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Failure to prevent corruption now a criminal offence in terms of PRECCA

Failure to prevent corruption now a criminal offence in terms of PRECCA

Failure to prevent corruption now a criminal offence in terms of PRECCA.

The Judicial Matters Amendment Act of 2023 was accented on the 3rd of April 2024. The amendment Act creates a new offense under the Prevention and Combatting of Corrupt Activities Act (PRECCA), 2004 (Act No. 12 of 2004). This offense targets members of the private sector and state-owned entities who fail to prevent corrupt activities.

The provision aligns with recommendations from the Judicial Commission of Inquiry into Allegations of State Capture, Corruption, and Fraud in the Public Sector (commonly known as the Zondo Commission).

In terms of the new section 34A, a “member of the private sector or incorporated state-owned entity” will be guilty of an offence if a person associated with that member gives or agrees or offers to give any gratification to another person (as currently prohibited in terms of Chapter 2 of PRECCA) intending to obtain or retain business or an advantage for that member.

Key Takeaways from the amendment:

  • No offence will be committed in terms of section 34A if the member had in place “adequate procedures” designed to prevent associated persons from committing corrupt activities.  Associated guidance to the UK Bribery Act sets out six non-prescriptive fundamental principles that commercial organisations should consider when adopting “adequate procedures” to prevent bribery being committed on their behalf, commonly referred to as the “Six Principles”, outlined below –
    • Proportionate Procedures: Organizations should establish anti-bribery procedures that are proportionate to the bribery risks they face. These procedures should be clear, practical, accessible, effectively implemented, and enforced. Policies play a crucial role in articulating an organization’s anti-bribery stance and creating an anti-bribery culture.
    • Top-Level Commitment: Senior management must demonstrate a commitment to preventing bribery. Their active involvement sets the tone for the organization’s anti-bribery efforts.
    • Risk Assessment: Organisations should assess the nature and extent of its exposure to risks of bribery, including potential external and internal risks of bribery. across the entire organization. The level of risk varies based on factors such as the organization’s size, nature of business, and the types of associated persons. For example, some industries are considered higher risk than others, such as the extractive industries; some overseas markets may be higher risk where there is an absence of anti-bribery legislation.
    • Due Diligence: Adequate bribery prevention procedures should be designed to mitigate identified risks and prevent unethical conduct by associated persons. Due diligence is essential when dealing with third-party agents or intermediaries.
    • Communication and Training: Organizations should communicate their anti-bribery policies internally and externally. Training ensures that employees understand their responsibilities and the organization’s commitment to preventing bribery.
    • Monitoring and Review: Regular monitoring and review of anti-bribery procedures help ensure their effectiveness and identify areas for improvement.
  1. The concept of “association” for purposes of the offence is broadly framed and refers to persons who perform services for or on behalf of that member irrespective of the capacity in which such person performs services for or on behalf of that member. Section 34A casts the net of association broadly and would include not only employees but also independent contractors and other third parties providing services to the entity. While it may seem like companies cannot necessarily control the actions of its associated persons, particularly when the company has outsourced specific tasks to third parties, it is a defense if the organisation can show adequate procedures were put in place to prevent bribery being committed. It will therefore be important to ensure anti-corruption risk mitigation controls are sufficient to cover such third parties.

The introduction of the new offence for failure to prevent corruption constitutes a significant change to South Africa’s anti-corruption legal landscape and will require organizations to reexamine their compliance programmes to ensure they align with the Six Principles approach.

Download the Amendment Act here.

Visit our webpage to find out more about our anti bribery and corruption compliance and training solutions.

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