaustive list:

Red flags to spot in a company

Red flags to spot in management

Red flags to spot in finance

Red flags to spot in employees

Red flags to spot in third parties

Red flags to spot in transactions

Frequent disputes/insurance claims

Close relationships with competitors

Lack of reputable professional advisers

Place of incorporation and operation

Financial difficulties

Employee turnover or lack of training

Weak internal policies and procedures

Poor regulatory relationships

Powerful controlling individual or group

Complex structure

Over-dependence on IT solutions and internal and external auditors at the expense of maintaining a visible and enforceable anti-corruption policy

Reluctance to provide information to auditors

Powerful controlling individual or group

Lack of communication

High management and staff turnover

Weak internal controls

Failure to address irregularities

Management doing subordinate work

Secrecy and lack of transparency

Recording revenue before it is earned

One-off deals to boost profits

Frequent bank account changes

Failing to record transactions/liabilities

Unwillingness of internal auditors to confront senior management

Excessive/unjustified cash payments

Unusual amounts/too many round numbers

Unusual timing of transactions

Off-balance sheet items

Inflexible money laundering systems

Lifestyle/behaviour changes

Personal financial or other problems

Abnormal expenses/overtime

Lack of holiday

Overly protective of duties

Key staff recruited by executives from former employer

Close relationships with suppliers, customers, competitors

Avoidance of management/colleagues

Pressure to generate cashflow/capital

Lack of formal agreements

Unqualified or overpaid staff

Unrealistic forecasts or promises

Complicated structure

Excessively complicated transactions

Unusual transactions

Obscure complex cancellation provisions

Dominant controlling individuals

Lack of commercial justification

Lack of involvement of reputable advisers

Missing or unnecessarily photocopied documents

Overstated inventories or receivables

Sellers or buyers without addresses

Inventory plugging

Unusual nature of transaction



Joint ventures and third party due diligence

Joint venturesEnsuring the effective implementation of anti-bribery procedures in a joint venture is key to minimising liability for any corruption offences committed by the joint venture entity. This will inevitably be harder to achieve where a company does not exercise a sufficient degree of control over the joint venture or investment entity. For example, in certain jurisdictions foreign investors are not permitted to hold a controlling stake in a local enterprise. The fact that those same jurisdictions are often those characterised by higher risks of corruption presents an obvious risk to a minority foreign investor.

Not having a controlling stake in an entity may not be a defence under the UK Bribery Act (although it may be a relevant factor) and whilst it is arguably less likely that liability for a commercial organization (C) will arise in respect of the actions of its joint venture partners, ultimately the courts will have a wide discretion in determining whether a joint venture vehicle or a joint venture partner is an “associated person” (A) for the purposes of the UK Bribery Act, taking into account “all relevant circumstances”. These circumstances may include:

• the degree to which A was able to act independently from C

• the particular facts of any joint venture or consortium arrangements, both documented and arising by virtue of the parties’ conduct, between A and C.

Third partiesThird parties include a broad range of entities and individuals that act on an enterprise’s behalf, including agents, consultants, representatives, re-sellers, sub-contractors, vendors, franchisees, advisers or similar intermediaries. A commercial organisation may use third parties for marketing or sales or as subcontractors in the supply chain, in the negotiation of contracts, the obtaining of licences, permits or other authorisations, or for any other actions that benefit the commercial organisation. Often, these third parties may not be subject to effective anti-bribery laws, but a company may well be liable for any corrupt practices employed by such third parties on its behalf and for its benefit, if those parties are not carefully selected or are inappropriately managed.

As international anti-corruption laws exert their impact on global companies and their dealings with other companies, a system of “corporates policing corporates” is undoubtedly beginning to emerge. In order to protect themselves from liability and reputational harm attaching to them from other potentially corrupt business entities, commercial organisations are increasingly requesting details of the anti-corruption policies and procedures of the companies with which they enter into business relationships. This is intended to enable them to show, for example, that they have adequate procedures in place. Companies which do not have satisfactory anti-corruption procedures may lose out on business. However, the need to carry out due diligence of third parties is often easy to state in theory but more difficult to achieve in practice, primarily, on account of the fact that the amount of due diligence that can actually be carried out will depend on the economic bargaining power of the third party. For instance, an in-demand specialist sub-contractor, supplier or successful distributor faced with a request for ongoing audit or monitoring rights may simply refuse to get involved at all particularly, in circumstances where that third party is not exposed to international bribery legislation.



