Deferred Prosecution Agreement: A Timely Consideration?

In recent years, Malaysia has faced significant challenges to its economic stability due to the prevalence of financial crimes, including money laundering, bribery and corruption.

As an effort in combating this pressing issue, Malaysian Anti-Corruption Commission (“MACC”) Chief Commissioner, Tan Sri Azam Baki, has recently suggested for the implementation of Deferred Prosecution Agreement (“DPA”) to assist in faster recovery of funds without the hassle of tedious and expensive trials.[1]

 

What is a Deferred Prosecution Agreement (DPA)?

Generally, DPA is a voluntary legal arrangement allowing for a suspension of a trial proceeding specifically against a corporate entity or corporation facing criminal charges by meeting specified conditions and/or corrective actions as determined and agreed by the Public Prosecutor.

A DPA would typically outline specific requirements to be complied with by the relevant entity over a defined period, such as :

(a)  Payment of monetary fine;

(b)  Disgorgement of monies associated with the criminal offence;

(c)   Providing information and cooperation to relevant regulatory authorities; and

(d)  Being subjected to monitoring / surveillance by regulatory authority to ensure compliance.

Nevertheless, it is expected that the implementation of DPA would also be substantiated with the prescribed conditions or tests in determining whether a DPA is appropriate. This may include whether such proposal for DPA would be in the best interest of the public, existence of any prior criminal records, risk of non-compliance/breach of conditions etc.

Whilst the consideration of adopting DPAs in Malaysia is still in its early stage, other jurisdictions such as the United Kingdom, Singapore and France have adopted the same for several years now as a mean of fast-tracking resolution of white-collar related offences.

 

How Does a DPA Benefit Companies?

(a)  Continuity of Business Operations – A DPA allows a company faced with criminal / corruption charges to remain operational whilst correcting the wrongdoing in question by strictly complying to the terms and conditions of the DPA.

(b)  Self-Reporting Mechanisms Are Available – Should a company become aware of any potential corruption-related misconduct within its business, a DPA allows a company to self-report and avoid collateral repercussions from the conviction of liability.

(c)  Legal Certainty – DPA provides a roadmap of certainty to companies in view of the specific agreed terms that will be set out in the agreement itself. Additionally, DPAs generally would include timelines of compliance allowing companies to have visibility on their next steps and exit strategy in rebuilding the company’s reputation and trust with their stakeholders.

(d)  Reputational Management – Companies are in a better position to manage and resolve allegations of corruption without the stigma and adverse effect of a criminal conviction.

  

What Are Key Factors for Companies to Consider Before Agreeing to a DPA ?

DPAs are evidently an attractive alternative to facing the full brunt of criminal prosecution. With that said, agreeing to a DPA is not a one-size-fits-all solution and comes with its own set of risks to a company which requires careful assessment, namely:

(a)  Ongoing Reputation Risks – Companies would potentially face continuous public scrutiny and reputational repercussions as it is almost certain that the terms of a DPA would be publicly available. The Airbus case is an illustrative example of this in view of the five separate charges faced by the company for failing to prevent bribery under Section 7 of the UK Bribery act (which is the equivalent of Malaysia’s section 17A MACC Act) that was highly publicised.

(b)  Consistent Regulatory Scrutiny – Entering into a DPA comes with it heightened scrutiny and ongoing monitoring by regulatory bodies in view that the non-conviction of the offence is contingent upon the company having to fulfil its obligations in accordance with the terms of the DPA. This would potentially impact shareholders and stakeholders’ confidence in the long-term, which shall need to be managed by the company carefully.

(c)  Cost-Benefit Considerations – Companies would need to evaluate the financial implications of entering into a DPA as opposed to the potential consequences of criminal prosecution, given that the penalties incurred may be substantial, as seen in the Airbus case where a hefty fine of GBP991 million was paid to the Serious Fraud Office, UK. Other cost considerations would include potential compliance costs incurred to ensure fulfilment of obligations under the DPA as well as other potential costs incurred from legal fees, reputational risk management and audit on compliance related policies within the company.

(d)  Operational Changes May Be Required – Compliance with the terms of the DPA potentially requires companies to consider the adequacy of existing internal practices and to revise the same for purposes of strengthening anti-bribery and anti-corruption practices.

 

Downside to DPAs

Despite the advantages offered by DPAs, there are potential downsides that warrant closer and thorough consideration.

(a)  Rushed investigation – In view that DPAs are meant to act as time efficient and cost saving alternatives for the authorities, there is a risk of hastened investigation potentially resulting in key aspects of the investigation findings and process being overlooked or compromised.

(b)  Investigation/Evidence Gathering Procedures and Its Legality Not Challenged in Court – The checks and balance normally found in usual criminal trial proceedings regarding the admissibility and legality of evidence obtained during investigation is an essential missing element of DPA.

(c)  Disregard for the Seriousness of the Offence – DPAs come with the opportunity for corporate perpetrators to minimise the liability that is attached to the corruption related offences, which may allude to the perception that DPAs are a lenient approach that fails to adequately address the harm caused by corporate related offences.

(d)  Objective of Section 17A is Disregarded – Ultimately, the goal of section 17A MACC Act is to hold corporations and its officers accountable for bribery and corrupted practices. Therefore, DPA may arguably be seen to undermine the main objective of the provision in view that the individuals directly involved with the act of bribery and corruption may evade or mitigate personal liabilities.

While the implementation of DPA in Malaysia has yet to be realized, the discussion above serves as a glimpse of key considerations for companies should DPA becomes part of the MACC’s enforcement measures against bribery and corruption. Understanding these ongoing developments is imperative for businesses to navigate the evolving terrain of corporate compliance in Malaysia.

 

[1] Mazwin Nik Anis, ‘Fast-tracking recovery of illegal gains’ (The Star, 19 September 2023) <https://www.thestar.com.my/news/nation/2023/09/19/fast-tracking-recovery-of-illegal-gains#openShareModal> 31 October 2023