22 April 2024

Key Considerations And Compliance Challenges As South Africa Introduces New "Failure To Prevent Corrupt Activities Offence" In Section 34A Of The Prevention And Combating Of Corrupt Activities Act.



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A significant recommendation of the State Capture Commission, the introduction of a failure to prevent corruption offence, has been introduced in South Africa with effect from 3 April 2024.
South Africa Criminal Law
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A significant recommendation of the State Capture Commission, the introduction of a failure to prevent corruption offence, has been introduced in South Africa with effect from 3 April 2024. The Judicial Matters Amendment Bill (the "Bill") was passed by the National Council of Provinces on 6 December 2023 and President Cyril Ramaphosa assented to the Bill on 3 April 2024 (as per Government Gazette No. 50430). The Bill includes an amendment to South Africa's primary anti-corruption legislation, the Prevention and Combating of Corrupt Activities Act, 2004 ("PRECCA") in the form of a new clause 34A to PRECCA, creating a failure to prevent corrupt activities offence.

The wording of the new offence is closely aligned with the version proposed in the State Capture Report and draws inspiration from the failure to prevent bribery offences contained in section 7 of the United Kingdom Bribery Act, 2010 (the "Bribery Act"). 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.

While there are many aspects of the new offence which require careful consideration, below are a few key takeaways:

  • 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. Unlike the Bribery Act, there is no requirement to publish an accompanying guidance clarifying what will constitute "adequate procedures". The UK Guidance 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". In the absence of further clarity, it would be advisable for South African entities to adopt an approach to adequate procedures which mirrors the "Six Principles" approach. The Six Principles require procedures which are proportionate to the extent of the corruption risks facing the organisation. Therefore, an important first step will be to conduct a risk assessment to assess the extent of the corruption risks so that procedures can be tailored accordingly.
  • 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. It will therefore be important to ensure anti-corruption risk mitigation controls are sufficient to cover such third parties.
  • Unlike the UK, South Africa does not have a prosecutorial regime which allows for entities to enter into deferred prosecution agreements ("DPAs"). DPAs have been successfully used in both the US and the UK as a mechanism to encourage organisations to self-report wrongdoing in exchange for the imposition of a reduced fine and avoiding prosecution. The introduction of DPAs is not addressed in the PRECCA amendment, however, President Ramaphosa previously confirmed that the South African Law Reform Commission is considering DPAs as part of its review of the criminal justice system. In the interim, the National Prosecuting Authority is relying on the Corporate Alternative Dispute Resolution Directive to reach similar outcomes.

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

In light of current developments, it is crucial for organisations to establish strong anti-corruption compliance programmes. The ENS Forensics team provides support to enhance these programmes and to align them with the Six Principles approach to "adequate procedures" from the Bribery Act guidance. This positions us well to assist organisations in responding to the introduction of section 34A of PRECCA.

*This article has been updated, view the previous article here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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