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Monday 2 November 2015

The increasing importance of an anti-corruption compliance programme in Thailand - Anti-Corruption Committee news, November 2015

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The increasing importance of an anti-corruption compliance programme in Thailand


Jimmy Chatsuthiphan
DLA Piper, Bangkok


There has long been a view that corruption is an inevitable aspect of doing business in Thailand, in large part due to constant allegations of graft against government officials coupled with historically weak enforcement by local regulators. However, companies operating in Thailand should be aware of several indications that this is changing.

A renewed attitude to corruption

From the outset, the current military government has made anti-corruption a centrepiece of its domestic policy. We have witnessed a wave of corruption probes and enforcement against the public sector, including arrests of high-ranking police officers, suspensions of numerous public officials, and the recent indictment of a former Tourism Authority of Thailand governor in a well-known bribery scandal. In addition, former Prime Minister Yingluck Shinawatra and several former ministers have been charged with graft. The office of the Auditor General has also become extremely active in the anti-corruption space under the new government regime. This overall uptick in enforcement activity seems to signal a renewed commitment to tackling the problem of corruption in Thailand.

The new amendments

The country's primary anti-corruption law, the Organic Act on Counter Corruption, has been significantly strengthened by recent amendments which impose harsher penalties for corruption offences. Fines and prison terms have increased and, most notably, severe corruption is now punishable by death under the Act. 

The Organic Act on Counter Corruption was enacted in 1999 to regulate public sector corruption and established the National Anti-Corruption Commission. The recent amendments include provisions that extend punishments to foreign and Thai officials for the giving of bribes. This offence, along with that of accepting of bribes, carries the death penalty. The regulator has commented that the changes are justified due to the severity of a corruption offence and the dangers they pose to the country.  

Another key amendment is a new provision that penalises a company for a bribe made by an employee, agent, or associated company – much like the UK Bribery Act. Importantly, the provision expressly provides for a defence if ‘appropriate internal control measures' are in place to prevent the offence. It is unclear what would specifically meet that standard, but this language presents a compelling reason for Thai companies to implement a robust compliance programme that includes educating and training employees to act accordingly.

Further reforms include penalties for accepting property in return for compelling state or foreign officials or international organisations to carry out their duties by unlawful means or coercion, and for giving property to officials so that they might carry out their duties or delay doing so.

Further reform

Other legal reforms have been implemented that also reflect the government’s emphasis on rooting out unscrupulous activities that have long flown under the radar in Thailand. For example, the new Licensing Facilitation Act is designed to counter bribery and enhance transparency in relation to the issuance of licences and permits. Under this Act, all agencies that issue licences and permits are to develop a manual that describes the procedural requirements and sets internal timelines for approvals. Importantly, the Act also contains a whistleblower remedy so that applicants can file complaints.

The impending creation of an integrated ASEAN Economic Community (AEC) is fast approaching. This will also have an effect on corruption within Thailand. The AEC countries are aiming for regional cooperation to curtail systemic corrupt business practices that have become deeply engrained in the region. It is expected that the AEC will allow countries to share best practices and develop joint approaches to fight corruption, and that the looming formation of the AEC will continue to put pressure on corrupt business practices in Thailand. This will cause them to be investigated more aggressively and prosecuted with a greater sense of urgency.

What to expect?

Given the convergence of all the above, the perception in the market is that Thailand's stance on corruption is finally hardening after years of rhetoric and inaction. Although Thai anti-corruption laws and measures have so far been aimed at Thai and foreign public officials and international government agency/organisation officers, it appears inevitable that enforcement against private companies is on the horizon. Businesses will want to be more attentive than ever about their operations to avoid becoming embroiled in a corruption investigation or prosecution in Thailand. Notably, this could not only result in a ban from conducting business in Thailand, but for multi-nationals it could also trigger a separate investigation by regulators in their home country, and/or by US and UK regulators if subject to the FCPA or UK Bribery Act.  

In light of the changing business environment, establishing a comprehensive corporate compliance programme is becoming vitally important for companies operating in Thailand. For the first time, it is expressly indicated that appropriate compliance measures can serve as a defence for companies under the new amendments to the anti-corruption law. Internal anti-bribery policies, procedures and guidelines should be established and actively enforced. Any company engaging in transactions with government entities or individuals is well advised to conduct regular compliance audits and address any complaints or ‘red flags’ immediately. 

Some of the areas worth paying attention to include:

  • Maintain up-to-date policies, procedures, and codes of conduct and ethics in both English and Thai. 
  • Regular training of staff, in both Thai and English, to ensure they understand their roles and responsibilities and applicable procedures. 
  • Set out clear instructions/guidance to applicable staff regarding interactions with government officials and reporting of interactions and work to their direct report.
  • Periodic monitoring and auditing of sales and marketing practices, as applicable.
  • Check and assess the current procedures for the handling of whistleblower complaints.
  • Check and assess document management and data retention policies, and whether these are well communicated to employees.
  • A plan for an unannounced visit from local authorities and for a potential regulatory investigation, including protocol to properly implement and train your employees to respond in an orderly and effective manner.