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Singapore needs stronger anti-bribery laws

Areas to beef up in 1960 Act include bigger fines and a wider net for prosecutors

Singapore's biggest corruption scandal, involving Keppel Offshore & Marine, has shown up areas in the country's anti-bribery laws that could be strengthened to better deter graft offences overseas.

The maximum fine under Singapore's Prevention of Corruption Act (PCA) of $100,000 per charge is too low, industry experts say, given that bribe payments today can easily amount to millions of dollars.

And the scope of the law should be widened so that those in the corporate echelons, and also those lower down in the scheme of things such as agents, are held more accountable, they suggest.

This means providing for criminal liability of board directors and senior management if it can be shown that they could have done more to prevent the corrupt practices.

It also means that third parties should be penalised for corrupt acts committed overseas, say the experts.

PENALTIES HERE AND OVERSEAS

These suggestions come after Senior Minister of State for Law Indranee Rajah disclosed in Parliament on Jan 8 that Keppel Offshore & Marine (KOM), the subsidiary of government-linked conglomerate Keppel Corp, is being penalised more harshly under a global resolution reached with the criminal authorities in the United States, Brazil and Singapore than if the matter had been prosecuted under Singapore laws alone.

KOM and its American subsidiary were fined close to eight times more - US$422 million (S$559 million) - under the US' Foreign Corrupt Practices Act (FCPA) on Dec 22 for paying US$55 million in bribes.

Ms Indranee pointed out that the maximum fine under Singapore's PCA is $100,000 per charge - which "wouldn't get us anywhere near the penalty under the global resolution".

"Any penalty or claim that KOM might be subject to under Singapore law would be far less than what KOM is now liable for under the coordinated resolution," she said.

While the $100,000 per charge penalty may not have been low in 1989 when it was set, it would seem like "a slap on the wrist" in today's context, Singapore Management University (SMU) law don Eugene Tan said.

The PCA, Singapore's primary anti-corruption law, was enacted back in 1960.

Its Section 37 provides for extra-territorial jurisdiction, so Singaporeans who commit corrupt acts overseas can be prosecuted. Both Singaporeans and foreigners can also be prosecuted for corrupt acts committed within Singapore.

 

Along with the maximum $100,000 fine, the jail term is up to five years, or both. If a transaction involves a government contract, the fine is also a maximum of $100,000 but the maximum prison term is seven years, or both.

Companies in Singapore can be charged under the PCA as well, the Corrupt Practices Investigation Bureau (CPIB) told The Straits Times.

In comparison, the US' FCPA contains higher maximum penalties. For example, corporations are subject to a fine of up to US$2 million for each violation of the anti-bribery provisions of the FCPA, noted Mr Abraham Vergis of Providence Law.

And in Britain, any organisation that breaches the provisions of the UK Bribery Act is liable for an unlimited fine, he added.

Still, while the US' FCPA - enacted in 1977 - has harsher fines, Singapore's PCA is tougher in certain areas, corporate governance advocate Mak Yuen Teen said.

"Our PCA was developed to minimise corruption here and to ensure that our public servants are clean. The definition of 'gratification' in the Act is extremely broad. For example, facilitating payments for 'routine government action' is allowed under the FCPA (if paid outside the US) - but the PCA does not spell out any such exceptions."

RHTLaw Taylor Wessing managing partner Tan Chong Huat noted that the receiver of the bribe can be found guilty under the PCA even if he does not return the favour. The PCA also allows evidence relating to having more money or assets than can be accounted for by the person's declared income to be used as supporting evidence of corruption in court, he said.

Indeed, the CPIB has an "unblemished record in taking action against people, regardless of their status", Ms Indranee pointed out in Parliament. Among those she named was former civil defence chief Peter Lim, who was dismissed after his 2013 conviction of corruptly obtaining sex from a 49-year-old woman whose engineering company bid for a contract from his agency.

She also referred to seven former senior management members of ST Marine who were convicted after the company paid $24.9 million in bribes - falsely claimed as entertainment expenses - between 2000 and 2011 in return for ship repair contracts.

The number of individuals prosecuted for corruption and other offences averaged about 130 per year from 2014 to 2016, CPIB figures show.

MAKING BOARDS MORE ACCOUNTABLE

Currently, there are no specific liabilities against Singapore directors and boards under the PCA unless they paid the bribe, approved it or otherwise abetted it, Professor Mak said.

