First published on BusinessTech
One of the proposals from Chief Justice Raymond Zondo’s state capture report is to include failure to prevent corruption as a new criminal offence for companies.
According to law firm Bowmans, this recommendation by Zondo will require the amendment of the Prevention and Combating of Corrupt Activities Act 12 of 2004 (Precca).
The proposal follows the granting of permission by the Pretoria High Court on 4 October 2022 to allow Zondo to make corrections to the final volume of the report, which was submitted to the Presidency in June 2022.
While section 34 of the Precca imposes obligations on companies to include instances of corruption in their reporting, it does not impose criminal sanctions for failing to implement systems to prevent such corruption. Criminal sections are only charged if the company fails to make the required reports.
This is not satisfactory for Zondo, however. He suggests amendments to Precca that would require companies to prevent corruption from occurring in the first instance, and hold companies criminally liable if they do not, Bowmans said.
Bowmans said that Zondo’s proposed amendments do, however, create a defence in that the company may contend that it has “adequate procedures” in place to prevent corruption, even though corruption has occurred. This raises the question of what amounts to ‘adequate procedures’ in the Precca.
According to Bowmans, There is no definition or guidance in the recommendation proposed by Zondo, but the meaning of ‘adequate procedures’ may not be as vague as it appears.
The law firm cited the UK Bribery Act 2010 (UK Bribery Act), which contains a section that creates corporate liability for failing to prevent bribery. Additionally, a company will have a defence under the UK Bribery Act if it can show that, despite a particular case of bribery, it had adequate procedures to prevent persons associated with it from committing it.
Given the similarities between the UK Bribery Act and the amendments proposed by Chief Justice Zondo, Bowmans have pointed to six principles that guide determining what amounts to adequate procedures under the UK Bribery Act.
These principles could be used as a reference point to guide the definitions of what constitutes ‘adequate procedures’ concerning the proposed new offence by Zondo.
These are the six principles as outlined by Bowmans:
- Principle 1: Proportionate procedures – A company’s procedures to prevent bribery by persons associated with it should be proportionate to the bribery risks it faces and proportional to the nature and complexity of the company’s activities.
- Principle 2: Top-level commitment – The top-level management of a company must be committed to preventing bribery.
- Principle 3: Risk assessment – The company must assess the nature and extent of bribery’s internal and external risks.
- Principle 4: Due diligence – The company must apply proportionate due diligence procedures for persons who perform or will perform services on its behalf.
- Principle 5: Communication – The company must ensure that its anti-bribery procedures are understood throughout the company, including having a training programme on the various policies.
- Principle 6: Monitoring and review – The company must monitor and review procedures designed to prevent bribery by persons associated with it to improve those procedures.
These principles could provide direction to companies looking to formulate and implement adequate procedures – at least until the legislature releases its own guidance on the proposed new section to Precca.