A lack of control over an agent or a third party will not necessarily extricate a company from potential liability for the bribes paid by agents or other third parties acting for it, although it may be a relevant factor to be taken into account, amongst others.

There may be instances, particularly in high risk jurisdictions, in which the distribution channels employed by a company may make these relationships more complex and more difficult to control. For example, a counterparty may only be willing to work with a company if a certain agent is involved and, in practice, this agent may have wide discretion as to how its services are provided, leaving a company with little or no control over the agent’s conduct and therefore potentially exposed. A failure to carry out due diligence or requiring compliance from third parties, particularly, in high risk countries may carry substantial and often unacceptable compliance risks. Accordingly, a balanced, proportionate and informed approach must be taken.

For example, as a result of a risk assessment, certain bribery risks may be identified with the need to use an agent in dealings with a Government for a particular project. In this scenario, due diligence as a form of risk mitigation should involve performing background checks on the prospective agent. This allows the potential agent to be appointed for that particular transaction. Where a company has operations carried out by another individual or entity on its behalf, even in small part, particularly in difficult jurisdictions, it is important to ensure that at the very least, there is a review of its anti-bribery policies, that the third party is aware of and commits itself to the anti-bribery policies of the principal, that it is made aware of a zero tolerance culture within the organisation, that it is subject to appropriate due diligence and monitoring and that there are anti-bribery declarations and contractual anti-bribery warranties and termination provisions.

Crucially, commercial organisations are becoming increasingly concerned with compliance with national and international anti-corruption legislation even if those laws do not directly apply to them.

Corruption investigations

The operation of effective compliance systems may deter but cannot be guaranteed to eradicate corruption. For that reason organisations are increasingly expected to look critically at their practices and procedures, particularly where there is a suspicion of wrongdoing. All businesses must now be prepared to manage their own internal investigations effectively and with particular regard to the possibility of external scrutiny and incident fallout. Procuring an effective and rigorous investigation may also be a particularly important mitigating factor in the event that any wrongdoing is uncovered by the relevant authorities.

Key principles• Ensure compliance with applicable laws, regulations, contractual terms and internal

policies.

• Ensure investigation is impartial, fair and perceived to be so.

• Maintain discretion, confidentiality and privilege as appropriate.

• Discourage the proliferation of documentation.



• Secure co-operation from regulators, employees and business partners.

• Ensure the protection of employees.

• Managing media and reputational issues.

At the outset of a corruption investigation, it is vital to deal with the corrupt activities and limit their damage without jeopardising the company’s commercial and legal position. Accordingly, it is vital to engage external legal resources as soon as possible to advise on how to tackle the problem and in particular, how best to maintain confidentiality and legal professional privilege.

Part of any initial damage limitation exercise will involve the cancellation of relevant payments and contracts, obtaining freezing injunctions to preserve assets for future enforcement and preserving evidence by confiscating files, computers and other digital storage devices. Again, these are matters on which external legal advice must be taken.

Most corruption events will require an initial internal investigation. The form of that investigation will depend on the type and location of the corrupt activity, the company’s operations and the number of individuals involved. However, it is essential that such an investigation is both impartial and fair and perceived to be so. When assembling an investigating team, it is important to ensure the independence and impartiality of both internal members and external resources. For instance, it may not be appropriate to retain forensic accountancy services from existing auditors or accountants.

It is absolutely essential that extreme caution is exercised in relation to waiver or partial waiver of privileged documents and the creation of non-privileged documents during the investigation. In addition, as an investigation will often involve looking at a lot of documents, sourcing documents and creating documents across different jurisdictions, consideration must be given to the applicability of respective data protection laws.

The investigating team must consider whether its terms of reference and remit are sufficient, identify issues and establish a plan to collect and consider the documentary evidence on which to conduct interviews with relevant personnel.