SMU's Associate Professor Tan suggested that imposing greater liability on companies, boards and senior management could put greater onus on them to ensure their employees do not pay bribes.

For instance, the PCA could provide explicitly for an offence if a company or an individual did not exercise due diligence over the activities of an agent who commits corruption offences, he added.

The PCA is far more "bare bones" legislation, Prof Tan said, when compared with the FCPA and the UK Bribery Act, which came into effect in 2010.

The UK Bribery Act holds an enterprise ultimately responsible, even if the bribery was unsanctioned, he said.

For example, if an act of bribery were carried out by an employee or even a non-employee agent of his own volition, the enterprise would be held responsible, he added.

LONGER ARM OF THE LAW

The PCA's extra-territorial reach could be expanded so that the law can apply also to non-Singaporeans who commit corruption offences abroad where they are agents of a Singapore company, or have a "Singapore connection", suggested Prof Tan. That could be if the business has assets here or is registered here, he suggested.

Prof Mak, meanwhile, noted that the US' FCPA covers bribery of foreign public officials, but not private-sector individuals. Still, companies and individuals get caught up because they are US citizens, companies or third parties that have used the US financial system.

That the FCPA doesn't prohibit facilitating payments, or bribes paid to get something the payer is otherwise entitled to, is "a historical weakness of the law", acknowledged Ms Alexandra Wrage, president of US-based anti-bribery organisation Trace.

"If a company has a large piece of equipment stuck in Customs and the official responsible for Customs clearance won't process it until he gets a payment, that's a bribe demand.

"But it's also a facilitating payment because processing shipments is his job, so he's being paid to provide a service he was hired and expected to provide. People often say that these are 'small payments', but in fact they may be quite large," she said.

"The US developed the term 'facilitating payments' for the type of bribes paid to get a government official to do his job. (They) are not illegal under US law - when they're paid outside the US. But they would be illegal if they were paid within the US, and they're always illegal in the country in which they're paid," Ms Wrage noted.

But most US companies now prohibit them under their corporate policies because they result in shoddy governance, books and records' violations as employees don't account for them accurately, she said.

"It's almost impossible to train employees that commercial bribes are illegal, but this sort of bribery isn't."

Even worse, they violate local law, she pointed out.

"A US company may be able to pay facilitating payments in Brazil under US law, but they violate Brazilian law. This creates an insurmountable conflict for companies that expressly state, as most do, that they abide by the laws of every market in which they do business," she said.

"Singapore has a reputation for being a good partner with the US in investigating international bribery. One area for improvement would be policing the conduct of Singapore companies overseas. Singapore's reputation for transparency within its borders is well deserved, but there is still room to reduce the export of corruption from Singapore, especially to developing countries."

ROOM FOR IMPROVEMENT

On Monday, the Government proposed a deferred prosecution agreement (DPA) framework, which will cover certain corporate offences, as one of several suggested amendments to the Criminal Procedure Code and Evidence Act. The DPA legal tool was used in the KOM case.

DPAs could be offered in Singapore to corporations as long as they comply with specific requirements. Under the proposed framework, the public prosecutor can agree to dismiss the charges a company faces, provided it agrees to undertake strict obligations.

As for the PCA, a review of it was conducted by the CPIB and the Attorney-General's Chambers in 2015, but did not result in amendments to the PCA, said Providence Law's Mr Vergis.

"The latest legislative change to the PCA was in 2012 where the main substantive amendment was to give CPIB officers the right to be armed," he added.

Asked if the Government would beef up the PCA in the light of the KOM saga, a CPIB spokesman said: "The Government regularly reviews the provisions in the PCA with a view towards improving the anti-corruption regime in Singapore. If there are proposals to enhance penalties, these will be announced only when plans have been firmed up."

While the PCA has served Singapore well - helping eradicate domestic corruption, which was a major problem in Singapore before 1960 - the latest KOM saga shows the need to update the law.

Today, the battle against corruption will have to focus more on corruption overseas because the KOM case seems to suggest that Singapore companies can become entangled in corruption abroad.

And to prevent such practices from being imported into Singapore, there is a need to fight corruption overseas with the same vigour that domestic corruption cases are dealt with. Hence, there is a need for the PCA to be significantly updated.

 
A version of this article appeared in the print edition of The Straits Times on January 18, 2018, with the headline 'S'pore needs stronger anti-bribery laws'. Print Edition | Subscribe