Anti-corruption investigations – an Indian perspective
India is taking steps to identify and clamp down on corrupt business practices.
With economic progress, emerging technologies and increasing public agitation, the world is witnessing a heightened need for transparency and better governance. Regulators are increasingly considering international cooperation for criminal investigation and extraterritorial compliance enforcement. This is especially true with respect to corruption issues, as these issues defy the efforts being made towards improving transparency and governance.
In India, there have been many publicly reported investigations of companies or their third parties with respect to violations under the Foreign Corrupt Practices Act (FCPA). While FCPA enforcements are soaring, India’s Prevention of Corruption Act (POCA), though harsher than its US counterpart, remains lame with limited enforcements. The POCA does not have any exception for facilitation payments (that is, small, non-routine payments to facilitate or speed up an activity that is legal), unlike the FCPA.
Anti-corruption investigations in India often reveal transactions with a third party which facilitate obtaining an approval and petty-cash pay-outs or gifts (such as watches, electronics or gold coins), at undefined intervals to unidentified public officials, are the usual modus operandi. The lack of a structured contract, a weakly defined purpose, limited or no due diligence, and/or a lack of evidence to substantiate the third party’s experience in the service – these are all prominent red flags in transactions with third parties. In addition, approved petty-cash vouchers and supporting documents contain written references of the intended use for gifting to unnamed public officials, mostly in the nature of facilitation payments.
Communication channels (emails) of employees who interact with third parties and approval documents do contain references to a structured scheme or knowledge or indicative awareness of possible corrupt payments intended by the third party for obtaining an approval/licence. Interviews with selected employees and identified third-party representatives may reveal a broader modus operandi; however, these may have limited demonstrable evidence.
Definitive evidence – in the form of names of public officials to whom payments were intended to be made or actually made, transactional references, or other evidence of such payments – is non-existent in most cases, possibly due to the cash-based nature of such transactions. Also, in most instances it is not possible to determine whether, in fact, the third party made a payment to a public official and, if it did, what the amount of such payment was.
While the above evidence may be adequate for reporting to the Department of Justice or initiating corporate action or remedial measures, additional specific evidence may be required to pursue legal action in India.
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