It will be important to put in place efficient reporting and communication lines both between investigative team members, management and the Board. As part of that exercise, the creation of documentation and email traffic should be strictly controlled.

It is vital that the investigating team should carefully plan and conduct interviews. Consideration must be given to whether or not advance disclosure should be given to interviewees; the provision of legal representation for interviewees; venues and recording the interviews. These are matters on which external legal advice should be sought.

On completion of interviews, the investigating team should compile a written report based on the evidence and interviews and make the necessary written recommendations to the Board. Going forward this will be an important and confidential document. Documentation generated as a result of the investigation process, including the written report, should be protected by legal professional privilege. External legal advice should be taken on how best to do so.



The Board must then take external legal advice to consider, amongst other matters, potential obligations under self-reporting regimes, money laundering obligations and how best to take effective remedial compliance action.

Immediate actions Preparing for investigation Conducting investigation

Contain and preserve

Damage limitation:• suspension of individuals

or activity• notification• cancellation of mandates and

proxies, payments, contracts• freezing injunctions

Preservation of evidence:• document preservation

notice/suspension of document destruction

• confiscation of devices and access restrictions

• instruction of forensic computer experts

Assess the situation:• which offices, jurisdictions and

business areas are affected?• which periods of time are

relevant?• whose actions need to be

scrutinised? Third parties?• is it “live”?

Assemble the team

Independence

Internal and external resources

Reporting lines

Communication lines

Scope and plan

Identify the objective

Set the terms of reference and the remit

Identify the issues

Consider whether and what documentation will be required

Prepare a plan, timeline and communications strategy

Gather and review the evidence

Sources (hard copy files; electronic devices; recordings; third parties)

Storage review

Plan and conduct interviews

Pre-interview steps

Check employment contracts and staff handbook

Consider recording method and approval of the record

Plan the interview sequence, introduction and skeleton

Consider provision of advance documentation

Consider representation issues

Conduct interviews

Analyse, report and react

Analyse (update documents; reconsider issues; reach conclusions)

Prepare and present any written or oral report as required

Implement recommendations and take follow up steps


Anti-bribery regimes in the UK and US


Summary of UK’s anti-corruption regime

Although the FCPA has been the most important piece of extra-territorial anti-bribery legislation for international business in the last 30 years, it is evident that the UK Bribery Act, which came into force on 1 July 2011, has raised the bar and gone beyond the FCPA in many respects. Meeting the stringent standards set by the UK Bribery Act would, in almost all cases, meet or surpass the requirements of the FCPA.

New bribery offences

The UK Bribery Act introduces two general offences of bribing and being bribed: a new specific offence of bribing a foreign public official; and a new corporate offence for failing to prevent corruption (which is based on strict liability, subject only to a defence of having in place adequate procedures to prevent bribery (the corporate offence).

Where any of the general offences are committed by a body corporate with the “consent or connivance” of a senior officer (defined as a director, manager, secretary or other similar officer) of that body corporate, or a person purporting to act in that capacity, both that individual and the body corporate will be guilty of the same offence. However, where the general offence is committed outside the UK, the senior officer will only be guilty if he or she has a close connection with the UK.

The corporate offence will be of particular importance for international companies on account of the fact that liability will extend to any foreign companies carrying on a business or part of a business within the UK whenever a bribe is paid by a person associated with the company.

In March 2011, the Ministry of Justice published statutory guidance regarding the procedures that must be in place if a commercial organisation is to successfully defend a prosecution for “failing to prevent bribery” under Section 7 (the Guidance).

The Guidance has sought to clarify which foreign companies will fall within the scope of the offence of failing to prevent bribery. The Guidance states that a foreign company with a subsidiary in the UK is not necessarily “carrying on a business or part of a business” in the UK and so may not, by that mere fact alone, be subject to the jurisdiction of the UK Bribery Act. The Guidance also suggests that a company will probably not be carrying on business in the UK merely because it is listed on a UK stock exchange.

The Guidance emphasises that an organisation’s procedures to prevent bribery should be “proportionate” to the particular bribery risks faced by that organisation and to the “nature, scale and complexity” of its activities. The Guidance sets out Six Principles for adequate procedures:

• proportionate procedures

• top-level commitment



• risk assessment

• due diligence

• communication (including training)

• monitoring and review.

