SOUTH AFRICA: IN A BID TO FIGHT CORRUPTION CHIEF JUSTICE ZONDO PROPOSES THAT FAILING TO PREVENT CORRUPTION SHOULD BE AN OFFENCE
One of Chief Justice Zondo’s recommendations in the Judicial Commission of Inquiry into State Capture Report, is to amend the Prevention and Combating of Corrupt Activities Act 12 of 2004 (PRECCA) to include not implementing adequate internal procedures to prevent corruption as a new offence for companies.
This is not the first time that PRECCA amendments have been suggested - the Prevention and Combating of Corrupt Activities Amendment Bill 2017 did so as well. However, there are differences between the amendments proposed in 2017 and those suggested by Chief Justice Zondo.
The amendments suggested under the 2017 Bill contemplated companies implementing systems to detect corruption that would allow them to fulfil their reporting obligations in terms of section 34 of PRECCA; and imposed no criminal sanction for failing to implement these systems, although failure to make the required reports would be an offence.
In contrast, Chief Justice Zondo’s suggested amendments to PRECCA would require companies to prevent corruption from occurring in the first instance; and hold companies criminally liable if they do not. The 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.
Of course, that raises the question as to what amounts to ‘adequate procedures’ in terms of PRECCA. There is no definition or guidance contained in the recommendation proposed by Chief Justice Zondo. However, the meaning of ‘adequate procedures’ may not be as nebulous as it first appears. The UK Bribery Act 2010 (UK Bribery Act) contains a section that creates corporate liability for failing to prevent bribery. Furthermore, a company will have a defence under the UK Bribery Act if it can show that, despite a particular case of bribery, it nevertheless had adequate procedures in place to prevent persons associated with it from committing bribery.
Given the similarities between the UK Bribery Act and the amendments proposed by Chief Justice Zondo, it is likely that the six principles that guide the determination of what amounts to adequate procedures under the UK Bribery Act could similarly be used in relation to the proposed new offence. These are:
- 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 proportionate 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 the internal and external risks of bribery.
- Principle 4: Due diligence: The company must apply proportionate due diligence procedures in respect of 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, and this includes 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 therefore 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.
If companies were to implement these principles immediately, and not wait for the promulgation of any amendments to PRECCA, it would not only amount to good corporate governance but would also signal a renewed commitment by corporate South Africa to eradicate corruption.