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Surviving the long arm of global anti-bribery laws

By Sharanya Ranga and Probal Bose

Business today is global and so is anti-corruption enforcement. The recent multi-million dollar settlement between Mondelez International Inc., the international snack-food manufacturer and the US Securities and Exchange Commission (SEC) highlights the reach of the United States Foreign Corrupt Practices Act, 1977 (FCPA.  Mondelez was pulled up by the SEC because its Indian subsidiary Cadbury India made “facilitation payments” made in violation of the FCPA to obtain approvals for its unit in India. The matter was closed with Mondelez agreeing to pay $13 million as the settlement amount, without admitting to the charges.

The anti-bribery framework in India

The Prevention of Corruption Act, 1988 (PCA) and the Indian Penal Code, 1860 (IPC) deal with  corruption primarily in India. Some of the other anti-corruption laws are the Whistleblowers’ Protection Act 2011, the Lokpal and Lokayuktas Act, 2013 and Prevention of Money Laundering Act, 2002. The Central Vigilance Commission, Central Bureau of Investigation and  the Anti-corruption Bureau are the main agencies responsible for investigation of corruption charges against both central and state government departments, government companies, local government bodies and public servants under the PCA and IPC. The Serious Fraud Investigation Office, the investigating arm of the Ministry of Corporate Affairs, probes fraud in companies.  

The main focus of the anti-corruption laws in India is on the public sector. Further, they seek just to prosecute public officials accepting the bribe and not the person offering it. The bribe giver may be convicted, on rare occasions, at best for abetment. The PCA is proposed to be amended through the Prevention of Corruption Amendment Bill, 2013 (Bill), pending in Parliament. Though the Bill seeks to bring in private entities and the bribe givers within the penal purview, it does not provide a comprehensive regulatory framework to deal with corruption.

Merely bringing private entities under the purview of PCA is but a half-hearted approach that may not help in combating corruption.  The Bill does not outline guiding principles or prescribe good corporate governance standards or act against extraterritorial offences unlike the FCPA and the UK Bribery Act do.

A statutory framework on the lines of the FCPA has to be in place to prohibit payment by private entities to government officials and/or assist in obtaining/retaining a business favour. Also, private entities have to be mandated to maintain books of record and reports related to all facilitation payments made by them, failing which penal repercussions will follow. Given the low conviction rates of corruption cases, this may bring about compliance if accompanied with strict enforcement.

The Mondelez case is just the latest in a series of actions passed against companies operating in India. They include Walmart, Oracle and Diageo. Regardless of when the Bill becomes law, it is imperative that Indian subsidiaries of foreign companies (especially the ones having a US/UK connection) take measures to avoid going the Mondelez way. Most multinational corporations have to adopt an anti-bribery policy and identify corrupt practices. The policy should distinguish between an acceptable and unacceptable practices. For instance, greeting cards are deemed acceptable but gift vouchers may not pass muster. Management and the employees must be made aware of this. A whistleblower protection mechanism, coupled with setting up a disciplinary process and periodic audit/monitoring of such acts, will usher in integrity in the organisation. While it is one thing to have policies and records in place, the challenge is strict implementation. With checks and balances, foreign companies operating in India will find it relatively easy to comply with the requirements of the FCPA and other international anti-corruption laws. 

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