The definition of an “associated person” remains a broad one (namely, someone who “performs services” for a business). The Guidance has confirmed that a subsidiary will not always be the “associated person” of its parent company (for example, if it merely remits dividends to its parent). The Guidance also explains that an organisation is only liable for the actions of its associated person if the bribe was intended (by such an associated person) to benefit the organisation directly. It clarifies that a bribe paid by an employee of a subsidiary is normally intended to benefit the subsidiary and not the parent company, even though the parent may benefit indirectly. Thus a parent will not always be caught by bribes paid by or on behalf of a subsidiary.

The Guidance explains that a contractor or a supplier will generally be deemed to perform services only for the entity with which it has a direct contractual relationship.

In the case of joint ventures, the Guidance suggests that an employee of the joint venture entity is likely to be performing services for that entity only and will not be associated with the participants in the joint venture. In addition, a bribe paid on behalf of the joint venture may be deemed to benefit the joint venture entity only, even though the owners may benefit from it indirectly. Thus shareholders may not be held liable for all activities of the joint venture company. The situation becomes more complicated if the employee of the joint venture entity was seconded by (and remains an employee of) one of the joint venture participants.

Where the joint venture is conducted through a contractual agreement, the Guidance states that an employee of one of the parties is likely to be associated with his direct employer only, and a bribe paid by the employee is probably paid for the benefit of the direct employer only. The degree of control that each party has over the joint venture arrangement will be a relevant factor in this respect.

Hospitality

Reasonable and proportionate business hospitality that seeks to showcase products or services or to cement relationships will fall outside the scope of the offence. Hospitality will constitute bribery only if the provision of the hospitality is intended to induce someone to breach a relevant duty defined in the Act or to influence a foreign public official. The Guidance provides examples of acceptable hospitality, such as taking a client to a sporting event, or paying for a foreign public official to travel abroad for a site visit and then providing a meal and entertainment. Most commercial organisations will already have policies in place regarding hospitality, gifts and entertainment and they should continue to exercise their good judgment and common sense as to what is proportionate in the circumstances.



Facilitation payments

The Bribery Act provides no exemption for facilitation payments which, in common with the vast majority of international legal systems, will amount to bribery (with the exception of legally required administrative fees, or fast-track services). The elimination of facilitation payments remains a UK Government objective because such payments are perceived to have a corrosive effect on the countries in which they are paid. However, the UK Government acknowledges the difficulty of eradicating such payments in the short term and has provided some comfort to businesses by confirming that prosecutorial discretion will be applied where necessary.

The message from the Guidance is that a commercial organisation can demonstrate that it has “adequate procedures” by conducting regular risk assessments and implementing proportionate measures to address the risks identified. The Guidance has a strong commercial focus. It addresses the question of which foreign companies will fall within the scope of the offence of failing to prevent bribery together with providing much needed clarification on the issues of corporate hospitality and facilitation payments. However, it remains the case that the Guidance may have limited weight in the English courts: the Guidance does not have the force of law and can be revised by the Secretary of State at any time. The effect of the Bribery Act will depend on how it is interpreted by prosecutors and the courts and, ultimately, there remains a risk that they will approach issues such as “associated persons” or the territorial scope of the Act more broadly than the Guidance suggests.

Finally, whether or not a company’s activities come within the scope of the UK Bribery Act, strict bribery laws are becoming more commonplace around the world. China, for instance, has recently introduced measures to combat the bribery of foreign public officials and other countries are expected to follow suit. A further incentive for all companies to address their bribery risks as a matter of urgency is that their business partners, for their own protection and reputation, will increasingly expect to see evidence that a business has in place adequate procedures. If such evidence is not forthcoming, the possibility of certain business relationships being lost, or at least, affected, cannot be ruled out.

The US Sentencing Commission Guidelines Manual (US Guidelines)

Although the US Guidelines are a sentencing tool, they set out valuable guidance on what constitutes an effective compliance and ethics programme to prevent corruption. The US Guidelines spell out what a corporation or other organisation must do to have an effective compliance and ethics program, and they permit a reduction in sentence for a firm with an effective program.

