New Anti-Corruption Laws Demand Stronger Due Diligence
The introduction of Section 34A to the Prevention and Combating of Corrupt Activities Act (PRECCA) marks a pivotal shift in anti-corruption laws, placing greater accountability on businesses and State-Owned Entities (SOEs). The law directly implicates organisations if corruption occurs within their operations, regardless of the perpetrator's role or capacity.
What Does Section 34A Say?
Under Section 34A, a private company or SOE will be guilty of an offence if a person associated with it commits a corrupt act to gain a business advantage.
Who Are “Associated Persons”? This term is defined broadly, including employees, contractors, directors, third-party service providers, and anyone performing services for or on behalf of the entity.
Defenses Against Liability: A company can avoid liability if it demonstrates that adequate anti-corruption measures were in place to prevent such activities.
Implications for Accountants
The practical implications of Section 34A are significant, especially for accountants responsible for ensuring compliance and mitigating risks. Here’s what you need to focus on:
Due Diligence Practices
Conduct background checks on employees, contractors, directors, and third-party service providers.
Be aware of red flags such as unclear ownership structures, abnormal financial transactions, or a history of unethical practices.
Assess and Implement Adequate Procedures:
Review current anti-corruption policies and compliance frameworks to ensure they meet the new legislative standards.
Collaborate with leadership to create a culture of zero tolerance for corruption.
Professional Skeptisism When Monitoring Transactions and Relationships:
Scrutinise financial records for irregularities, such as unexplained payments or contracts that seem out of line with typical business practices.
Verify that funds intended for legitimate purposes are not being misused to gain undue advantages.
Proactively Report Suspicions:
If suspicious activities are identified, file a Suspicious Transaction Report (STR) with the Financial Intelligence Centre (FIC) as required by law.
Document findings comprehensively to support investigations and ensure compliance.
Why This Matters
Section 34A emphasises the need for robust anti-corruption measures within organisations. Without demonstrating adequate procedures, businesses could face severe legal consequences for corrupt acts committed by associated persons.
Accountants must be aware of these new requirements and how they may be impacted. By implementing enhanced due diligence processes and fostering compliance programs, you not only safeguard your own practice but also contribute to a broader culture of accountability.
For assistance in compiling anti-corruption policies and formulating compliance programs, consider consulting experts to align your practices with the latest legislative standards. The fight against corruption starts with informed and proactive professionals like you.
