Monday, 10 February 2020

Offsets, Commissions and Bribes

Malaysiakini reported on 6th February 2020 that Mahathir sees nothing wrong with an offset in a business transaction provided the money is not pocketed. “And whether you regard an offset as bribery, that’s up to you”, he told reporters after an event in Kuala Lumpur (FMT, 6 Feb 2020). So instead of going into your own pocket but goes for a certain purpose then it is offset not bribery. That’s the PM!

But the offset went to AirAsia officials not to AirAsia. And that’s according to court documents made by the U.K.’s Serious Fraud Office (SFO). The quantum is USD50 million or RM205 million. AirAsia officials are not alone, the Malay Mail on 6th February 2020 reported former Sri Lankan Airlines CEO was arrested over allegations he received bribes for an Airbus aircraft deal.  There was no offset here! Airbus has been ordered by a French court to pay Euro 3.6 billion fine to France, Britain and the U.S. to settle the investigations.

So could Rosmah have done an offset instead of pocketing RM187.5 million (15%) of the RM1.25 billion solar hybrid power project? And avoid prosecution?

A lot of commission arrangements are perfectly legal but it is easy to overstep. Bribing occurs when a person offers, gives, or promises to give, a financial or other advantage to someone else in exchange for improperly performing a function or activity. That’s from the U.K.’s Bribery Act 2010.

So what about those instances where greasing palms to get things done is just the way things are?

The Act states that local practices should be disregarded when deciding on improperness, unless they form part of the written local law.

While the UK authorities are alive to the necessity of facilitation payments, official tolerance relates only to small payments, made by companies with the right bribery policies and procedures in place. Hospitality can constitute bribery if it is disproportionately generous.

The SFO acts as the focal point for any allegations of corruption by UK nationals or incorporated bodies overseas, while the City of London Police has an Overseas Anti-Corruption Unit with the specific function of supporting overseas corruption investigations undertaken by the SFO.

The idea that prosecuting authorities have tentacles that can reach worldwide is not limited to the UK. As with many areas of the criminal law, most countries laws are broadly similar, and both European Union (EU) and United Nations (UN) conventions provide for international co-operation with regard to both the investigation and prosecution of bribery and corruption.

While the reach of US law enforcement agencies is equally global in nature, a slight difference can be seen in their approach. The US Foreign Corrupt Practices Act of 1977 allows payments to be made to foreign public officials to facilitate or expedite their performance of the duties they’re already bound to perform, even if this still violates local laws. So making a payment to an official to speed up a visa application, for example, would be acceptable.

In Malaysia, Section 17A to the MACC Act takes effect in June 2020. Commercial organisations have to show that they have “adequate procedures” in place. What is adequate is the question.

Every country faces a moral/legal issue. It is one of degree. And painfully authorities worldwide are coming down hard on corruption. It is not a moral crusade. But simply corruption distorts rational product and service choices, screws markets, threatens economic growth and prevents the best from rising to the top.


1. PM on AirAsia’s graft probe: Offset is not bribery, Malaysiakini, 6 February 2020
2. Prime Minister, you are of so wrong over AirAsia bribes, P. Gunasegaran (Focus Malaysia, 6 February 2020)
3. Sri Lanka arrests airline chief over Airbus kickback claims, Malay Mail, 6 February 2020

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