Elements of an effective compliance and ethics program

According to § 8B2.1(b) of the US Guidelines an effective compliance and ethics program requires:

• effective due diligence to prevent and detect criminal conduct

• promotion of an organisational culture that encourages ethical conduct and a commitment to compliance with the law.



A company must have in place standards and procedures to “prevent and detect criminal conduct”, and this means standards of conduct and internal controls that are “reasonably capable of reducing the likelihood of criminal conduct”.

The US Guidelines require:

• the board of directors or equivalent body must be knowledgeable about the compliance and ethics program and must exercise “reasonable oversight” of the program

• ultimate responsibility for the program must rest with a high level member of management

• the responsible officer to be given adequate resources for implementing the program and effective reporting rights to the board of directors

• effective and ongoing training programs for directors, officers and managers

• effective monitoring of compliance with the program.

The US Guidelines impose affirmative duties on a company to achieve compliance by:

• taking reasonable steps to ensure that the compliance and ethics program is actually being followed, and this includes the use of “auditing and monitoring systems designed to detect criminal conduct”

• periodically evaluating the effectiveness of the program

• implementing and publicising a system by which employees and agents may be incentivised to report actual or potential criminal conduct without fear of retaliation

• taking effective remedial action on discovery of criminal conduct.

The US Guidelines provide that a firm’s sentence may be mitigated if it had an effective compliance and ethics program in place during the time of the criminal activity and if it has “fully cooperated in the investigation” of the offence, which in practice, may entail the waiver privilege.

The main differences between the UK Bribery Act and the FCPA

Bribery of foreign (public) officialsBoth the UK Bribery Act and the FCPA make it an offence to bribe foreign (public) officials. Under the UK Bribery Act a “foreign public official” is defined more narrowly than under the FCPA but still includes:

• anyone who holds a foreign legislative or judicial position

• individuals who exercise a public function for a foreign country, territory, public agency or public enterprise

• any official or agent of a public organisation.



Private-to-private briberyThe FCPA does not cover bribery on a private level, unlike the UK Bribery Act, although such conduct can be caught under other US legislation.

Active and passive briberyThe FCPA only covers active bribery, that is to say the giving of a bribe. In contrast, the UK Bribery Act prohibits both active and passive bribery ie, the taking of a bribe.

Failure to prevent briberyThe UK Bribery Act creates a strict liability corporate offence for failure to prevent bribery (as opposed to vicarious liability) subject to being able to establish that a company has “adequate procedures”. Under the FCPA, however, a company subject to US jurisdiction can be held vicariously liable for acts of its employees and agents. The UK offence extends to acts of “associated persons” which means anyone who performs services for or on behalf of the commercial organisation.

Intent Under the FCPA it must be proved that the person offering the bribe did so with a “corrupt” intent. The UK Bribery Act does not have a requirement for a “corrupt” intent.

Facilitation paymentsThe FCPA creates an exemption for facilitation payments whereas the UK Bribery Act makes no such exception. The Ministry of Justice Guidance, however, confirms that prosecutors will exercise discretion in determining whether to prosecute. In addition, guidance from the SFO indicates that where it is considering action, it will be guided by the following factors:

• Factors tending in favour of prosecution:

– large or repeated payments

– facilitation payments planned for or accepted as part of a standard way of conducting business which may suggest premeditation

– indications of active corruption of the official

– where the commercial organisation has a clear and appropriate policy setting out procedures an individual should follow it if facilitation payments are requested and these have not been correctly followed.

• Factors tending against prosecution:

– a single small payment which is likely to result in a nominal penalty

– the payments came to light as a result of a genuinely proactive approach involving self reporting and remedial actions

– where a commercial organisation has a clear and appropriate policy setting out procedures an individual should follow it if facilitation payments are requested and these have been correctly followed



– where a payer was in a vulnerable position arising from the circumstances in which the payment was demanded.

