Costa Rica's New Anti-Corruption Law

/ Global Compliance Solutions Group LLC/

On June 6, 2019 the Costa Rican Legislative Assembly approved a new anti-corruption law(1). The law is the result of efforts(2) by Costa Rica to join the Organization for Economic Cooperation and Development (OECD)(3). To further their efforts, Costa Rica approved the adoption of the OECD “Convention on Combating Bribery of Foreign Public Officials in International Business Transactions” on May 10, 2017(4,5).

Highlights of the new law:

  • Allows for holding domestic (private or state owned) or foreign corporations (conducting business in Costa Rica), trusts, associations, and foundations criminally responsible for domestic or transnational bribery

  • Allows for sanctioning a parent company for the actions of their subsidiaries and affiliates

  • Establishes large potential financial penalties for corporations found guilty of corruption

  • Allows for the potential reduction of penalties (up to 40%) if certain “mitigating circumstances” are met by the corporation

Mitigating Circumstances include:

  • Having in place an effective anti-corruption program

  • Having in place an independent compliance officer

  • Reporting potential non-compliance

  • Cooperation with authorities investigating the potential non-compliance

Costa Rica Corruption Rankings

  • 2018 TRACE Bribery Risk Matrix Rank(6): 48 out of 200 countries (1 Best)

  • 2018 Corruption Perceptions Index Rank(7): 48 out of 180 countries (1 Best)

  • 2019 GCSG Country Compliance “Corruption” Risk Rating(8): Moderate

Contact us to learn more about this development in Costa Rica.

References

  1. Legislative Assembly of the Republic of Costa Rica - “Liability of Legal Persons in Domestic Bribery, Transnational Bribery and Other Crimes” - Legislative Decree No. 9699, Record No. 21,248 | Approved 06/06/2019

  2. OECD - “OECD establishes roadmap for membership with Costa Rica” - 15/07/2015

  3. OECD Home page - “Organization for Economic Cooperation and Development”

  4. FCPAmericas Blog - “Costa Rica Adopts the OECD Anti-Bribery Convention” - 06/06/2017

  5. OECD - “Costa Rica to join the OECD Anti-Bribery Convention” - 31/05/2017

  6. Trace International, Inc. - “2018 TRACE Bribery Risk Matrix”

  7. Transparency International - “2018 Corruption Perceptions Index”

  8. Global Compliance Solutions Group LLC (GCSG) - “Country Risk Ranking - Sources & Methodology”

Malaysia proposes amendments to Anti-Corruption Act

/ Global Compliance Solutions Group LLC/

On March 26, 2018 the Malaysian Anti-Corruption Commission Amendment Bill 2018 (the "Amendment") passed the first reading.  The amendments propose several changes to the Malaysian Anti-Corruption Commission Act of 2009 ("2009 Act"). 

The most significant proposed change is the addition of a new section(1) which for the first time adds a corporate liability(2) provision for corrupt acts committed by persons associated with a "commercial organization"(3).  The 2009 Act only contained provisions for individual liability.  With the Amendment a commercial organization commits an offense if:

"a person associated with the organization(4) corruptly gives, agrees to give, promises or offers to any person any gratification whether for the benefit of that person or another person with intent- (a) to obtain or retain business for the commercial organization; or (b) to obtain or retain an advantage in the conduct of business for the commercial organization."(5)

Penalties under the Amendment are no less than ten times the sum or value of the gratification, or one million ringgit ($253,000), whichever is higher, and/or imprisonment for up to 20 years.  In addition, the Amendment states that commercial organizations will be able to provide a defense against a corruption charge by having adequate procedures in place that were designed to have prevented persons associated with the organization from committing the offense.  The Malaysian government intends to publish guidelines in the future that will provide more clarity on how they will interpret "adequate procedures".

Key Takeaways

  • The Amendment introduces corporate liability for corrupt acts committed by persons associated with a commercial organization
  • Having an adequate compliance program in place may mitigate the potential penalties associated with a corrupt act by an associated person
  • Associated persons include both employees AND third parties providing services on the company's behalf
  • The penalties for non-compliance are potentially severe 

Recommendations

  • If you have a business that operates in Malaysia we recommend a review of your  compliance programs in country and a review of your monitoring and auditing practices to ensure they are adequate to prevent and detect corrupt acts.

GCSG will continue to follow developments and will distribute the guidelines when the Malaysian Anti-Corruption Commission publishes them.  For more information contact your GCSG experts.

E  info@globalcompliancesg.com

References and Definitions:

  • (1) The 2009 Act only provided for individual liability associated with corruption by company employees - Malaysian Anti-Corruption Commission Act 2009
  • (2) The corporate liability amendments are modeled after the UK Bribery Act 2010.
  • (3) "Commercial Organization...means (a) a company incorporated under the Companies Act 2016 and carries on a business in Malaysia or elsewhere; (b) a company wherever incorporated and carries on a business or part of a business in Malaysia; (c) a partnership- (i) under the Partnership Act 1961 and carries on a business in Malaysia or elsewhere; or (ii) which is a limited liability partnership..and carries on a business in Malaysia or elsewhere; or (d) a partnership wherever formed and carries on a business or part of a business in Malaysia."(5)
  • (4) "A person is associated with a commercial organization if he is a director, partner or an employee of the commercial organization or he is a person who performs services for or on behalf of the commercial organization."(5)
  • (5) Malaysian Anti-Corruption Commission (Amendment) Bill 2018
  • Malaysian Anti-Corruption Commission

