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. – White Collar Crime, Anti-Corruption & Fraud

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.

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