Promotional expensesThe FCPA provides for a “defence” to promotional expenses in so far as it can be demonstrated that they were a reasonable and bona fide expenditure. There is no such defence concerning promotional expenses under the UK Bribery Act, in relation to foreign public officials, although the Ministry of Justice has provided some comfort on this aspect in its Guidance.

PenaltiesAn individual found to have committed an offence under the UK Bribery Act is liable to imprisonment of up to ten years and/or to an unlimited fine. A company found guilty is subject to an unlimited fine.

For offences committed under the FCPA an individual can be fined up to US$250,000 per violation and may also be given up to five years imprisonment. A company guilty under the FCPA is liable for a fine of up to US$2 million per violation.

Key considerations for FCPA compliant organisations

• Business-to-business or commercial bribery must be taken as seriously as bribery of public officials.

• Companies should review gift, hospitality and promotional expense guidelines.

• Companies should reconsider policies that allow facilitation payments and develop strategies to eliminate such payments.

• Companies should formalise or revise risk assessment processes.

• Companies should expand the scope of their anti-corruption programmes to include all “associated persons” and review third party due diligence, contractual protection and monitoring.

• Companies should ensure they have adequate procedures in place; these are a complete defence for companies under the UK Bribery Act and represent significant protection and/or “sentence mitigation” elsewhere.



FCPA Common ground UK Bribery Act

Focuses on corruption of foreign Governmental and political officials

Corruption of foreign officials Also covers non-governmental officials ie, private to private bribery

Criminalises payments to foreign public officials that are made corruptly

None Does not require that payments be made “corruptly”

Does not prohibit requesting or receiving or accepting bribes

Payment of bribes Criminalises requesting/receiving or accepting bribes

Facilitation payments allowed (to facilitate routine Governmental actions)

Certain facilitation payments prohibited

No facilitation payments allowed

FCPA has no strict liability offence

Controlling mind required for some offences

Strict liability of a corporate for failure to prevent bribery and senior officer offence

Five-year criminal penalty per offence

Criminal penalties 10-year criminal penalty per offence

Books and records provisions require accurate accounting

Accounting UK Companies Act 2006 (ss 386 and 387): duty to keep accounting records

Defence where reasonable and bona fide expenditure is paid to demonstrate a product or perform a contractual obligation

None Only defence is adequate procedures to corporate offence



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Contacts

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Contributing law firms

IndiaAmarchand & Mangaldas & Suresh A. Shroff & Co.216 Okhla Industrial Estate Phase IIINew Delhi, 110020India

Tel +91 11 2692 0500Fax +91 11 2692 4900

JapanAtsumi & SakaiFukoku Seimei Bldg. (Reception: 12F)2-2-2, Uchisaiwai-cho Chiyoda-ku, Tokyo 100-0011Japan

Tel +81 3 5501 2111Fax +81 3 5501 2211

Malaysia Zaid Ibrahim & Co Level 19Menara MileniumPusat BandarDamansara50490 Kuala LumpurMalaysia

Tel +603 2087 9999Fax +603 2094 4888

PhilippinesSyCip Salazar Hernandez & GatmaitanSyCipLaw Center105 Paseo de RoxasMakati City 1226Metro ManilaPhilippines

Tel +63 2 982 3500Fax +63 2 817 3896

South KoreaLee & KoHanjin Main Building, 18th Floor, 118Namdaemunno 2-GaJung-gu, SeoulKorea

Tel +82 2 772 4000Fax +82 2 772 4001/2

TaiwanHuang & Partners 9th Floor563 Chung Hsiao East Road, Sec. 4TaipeiTaiwan

Tel +886 2 2746 0868Fax +886 2 2764 2448

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Anti-corruption laws in Asia PacificNorton Rose Group is a leading international legal practice. With more than 2900 lawyers, we offer a full business law service to many of the world’s pre-eminent financial institutions and corporations from offices in Europe, Asia, Australia, Canada, Africa, the Middle East, Latin America and Central Asia. We are strong in financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and pharmaceuticals and life sciences. Norton Rose Group comprises Norton Rose LLP, Norton Rose Australia, Norton Rose Canada LLP, Norton Rose South Africa (incorporated as Deneys Reitz Inc), and their respective affiliates.

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