Italy Expands Whistleblower Protections

/ Global Compliance Solutions Group LLC/

Italy's Anti-corruption law, known as the Severino law (1), was promulgated in 2012.  The Severino law included public sector whistleblower protection provisions but it did not include protections for many private sector whistleblowers.  On November 30, 2017 a new law ("Law 179") was passed that included enhanced protections for public sector employees as well as more general protections for private sector whistleblowers. (2) 

Some of the important elements of Law 179 as it relates to public sector employees include:

  • A public employee that reports illegal conduct is not to be retaliated against
  • The anti-retaliation provisions for public employees now include employees of public economic entities, private law employees subject to public scrutiny, and to employees of contractors of companies supplying goods or services to the public administration
  • Allows for the reporting of violations to an internal officer, to the National Anti-Corruption Authority (3), an accounting authority, or to the judiciary
  • Reinforces the protection of the anonymity of a whistleblower

Some of the important elements of Law 179 as it relates to private sector employees:

  • Extends private sector employee protections beyond just the finance sector, insurance companies, and specific activities such as worker health and safety (4,5,6)
  • Requires companies that already have compliance programs to develop a whistleblower reporting program that includes at least one reporting mechanism allowing employees to report illegal conduct or potential violations and at least one confidential reporting mechanism that protects the whistleblower's identity
  • Requires companies should have a department responsible for managing the whistleblower program, procedures that provide guidance on what is covered and the protections provided, and allow for the discipline of employees that violate the procedures
  • Includes a prohibition against whistleblower retaliation  
  • The Company bears the burden of proof when a whistleblower makes a retaliation claim

Law 179 entered into force on December 29, 2017.

References:

China announces launch of new anti-corruption system

/ Global Compliance Solutions Group LLC/

In November 2016 the general office of the Communist Party of China Central Committee announced that a new anti-corruption system would be created to improve oversight efficiency.  A pilot program was launched in Beijing, Shanxi and Zhejiang provinces.

"Zhuang Deshui, deputy director of the clean government research center at Peking University, said, 'the pilots were chosen as a foundation for anti-corruption.  It is unusual to pilot reforms in Beijing, and this move reflects China's determination to press ahead with reform.'"(1)

The goal of the reform is to establish a national anti-corruption work agency, similar to the Corrupt Practices Investigation Bureau in Singapore.  The plan is to expand the scope of inspections and cover more types of public officials.

"Li Yongzhong, former deputy head of the Chinese Discipline Inspection Institute said, 'The current supervision system only covers the country's administrative organs...The new plan will make everyone on the government payroll subjects of the supervision committee, even those in public hospitals and schools.'"(1)

Key Link(s):

OECD and IBA form Task Force to develop corruption guidance for lawyers

/ Global Compliance Solutions Group LLC/

The Organisation for Economic Co-operation and Development (OECD) and the International Bar Association (IBA) will form a Task Force to develop conduct standards and guidance for lawyers involved in international commercial structures and recommendations for governments.  The Task Force will be comprised of lawyers and policy leaders with experience in professional ethics, taxes, anti-money laundering, anti-corruption, financial services, trade and government affairs. 

When the International Consortium of Investigative Journalists (ICIJ) published the “Panama Papers” on May 9, 2016 it exposed a landscape with potential land mines for lawyers to unknowingly assist their clients in concealing assets or in laundering money.

The Financial Action Task Force (FATF) has published international standards for conducting due diligence on customers and identifying beneficial owners.  However, it’s become obvious these standards are not sufficient alone.  Underlying this issue is the professional obligation lawyers have to maintain attorney-client privilege.

In a December 14, 2016 OECD news release IBA President David W Rivkin, said the following: “It is undeniable that lawyers must play a central role in complex offshore financial transactions.  To ensure that they do not unwittingly facilitate economic crime, it is imperative that lawyers ask the right questions of their clients, vet them sufficiently, understand who are to be the ultimate beneficiaries of their client’s actions, and have an understanding of sovereign laws.  In practice, inevitably complications arise. For example, what are a law firm’s obligations when conflicting sovereign laws apply in cross-border transactions? Recent events have shown that existing international and professional standards may not provide sufficiently clear guidance to lawyers who handle such transactions. Recent actions also present the danger that in their anti-corruption activities, governments may ignore the need for lawyers to advise their clients in confidence. For this reason, the IBA has partnered with the foremost inter-governmental organization analysing and promoting economic policies, the OECD, to create appropriate standards while, at the same time, respect the fundamental rules applicable to the profession that are a key element of the rule of law. Each organization will bring its relevant expertise to the project.”  

Some of the questions the Task Force will consider, per the OECD news release, include the following:

  • What is the legal profession’s role in combatting corruption, tax evasion money-laundering and terrorism financing taking into account relevant international standards professional duties of lawyers and the role that such duties play in preserving the rule of law?

  • What steps, if any, should lawyers take in the event that acts or transactions previously legal become illegal as a result of a change of law?

  • What should be the result when – notwithstanding the best efforts from the law firm – the client engages in activities that are legal in one jurisdiction but illegal in another?

  • What use, if any, may be made of illegally garnered information and what liability do lawyers have for inadvertent breach of client confidentiality?

  • What steps should governments take to provide transparency of such transactions while recognizing legitimate attorney-client privilege and professional secrecy?